As filed with the Securities and Exchange Commission on March 30, 2005

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

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[X]  Annual Report Under Section 13 or 15(d) of the  Securities  Exchange Act of
     1934 For the Fiscal Year Ended December 31, 2004

       or

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

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                         Commission File Number 33-87570

                        American Church Mortgage Company

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                 (Name of small business issuer in its charter)

                            10237 Yellow Circle Drive
                              Minnetonka, MN 55343
                            Telephone: (952) 945-9455

                       I.R.S. Employer Identification No.
                                   41-1793975

     State or other jurisdiction of incorporation or organization: Minnesota

Securities registered under Section 12(b) of the Exchange Act:  None

Securities  registered  under Section  12(g) of the Exchange Act:  Common Stock,
$.01 par value

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 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

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B not contained in this form, and no disclosure  will be contained,
to the best of  registrant's  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB.[ x ]

State issuer's revenues for its most recent fiscal year:      $3,153,104

State the  aggregate  market value of the voting and  non-voting  common  equity
stock held by  non-affiliates  computed by  reference  to the price at which the
common equity was sold, or the average bid and asked price of such common equity
stock, as of a specified date within the past 60 days: Not applicable.

The number of shares  outstanding of the issuer's $.01 par value common stock as
of February 28, 2005 was: 2,551,568

            Transition Small Business Disclosure Format: Yes ___ No X

                      DOCUMENTS INCORPORATED BY REFERENCE:

Definitive  proxy statement for the annual meeting of shareholders to be held on
or about May 27, 2005.
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<PAGE>




                        AMERICAN CHURCH MORTGAGE COMPANY
                                   FORM 10-KSB


                                                    INDEX                  Page
                                                                            No.

                                     PART I

Item 1.    Description of Business....................................        3

Item 2.    Description of Property....................................       15

Item 3.    Legal Proceedings..........................................       15

Item 4.    Submission of Matters to a Vote of Security Holders........       15

                                     PART II

Item 5.    Market for Registrant's Common Equity and
           Related Stockholder Matters................................       15

Item 6.    Management's Discussion and Analysis
           or Plan of Operation.......................................       17

Item 7.    Financial Statements:......................................       19

                  Balance Sheets
                  December 31, 2004 and 2003..........................      F-2

                  Statements of Operations
                  Years Ended December 31, 2004 and 2003..............      F-4

                  Statements of Stockholders' Equity
                  December 31, 2004 and 2003..........................      F-5

                  Statements of Cash Flows
                  Years Ended December 31, 2004 and 2003..............      F-6

                  Notes to Financial Statements.......................      F-8

Item 8.    Changes In and Disagreements With
           Accountants on Accounting and Financial Disclosure.........       19

Item 8A.   Controls and Procedures....................................       20

                                    PART III

Item 9.    Directors, Executive Officers, Promoters and Control
           Persons; Compliance With Section 16 (a) of the
           Exchange Act...............................................       20

Item 10.   Executive Compensation.....................................       20

Item 11.   Security Ownership of Certain Beneficial Owners and
           Management.................................................       20

Item 12.   Certain Relationships and Related Transactions.............       20

Item 13.   Exhibits and Reports on Form 8-K...........................       21

Item 14.   Principal Accountants Fees and Services....................       21


<PAGE>




                                     PART I

     In connection with the "safe harbor"  provisions of the Private  Securities
Litigation  Reform  Act of  1995,  readers  of this  document  and any  document
incorporated by reference  herein,  are advised that this document and documents
incorporated  by  reference  into  this  document  contain  both  statements  of
historical facts and forward looking statements.  Forward looking statements are
subject to certain risks and uncertainties,  which could cause actual results to
differ  materially  from those  indicated  by the  forward  looking  statements.
Examples  of forward  looking  statements  include,  but are not  limited to (i)
projections  of  revenues,  income or loss,  earning or loss per share,  capital
expenditures,  dividends,  capital  structure and other  financial  items;  (ii)
statements  of  plans  and  objectives  of ours or our  management  or  Board of
Directors, including the on-going public sale of our securities, or estimates or
predictions  of actions by borrowers,  competitors  or  regulatory  authorities;
(iii)  statements  of  future  economic  performance;  and  (iv)  statements  of
assumptions underlying other statements and statements about our business.

     This document and documents  incorporated by reference herein also identify
important  factors which could cause actual  results to differ  materially  from
those indicated by forward  looking  statements.  These risks and  uncertainties
include,  among other  things,  interest  rate  fluctuations  as they effect the
relative  yield of our loan portfolio and our ability to compete in making loans
to borrowers;  payment default on loans made by us, which could adversely affect
our  ability  to  make  distributions  to  our  shareholders;   the  actions  of
competitors;  the effects of government regulation;  and other factors which are
described herein and/or in documents incorporated by reference herein, including
the risks described at the end of Item 1.

     The  cautionary   statements  made  pursuant  to  the  Private   Litigation
Securities  Reform Act of 1995 above and elsewhere by us should not be construed
as exhaustive or as any admission  regarding the adequacy of disclosures made by
us prior to the  effective  date of such Act.  Matters  which are the subject of
forward  looking  statements are beyond our ability to control and in many cases
we cannot  predict what factors  would cause results to differ  materially  from
those indicated by the forward looking statements.

Item 1.    Description of Business

General

     Incorporated  as a Minnesota  corporation  on May 27, 1994, we operate as a
Real Estate  Investment Trust ("REIT") and are engaged in the business of making
mortgage  loans  to  churches  and  other  non-profit  religious   organizations
throughout the United States. The principal amount of loans we offer ranges from
$100,000 to  $2,000,000.  We may also  invest up to 30% of our Average  Invested
Assets in mortgage secured debt securities  (bonds) issued by churches and other
non-profit religious organizations.  Between the date upon which we began active
business  operations  (April 15, 1996),  and February 28, 2005, we have made 117
loans to 106 churches in the aggregate  amount of $49,927,061,  with the average
principal amount of such loans being $426,727. Of the 117 loans we have made, 25
loans totaling $11,756,350 have been repaid early by the borrowing churches.  We
also own, as of February 28, 2005,  $9,093,790 principal amount of Church Bonds,
which we purchased at a price of par value  ($1,000) or less. At no time have we
paid a premium for any of the bonds in our portfolio.  Subject to supervision of
our Board of Directors, our day to day business operations are managed by Church
Loan Advisors,  Inc. (the  "Advisor"),  which provides  investment  advisory and
administrative  services to us. The principals of the Advisor include principals
of American Investors Group, Inc., an NASD member broker-dealer which has served
as  underwriter  of the public  offerings  of our common  stock,  as well as our
current public offering of secured investor certificates.

Public Offerings

     On  October  7,  2004  the  Securities  and  Exchange  Commission  declared
effective  our  fifth  public  offering  of  $23,000,000  of  Secured   Investor
Certificates  under SEC file  333-75836.  The  Offering is being  conducted on a
"best-efforts" basis pursuant to applicable rules of the Securities and Exchange
Commission.  As of February 28, 2005,  $5,224,000 of certificates have been sold
through our  advisor's  affiliate,  American  Investors  Group,  Inc., to public
investors.  We expect to sell all $23,000,000 in secured  investor  certificates
prior to October 2006.

The Company's Business Activities

     Our  business  is  managed  by  Church  Loan  Advisors,  Inc.,  Minnetonka,
Minnesota  (the  "Advisor").  We have no  employees.  The  Advisor's  affiliate,
American Investors Group, Inc.,  ("American") has been engaged since 1987 in the
business of underwriting first mortgage bonds for churches throughout the United
States. In underwriting church bonds, they review financing  proposals,  analyze
prospective  borrowers' financial  capability,  and structure,  market and sell,
mortgage-backed  securities which are debt obligations (bonds) of such borrowers
to the investing general public. Since its inception,  American has underwritten
approximately 209 church bond financings, in which approximately $428,590,000 in
first  mortgage  bonds have been sold to public  investors.  The average size of
single church bond  financings  underwritten  by American since its inception is
approximately $2,051,000.

                                        3

<PAGE>

     In the course of its business,  American identified a demand from potential
borrowers  for  smaller  loans  of  $100,000  to  $2,000,000.   Because  of  the
regulatory,  administrative expenses and complexity normally associated with the
bond financing business,  American  determined that the economic  feasibility of
bond financing  diminished  for financings  under  $1,000,000.  As a result,  we
believe  that many  churches  are forced to either  forego the project for which
their  financing  request  was made,  fund their  project  from cash flow over a
period  of time and at  greater  expense,  or seek bank  financing  at terms not
always favorable or available to them, due to the historic reticence of banks to
lend to churches for other than economic reasons.  Our objective is to provide a
lending  source to this  segment of the  industry-by  capitalizing  on the human
resources  and  experience  available at American  and the  Advisor,  and taking
advantage of the marketing, advertising and general goodwill of American.

Financing Business

     Our primary  business is to make first  mortgage  loans in amounts  ranging
from  $100,000  to  $2,000,000,  to  churches  and  other  non-profit  religious
organizations,  and selecting and investing in mortgage-secured debt instruments
("Church Bonds") issued by churches and other non-profit religious organizations
throughout the United States. We attempt to apply essentially all of our working
capital  (after  adequate  reserves  determined  by the Advisor)  toward  making
mortgage  loans and  investing in Church  Bonds.  We seek to enhance  returns on
investments on such loans by:

     o    offering  terms  of up to 20 years or  more,  generating  the  highest
          yields possible under current market conditions;

     o    seeking  origination  fees (i.e.  "points")  from the  borrower at the
          outset of a loan and upon any renewal of a loan;

     o    making a limited amount of higher-interest  rate second mortgage loans
          to qualified borrowers; and

     o    purchasing a limited amount of mortgage-secured debt securities having
          various  maturities issued by churches and other non-profit  religious
          organizations.

     Our  policies  limit  the  amount of  second  mortgage  loans to 20% of the
Company's Average Invested Assets on the date any second mortgage loan is closed
and limit the  amount of  mortgage-secured  debt  securities  to 30% of  Average
Invested Assets on the date of their purchase.

     "Average  Invested  Assets"  for any period  shall mean the  average of the
aggregated  book value of the assets of the  corporation  invested,  directly or
indirectly,  in loans (or interests in loans) secured by real estate,  and first
mortgage bonds,  before reserves for  depreciation or bad debts or other similar
non-cash  reserves  computed  by taking the average of such values at the end of
each calendar month during such period.

     All  other  mortgage  loans  made  by us (or  Church  Bonds  purchased  for
investment) will be secured by a first mortgage (or deed of trust) lien in favor
of us.  Although we attempt to make mortgage  loans for various terms  typically
ranging  from  three  to  twenty-five  years,  we  may  determine  to  emphasize
longer-term  fixed-rate loans in our discretion,  in order to reduce the risk to
us of downward interest rate fluctuations.

     Our  lending  and  investing  operations,   including  determination  of  a
prospective borrower's or church bond issuer's financial credit worthiness,  are
made on our behalf by the Advisor.  Employees and agents of the Advisor  conduct
all aspects of our  business,  including (i)  marketing  and  advertising;  (ii)
communication  with prospective  borrowers;  (iii) processing loan applications;
(iv) closing the loans; (v) servicing the loans; (vi) enforcing the terms of our
loans;  (vii)  shareholder  relations and (viii)  administering  our  day-to-day
business. In consideration of its services, the Advisor is entitled to receive a
fee equal to 1 1/4%  annually of the Company's  Average  Invested  Assets,  plus
one-half of any  origination fee charged to borrowers on mortgage loans we make.
This fee is reduced to 1% on assets  from $35 million to $50 million and to .75%
on assets over $50  million.  The  Advisor's  management  fees are  computed and
payable monthly.

Current First Mortgage Loan Terms

     We offer prospective borrowers a selection of "Loan Types," which include a
choice of fixed or  variable  rates of interest  indexed to the "prime"  rate of
interest or other generally recognized reference index, and having various terms
to maturity,  origination  fees and other terms and conditions.  The Loan Types,
interest  rates and fees  offered  and  charged by us may from  time-to-time  be
limited,  changed  or  otherwise  unilaterally  amended  by the  Advisor  in its
discretion  as a result of such  factors  (among  others) as (i) balance of Loan
Types in our portfolio;  (ii) competition from other lenders;  (iii) anticipated
need to increase the overall  yield to our mortgage loan  portfolio;  (vi) local
and national  economic  factors;  and (v) actual experience in borrowers' demand
for the loans. In addition, we may make mortgage loans on terms other than those
identified  in our  list of Loan  Types.  Subject  to  change,  modification  or
elimination  at our  complete  discretion  ,  the  following  is a  list  of the
currently   available  Loan  Types  we  may  offer  to   prospective   borrowing
institutions:

                                        4

<PAGE>
<TABLE>
<CAPTION>
<S>                                <C>                                       <C>
=================================  ========================================= =========================
   Loan Type                          Interest Rate (1)                         Origination Fee (2)
20/25 Year Term (3)                Fixed @ 8.50%/8.75% respectively                    3.5%
20 Year Term (3)                   Variable Annually @ Prime + 2.50%                   3.5%
Renewable Term  (4)                Fixed @:
     3 Year                               7.75%                                        3.5%
     5 Year                               7.95%                                        3.5%
     7 Year                               8.25%                                        3.5%
10 Year                                   8.35%                                        3.5%
Construction 1 Year Term           Fixed @ 9.00%                                       2.0%
=================================  ========================================= =========================
</TABLE>

     (1)  "Prime"  means  the  prime  rate  of  interest  charged  to  preferred
          customers,  as published by a federally  chartered  bank chosen by our
          Advisor.

     (2)  Origination  fees are based on the  original  principal  amount of the
          loan  and are  collected  from the  borrower  at the  origination  and
          renewal  of  loans,  one-half  of which  is  payable  directly  to the
          Advisor.  Origination  fees are often  subject  to  negotiations  with
          borrowers and thus, may be less than these amounts.

     (3)  Fully amortized  repayment term.  Amortization  terms may vary, as may
          other loan  terms,  depending  on  individual  loan  negotiations  and
          competitive forces.

     (4)  Renewable  term  loans  are  repaid  based on a  20-year  amortization
          schedule,  and are  renewable at the  conclusion of their initial term
          for additional like terms up to an aggregated  maximum of 20 years. We
          charge a fee of 1% to the borrower  upon each renewal date. If renewed
          by the  borrower,  the  interest  rate is  adjusted  to  Prime  plus a
          specified percentage "spread," i.e., two and one half percent (2.50%).

The above table describes  certain material terms of Loan Types,  interest rates
and fees  currently  offered  and  charged by us.  The table does not,  however,
purport to identify all possible Loan Types,  terms, rates, and fees that we may
offer  from  time-to-time.  We may  determine  at any time to  modify  the terms
identified  above and/or offer loan terms  different than any of the Loan Types,
interest rates and fees identified above and do, in fact,  negotiate these terms
and fees with certain of our borrowers.

Mortgage Loan Processing and Underwriting

     Mortgage  loan  applications  are prepared  and  verified by our  Advisor's
personnel in our Loan  Origination  and  Underwriting  Department.  Verification
procedures are designed to assure a borrower's qualification under our Financing
Policies  which are  specifically  identified  herein and  include,  among other
things, obtaining:

     o    applications  containing key  information  concerning the  prospective
          borrowers;

     o    project description;

     o    financial statements in accordance with our Financing Policies;

     o    corporate records and other organizational documents of the borrower;

     o    preliminary  title report or commitment for mortgagee title insurance;
          and

     o    a real estate appraisal in accordance with the Financing Policies.

     All  appraisals  and  financial  statements  are  prepared  by  independent
third-party  professionals who we approve based on their experience,  reputation
and education. Completed loan applications,  together with a written summary are
then presented to our Underwriting Committee. Our loan Underwriting Committee is
comprised  of the  Advisor's  President  and  Vice-President  and certain of its
staff. Our Advisor may arrange for the provision of mortgage title insurance and
for  the  services  of  professional  independent  third-party  accountants  and
appraisers on behalf of borrowers in order to achieve  pricing  efficiencies  on
their  behalf  and to  assure  the  efficient  delivery  of  title  commitments,
preliminary  title  reports and title  policies,  and financial  statements  and
appraisals  meeting our underwriting  criteria.  Our Advisor may arrange for the
direct payment for such professional  services and for the direct  reimbursement
to it of such expenditures by borrowers and prospective borrowers.  Upon closing
and  funding  of  mortgage  loans,  a  negotiable  origination  fee based on the
original  principal  amount of each loan may be  charged,  of which  one-half is
payable by the borrower to our Advisor, and the other one-half to us.


                                        5

<PAGE>



 Loan Commitments

     Subsequent to approval by our Underwriting Committee,  and prior to funding
a  loan,  we may  issue  a  loan  commitment  to  qualified  applicants.  A loan
commitment  deposit may be required  from the  borrowing  church to commence the
loan preparation  procedure.  These deposits are directly applied by the Advisor
to engage  accountants and appraisers to prepare their respective reports on the
Church.   Commitments  may  indicate,  among  other  things,  the  loan  amount,
origination  fees,  closing  costs,  underwriting  expenses  (if  any),  funding
conditions,  approval  expiration  dates  and  interest  rate and  other  terms.
Commitments  generally set forth a "prevailing" interest rate that is subject to
change in accordance with market interest rate fluctuations until the final loan
closing  documents  are prepared,  at which time we commit to a stated  interest
rate. In certain cases we may establish ("lock in") interest rate commitments up
to sixty  (60) days from the  commitment  to  closing;  however,  interest  rate
commitments  beyond sixty days will not normally be issued  unless we receive an
appropriate  fee premium based upon our assessment of the risk associated with a
longer period.

Loan Portfolio Management

     Our portfolio of mortgage loans and Church Bonds is managed and serviced by
our  Advisor  in  accordance  with  the  Advisory  Agreement.   The  Advisor  is
responsible for all aspects of our mortgage loan business, including closing and
recording  of mortgage  loans;  collecting  payments of  principal  and interest
payments regularly and upon the maturity of a loan;  enforcing loan payments and
other  lender's  requirements;  periodic  review of each  mortgage loan file and
determination  of its reserve  classification;  and  exercising  our remedies in
connection  with any  defaulted  or  non-performing  loans.  Fees  and  costs of
attorneys,  insurance,  bonds and other direct  expenses  incurred in connection
with the exercise of such  remedies  are our  responsibility.  We may,  however,
recoup these expenses from the borrower in the process of pursuing our remedies.
The Advisor will not receive any additional  compensation for services  rendered
in connection  with loan  portfolio  management  or  exercising  remedies on our
behalf in the event of a loan default.

Loan Funding and Bank Borrowing

     Our mortgage  loans (and our purchases of Church Bonds) will be funded with
available cash resources and, at the discretion of the Advisor,  with borrowings
under a line of credit with a commercial  lender or bank.  We  currently  have a
$2,000,000 line of credit with Beacon Bank, Shorewood, Minnesota. As of February
28, 2005, we have no outstanding balance against our line of credit.  Currently,
we may borrow up to 300% of our shareholder  equity to make loans  regardless of
our  capacity  to (i) sell our  securities  on a  continuing  basis,  or to (ii)
reposition  assets from the maturity or early repayment of mortgage loans in our
Investor Saver Certificates, minus reserves for operating expenses, and bad-debt
reserves,  as  determined  by the Advisor.  Cash  resources  available to us for
lending purposes  include,  in addition to the net proceeds from future sales of
our  common  stock and  Investor  Saver  Certificates  (if any),  (i)  principal
repayments  from borrowers on loans made by us and (ii) funds borrowed under any
line of credit arrangement.

The Advisory Agreement

     We have entered into a contract with the Advisor (the "Advisory Agreement")
under which the Advisor  furnishes  advice and  recommendations  concerning  our
business  affairs,  provides  administrative  services  to us  and  manages  our
day-to-day operations. Among other things, the Advisor:

     o    serves as our mortgage loan underwriter and advisor in connection with
          our primary business of making loans to churches;

     o    advises  and  selects  Church  Bonds  to be  purchased  and  held  for
          investment by us;

     o    services all mortgage loans we make;

     o    provides  marketing and  advertising and generates loan leads directly
          and through its affiliates;

     o    deals   with   regulatory   agencies,   borrowers,   lenders,   banks,
          consultants, accountants, brokers, attorneys, appraisers, insurers and
          others;

     o    supervises the preparation, filing and distribution of tax returns and
          reports to governmental  agencies and to Shareholders  and acts on our
          behalf in connection with shareholder relations;

     o    provides office space and personnel as required for the performance of
          the foregoing services; and

     o    as  requested  by us, makes  reports to us of its  performance  of the
          foregoing  services  and  furnishes  advice and  recommendations  with
          respect to other aspects of our business.

                                        6

<PAGE>

     In performing  its services under the Advisory  Agreement,  the Advisor may
use facilities,  personnel and support services of its affiliates. Expenses such
as legal and accounting fees,  stock transfer agent,  registrar and paying agent
fees, proxy  solicitation  expenses,  and dividend  reinvestment  agent fees are
direct  expenses of ours and are not  provided for by the Advisor as part of its
services.

     The Advisory  Agreement is renewable  annually by us for one-year  periods,
subject to our determination, including a majority of the Independent Directors,
that the Advisor's  performance has been  satisfactory and that the compensation
paid the Advisor has been  reasonable.  We may terminate the Advisory  Agreement
with  or  without  cause  upon 60  days  written  notice  to the  Advisor.  Upon
termination of the Advisory  Agreement by either party,  the Advisor may require
us to  change  our name to a name  that does not  contain  the word  "American,"
"America"  or the  name of the  Advisor  or any  approximation  or  abbreviation
thereof, and that is sufficiently dissimilar to the word "America" or "American"
or  the  name  of  the  Advisor  as  to  be  unlikely  to  cause   confusion  or
identification  with either the  Advisor or any person or entity  using the word
"American" or "America" in its name. Our Board of Directors shall determine that
any successor Advisor possess sufficient  qualifications to perform the advisory
function for us and justify the  compensation  provided for in its contract with
us.

     Pursuant to the Advisory  Agreement,  the Advisor is required to pay all of
the expenses it incurs in providing  services to us, including,  but not limited
to, personnel expenses,  rental and other office expenses,  expenses of officers
and  employees  of the  Advisor,  including  travel and all of its  overhead and
miscellaneous  administrative  expenses relating to performance of its functions
under the Advisory Agreement. We are required to pay all other expenses we incur
in the daily  operations  of our  business-such  as the costs  and  expenses  of
reporting to various  governmental  agencies and the  Shareholders;  the general
conduct of our operations as a mortgage lender; fees and expenses of appraisers,
directors,  auditors,  outside legal counsel and transfer agents,  directors and
officers  liability  insurance premiums and unreimbursed costs directly relating
to closing of loan transactions.

     In the event that our Total Operating Expenses (excluding  interest) exceed
in any calendar year the greater of (a) 2% of our Average Invested Assets or (b)
25% of our net income,  the Advisor is obligated to reimburse  us, to the extent
of its fees for such calendar year, for the amount by which the aggregate annual
operating expenses paid or incurred by us exceed the limitation. The Independent
Directors  may, upon a finding of unusual and  non-recurring  factors which they
deem  sufficient,  determine that a higher level of expenses is justified in any
given year.

     Our bylaws provide that the Independent Directors are to determine at least
annually  the  reasonableness  of the  compensation  we pay to our  Advisor.  On
January 20, 2005, our Directors reviewed and unanimously approved renewal of the
Advisory  Agreement for another year.  Factors to be considered in reviewing the
Advisory  Fee  include  the size of the fees of the  Advisor in  relation to the
size, composition and profitability of our loan portfolio,  the rates charged by
other investment advisors  performing  comparable  services,  the success of the
Advisor in generating  opportunities  that meet our investment  objectives,  the
amount of  additional  revenues  realized  by the  Advisor  for  other  services
performed for us, the quality and extent of service and advice  furnished by the
Advisor, the quality of our investments in relation to investments  generated by
the Advisor for its own account, if any, and the performance of our investments.

     The Advisory  Agreement  provides for  indemnification by us of the Advisor
and each of its directors,  officers and employees  against expense or liability
arising out of such person's  activities in rendering  services to us,  provided
that the conduct  against which the claim is made was determined by such person,
in good faith,  to be in our best interests and was not the result of negligence
or misconduct.

Financing Policies

     Our business of mortgage lending to churches and other non-profit religious
organizations  is  managed  in  accordance  with and  subject  to the  policies,
guidelines,  restrictions and limitations  identified herein (collectively,  the
"Financing  Policy").  The intent of the Financing Policy is to identify for our
shareholders  not only the general  business in which we are  involved,  but the
parameters of our lending business. These policies may not be changed (except in
certain  immaterial  respects  by majority  approval of the Board of  Directors)
without the approval of a majority of the Independent Directors, and the holders
of a majority of our outstanding shares at a duly held meeting for that purpose:

     (i)  Loans  made by us will be  limited to  churches  and other  non-profit
          religious  organizations,  and will be secured by mortgages. The total
          principal  amount of all second  mortgage  loans that we fund shall be
          limited to 20% of Average  Invested  Assets.  All other  loans will be
          first mortgage loans.

     (ii) The total  principal  amount of  mortgage-secured  debt  securities we
          purchase from churches and other non-profit religious organizations is
          limited to 30% of our Average Invested Assets.


                                        7

<PAGE>

     (iii)The loan amount  cannot exceed 75% of the value of the real estate and
          improvements  securing each loan, such value being determined based on
          a  written  appraisal  prepared  by an  appraiser  acceptable  to  the
          Advisor.  On all loans, we will require a written appraisal  certified
          by a member of the Appraisal  Institute ("MAI"),  or a state-certified
          appraiser.

     (iv) An ALTA (American Land Title Association) or equivalent Mortgage Title
          Policy must be furnished  to us by the borrower  insuring our mortgage
          interest.

     (v)  The  borrower's  long-term  debt  (including the proposed loan) cannot
          exceed  four times  their gross  income for the  previous  twelve (12)
          months.

     (vi) The borrower must furnish us with financial  statements (balance sheet
          and income and expense  statement)  for their last three (3)  complete
          fiscal years and a current  financial  statement for the period within
          ninety days of the loan  closing  date.  On loans of $500,000 or less,
          the last  complete  fiscal  year must be  reviewed  by an  independent
          accounting  firm.  On loans in excess of $500,000,  the last  complete
          fiscal year  financial  statements  must be audited by an  independent
          auditor.  Borrowers in existence for less than three fiscal years must
          provide  financial  statements since their inception.  No loan will be
          extended to a borrower in operation less than two years absent express
          approval by our Board of Directors.

     (vii)The Advisor  typically  requires the borrower to arrange for automatic
          electronic payment or drafting of monthly payments.

     (viii) The Advisor may require (i) key-man  life  insurance  on the life of
          the senior  pastor of a church;  (ii)  personal  guarantees  of church
          members and/or affiliates;  and (iii) other security  enhancements for
          our benefit.

     (ix) The  borrower  must agree to provide to us annual  reports  (including
          financial  statements)  within  120  days  of  each  fiscal  year  end
          beginning  with the fiscal year end next  following the funding of the
          loan.

     (x)  The  Advisor  may  require  the  borrower  to grant  to us a  security
          interest in all personal  property  located and to be located upon the
          mortgaged premises (excluding property leased by the borrower).

     (xi) We  require  borrowers  to  maintain a general  perils  and  liability
          coverage  insurance  policy naming us as the  loss-payee in connection
          with  damage or  destruction  to the  property of the  borrower  which
          typically includes  weather-related damage, fire, vandalism and theft.
          Our  advisor may require  the  borrower to provide  flood,  earthquake
          and/or other special coverage.

     These Financing Policies are in addition to the prohibited  investments and
activities identified hereinafter and which are set forth in our bylaws.

Prohibited Investments and Activities

     Our bylaws impose certain  prohibitions  and restrictions on our investment
practices and lending activities, including prohibitions against:

     (i)  Investing  more  than  10% of our  total  assets  in  unimproved  real
          property or mortgage loans on unimproved real property;

     (ii) Investing in commodities  or commodity  futures  contracts  other than
          "interest rate futures" contracts intended only for hedging purposes;

     (iii)Investing in mortgage loans (including  construction loans) on any one
          property  which in the aggregate  with all other mortgage loans on the
          property  would  exceed  75% of the  appraised  value of the  property
          unless  substantial  justification  exists  because of the presence of
          other underwriting criteria;

     (iv) Investing in mortgage  loans that are  subordinate  to any mortgage or
          equity  interest  of the  Advisor  or the  Directors  or any of  their
          Affiliates;

     (v)  Investing in equity securities;

     (vi) Engaging  in  any  short  sales  of  securities  or  in  trading,   as
          distinguished from investment activities;

     (vii) Issuing redeemable equity securities;


                                        8

<PAGE>



     (viii) Engaging in  underwriting  or the agency  distribution of securities
          issued by others;

     (ix) Issuing  options or  warrants  to  purchase  our Shares at an exercise
          price less than the fair market value of the Shares on the date of the
          issuance or if the issuance  thereof would exceed 10% in the aggregate
          of our outstanding Shares;

     (x)  The aggregate  borrowings of the  corporation,  secured and unsecured,
          shall be  reasonable  in relation to the  Shareholder's  Equity of the
          corporation  and shall be reviewed  by the  Independent  Directors  at
          least  quarterly.  The  maximum  amount of such  borrowings  shall not
          exceed 300% of  Shareholder's  Equity in the absence of a satisfactory
          showing that a higher level of borrowing is appropriate;

     (xi) Investing in real estate  contracts of sale unless such  contracts are
          in  recordable  form and are  appropriately  recorded  in the chain of
          title;

     (xii)Selling  or  leasing  to the  Advisor,  a  Director  or any  Affiliate
          thereof  unless  approved by a majority of our Directors  (including a
          majority  of  our  Independent  Directors),   who  are  not  otherwise
          interested in such transaction, as being fair and reasonable to us;

     (xiii) Acquiring  property  from any Advisor or Director,  or any Affiliate
          thereof,  unless a majority of our Directors  (including a majority of
          our  Independent  Directors) who are not otherwise  interested in such
          transaction  approve the  transaction as being fair and reasonable and
          at a price  to us which is no  greater  than the cost of the  asset to
          such Advisor, Director or any Affiliate thereof, or if the price to us
          is in excess of such cost,  that  substantial  justification  for such
          excess  exists and such  excess is  reasonable.  In no event shall the
          cost of such asset exceed its current appraised value;

     (xiv)Investing or making  mortgage  loans unless a  mortgagee's  or owner's
          title  insurance  policy  or  commitment  as to  the  priority  of the
          mortgage or condition of title is obtained; or

     (xv) Issuing   shares  on  a  deferred   payment  basis  or  other  similar
          arrangement.

     We do not invest in the  securities  of other  issuers  for the  purpose of
exercising control, to engage in the purchase and sale of investments other than
as described in this Report, to offer securities in exchange for property unless
deemed prudent by a majority of the Directors,  to issue senior securities or to
make loans to other  persons  except in the  ordinary  course of our business as
described herein.

     We will not make loans to or borrow from, or enter into any contract, joint
venture or transaction  with,  any of our Directors or officers,  the Advisor or
any  Affiliate  of any of the  foregoing  unless a  majority  of our  Directors,
including a majority of our Independent  Directors,  approves the transaction as
fair and reasonable to us and the transaction is on terms and conditions no less
favorable  to us than those  available  from  unaffiliated  third  parties.  Any
investment  by us in any  property,  mortgage  or  other  real  estate  interest
pursuant to a transaction  with the Advisor or any Directors or officers thereof
will be based upon an appraisal of the  underlying  property from an independent
qualified  appraiser selected by the Independent  Directors and will not be made
at a price greater than fair market value as determined by such appraisal.

Competition

     The  business of making loans to churches  and other  non-profit  religious
organizations is highly competitive. We compete with a wide variety of investors
and other lenders,  including banks,  savings and loan  associations,  insurance
companies,  pension funds and fraternal  organizations which may have investment
objectives  similar  to our own.  A number  of these  competitors  have  greater
financial resources, larger staffs and longer operating histories than we do. We
compete  principally by limiting our business "niche" to lending to churches and
other non-profit  religious  organizations,  offering loans with competitive and
flexible  terms,  and  emphasizing  our  expertise in the  specialized  industry
segment of lending to churches and other religious organizations.

Employees

     We have no employees.  Our daily  operations and other material  aspects of
our business are managed by the Advisor on a "turn-key" basis using employees of
the Advisor and/or its Affiliates. At present, certain officers and directors of
American  and the  Advisor are  providing  services to us at no charge and which
will not be reimbursed to them. These services include,  among others, legal and
analytic  services  relating to the execution of our business plan,  development
and  preparation of reports to be filed under the  Securities  Exchange Act, and
utilization  of  proprietary  forms and  documents  utilized  by the  Advisor in
connection with our business operations.


                                        9

<PAGE>

     Subject to the  supervision  of the Board of  Directors,  our  business  is
managed by Church  Loan  Advisors,  Inc.  (the  "Advisor"),  which  provides  us
investment advisory and administrative  services. The Advisor is owned by Philip
J. Myers.  Mr.  Myers is  President  of the Advisor  and  President  of American
Investors Group, Inc., the underwriter of our past and current public offerings.
The Advisor  employs  three  persons on a part-time or other basis.  The Company
does not  presently  expect to directly  employ any  persons in the  foreseeable
future, since all of our administrative  functions and operations are contracted
for through the Advisor.  However,  legal, accounting and certain other services
are provided to us by outside professionals and paid by us directly.

Operations

     Our  operations  currently  are located in the 8,200 square foot offices of
the Advisor's  affiliate,  American  Investors Group,  Inc., 10237 Yellow Circle
Drive, Minnetonka,  Minnesota 55343. These facilities are owned by Yellow Circle
Partners,  L.L.P.,  a  partnership  owned by Philip J. Myers our President and a
member of our Board of  Directors.  We are not  charged  any rent for our use of
these  facilities,  or for our use of copying  services,  telephones,  facsimile
machines,  postage service,  office supplies or employee  services,  since these
costs are covered by the advisory fee paid to the Advisor.

Risks Related to Mortgage Lending

     We Are Subject to the Risks  Generally  Associated  with Mortgage  Lending.
Mortgage  lending involves various risks,  many of which are  unpredictable  and
beyond our control and  foresight.  It is not possible to identify all potential
risks  associated  with  mortgage  lending.   Some  of  the  more  common  risks
encountered may be summarized as follows:

<TABLE>
<CAPTION>

<S> <C>                                             <C> <C>
..   low demand for mortgage loans                   .   availability of alternative financing and competitive
..   interest rate fluctuations                           conditions
..   changes in the level of consumer confidence     .   factors affecting specific borrowers
..   availability of credit-worthy borrowers         .   interest rate fluctuations
..   national and local economic conditions          .   losses associated with default, foreclosure of a mortgage,
..   demographic and population patterns                  and sale of the mortgaged property
..   zoning regulations                              .   state and federal laws and regulations
..   taxes and tax law changes                       .   bankruptcy or insolvency of a borrower
</TABLE>

     Second Mortgage Loans Pose Additional  Risks. Our financing  policies allow
us to make second  mortgage  loans.  The principal  amount of such loans may not
exceed 20% of our average  invested  assets.  Second  mortgage loans entail more
risk than first mortgage loans,  as foreclosure of senior  indebtedness or liens
could require us to pay the senior debt or risk losing our mortgage.

     Fixed-Rate  Debt  Can  Result  in  Yield   Fluctuations.   Fixed-rate  debt
obligations carry certain risks. A general rise in interest rates could make the
yield on a particular  mortgage  loan lower than  prevailing  rates.  This could
negatively  affect  our value and  consequently  the value of our shares and the
certificates.  Neither we nor our advisor can predict changes in interest rates.
We will  attempt  to reduce  this risk by  maintaining  medium  and  longer-term
mortgage loans and through  offering  adjustable rate loans to borrowers.  We do
not intend to borrow funds or sell  certificates  if the cost of such  borrowing
exceeds the income we believe we can earn from lending the funds.

     The Mortgage Banking Industry Is Highly Competitive. We compete with a wide
variety of lenders,  including banks,  savings and loan associations,  insurance
companies,  pension funds and fraternal  organizations  for mortgage loans. Many
competitors have greater financial resources, larger staffs and longer operating
histories  than we have, and thus may be a more  attractive  lender to potential
borrowers.  We intend to compete by limiting our business  "niche" to lending to
churches  and other  non-profit  religious  organizations,  offering  loans with
competitive and flexible terms, and emphasizing our expertise in the specialized
industry  segment  of  lending  to  churches  and  other  non-profit   religious
organizations.

     Fluctuations  in  Interest  Rates  May  Affect  Our  Ability  to Repay  the
Certificates.  Prevailing  market  interest rates impact  borrower  decisions to
obtain new loans or to  refinance  existing  loans,  possibly  having a negative
effect upon our ability to originate  mortgage loans. If interest rates decrease
and the  economic  advantages  of  refinancing  mortgage  loans  increase,  then
prepayments  of higher  interest  mortgage  loans in our portfolio  would likely
reduce our portfolio's overall rate of return (yield).

     We Are Subject to the Risks  Associated  with  Fluctuations in National and
Local Economic Conditions. The mortgage lending industry is subject to increased
credit risks and rates of foreclosures during economic  downturns.  In addition,
because we provide  mortgages to churches and other religious  organizations who
generally  receive  financing through  charitable  contributions,  our financial
results are subject to fluctuations based on a lack of consumer  confidence or a
severe or prolonged national or regional

                                       10

<PAGE>

recession. As a result of these and other circumstances, our potential borrowers
may decide to defer or terminate plans for financing their properties decreasing
demand for mortgage loans. In addition, during such economic times we may be
unable to locate as many credit-worthy borrowers.

     Our Business May Be Adversely Affected If Our Borrowers Become Insolvent or
Bankrupt.  If any of our borrowers become insolvent or bankrupt,  the borrower's
mortgage  payments will be delayed and may cease  entirely.  We may be forced to
foreclose  on the  mortgage  and take legal  title to the real  estate and incur
expenses related to the foreclosure and disposition of the property. As of March
30, 2005, we had three first  mortgage  loans that are three or more payments in
arrears  and one  foreclosed  property  for  sale  totaling  $1,359,977.  We are
continuing to work with the borrowers of one of the loans  totaling  $403,378 to
bring their payments current. We have initiated  foreclosure  proceedings on two
loans totaling $740,247 and expect to take possession of these churches and list
their  properties for sale. We have  foreclosed on one church loan in the amount
of $216,352 and currently have this property listed with a local realtor. We may
incur a loss in these  transactions  if the borrower of the first loan is unable
to bring its  payments  current  and if we are  unable to  dispose  of the three
remaining  properties  and are unable to recoup  our  expenses  and  outstanding
balance from the sale of these properties.

Risks Related to Mortgage Lending to Churches

     Churches Rely on Member Contributions to Repay Our Loans.  Churches rely on
member  contributions for their primary source of income.  Member  contributions
are used to repay  our  loans.  The  membership  of a church  or the per  capita
contributions of its members may not increase or remain constant after a loan is
funded.  A decrease  in a  church's  income  could  result in its  temporary  or
continued inability to pay its obligation to us, which may affect our ability to
pay  dividends  on our common  stock or pay  interest  or  principal  due on the
certificates.  We have no control over the financial  performance of a borrowing
church after a loan is funded.

     Churches Depend Upon Their Senior Pastors. A church's senior pastor usually
plays an important role in the  management,  spiritual  leadership and continued
viability of that church. A senior pastor's absence,  resignation or death could
have a negative impact on a church's operations,  and thus its continued ability
to generate revenues sufficient to service its obligations to us.

     The Limited Use Nature of Church  Facilities  Can Limit the Resale Value of
Our Mortgage  Collateral.  Our loans are secured  principally by first mortgages
upon the  real  estate  and  improvements  owned  or to be  owned  by  borrowing
churches.   Although  we  will  require  an  appraisal  of  the  premises  as  a
pre-condition  to making a loan, the appraised  value of the premises  cannot be
relied upon as being the actual  amount  which might be obtained in the event we
need to foreclose after a default by the borrower.  The actual liquidation value
of church,  school or other  institutional  premises could be adversely affected
by, among other factors:  (i) its limited use nature;  (ii) the  availability on
the market of similar properties;  (iii) the availability and cost of financing,
rehabilitation or renovation to prospective  buyers; (iv) the length of time the
seller is willing to hold the property on the market; or (v) the availability in
the area of the mortgaged  property of  congregations or other buyers willing to
pay the fair value for a church facility. This factor may influence our decision
to restructure the terms of a non-performing loan rather than foreclosing on the
church property.

     Expenses of Foreclosure  May Prevent Us From Recovering the Full Value of a
Loan.  If we  foreclose  on a mortgage  and take legal title to a church's  real
estate,  real estate  taxes could be levied and  assessed  against the  property
until sold since the property  would no longer be owned by a non-profit  entity.
The  property  may also  incur  operating  expenses  pending  its sale,  such as
property insurance,  security, repairs and maintenance.  These expenses would be
our financial responsibility,  and could be substantial in relation to our prior
loan if we cannot readily  dispose of the property.  Such expenses could prevent
us from recovering the full value of a loan in the event of foreclosure.

Risks Related to Us

     Our Failure to Qualify as a Real Estate  Investment  Trust Could Reduce the
Funds We Have Available For Investment.  We operate as a real estate  investment
trust.  As a  REIT,  we are  allowed  a  deduction  for  dividends  paid  to our
shareholders in computing our taxable income.  Thus, only our  shareholders  are
taxed on our taxable  income that we distribute.  This  treatment  substantially
eliminates  the "double  taxation"  of earnings to which most  corporations  and
their shareholders are subject. Qualification as a REIT involves the application
of highly technical and complex Internal Revenue Code provisions.

     To qualify and  maintain our status as a REIT,  we must meet certain  share
ownership,  income,  asset and  distribution  tests on a  continuing  basis.  No
assurance can be given that we will satisfy  these tests at all times.  Further,
the requirements for a REIT may substantially affect day-to-day  decision-making
by our advisor.  Our advisor may be forced to take action it would not otherwise
take or refrain  from action  which might  otherwise  be  desirable  in order to
maintain our REIT status.

     If we fail to  qualify  as a REIT in any  taxable  year,  then we  would be
subject to federal income tax on our taxable income at regular  corporate  rates
and not be allowed a deduction for  distributions to  shareholders.  We would be
disqualified  from treatment as a REIT for the four taxable years  following the
year of losing our REIT status. We intend to operate as a REIT. However,  future
economic,  market,  legal,  tax or other  consequences  may  cause  our board of
directors to revoke the REIT election. The payment of


                                       11

<PAGE>

taxes resulting from our disqualification as a REIT or revocation of REIT status
would  reduce  the funds  available  for  distribution  to  shareholders  or for
investment.  Because  interest paid to certificate  holders will be a deductible
business expense to us, loss of our REIT status would not necessarily impede our
ability to make interest payments to holders of certificates.

     Conflicts of Interest  Arise From Our  Relationship  with Our Advisor.  The
terms of transactions  involving our formation and the formation of our advisor,
and our  contractual  relationship  with our  advisor,  were not  negotiated  at
arm's-length.  Our non- independent directors and officers may have conflicts of
interest in enforcing  agreements  between us and our advisor.  Future  business
arrangements and agreements between us and our advisor and their affiliates must
be approved by our board of directors,  including a majority of our  independent
directors.

Risks Related to the Shares

     There Is No  Public  Market  for Our  Shares.  There is no  market  for our
shares. It is unlikely that a market will develop. There are no current plans to
list on any exchange or qualify our shares for quotation on NASDAQ. In addition,
the market for REIT  securities  historically  has been less  liquid  than other
types of publicly-traded equity securities.

     There Are Restrictions on Certain Transfers of Our Shares.  Our articles of
incorporation  and bylaws  prohibit a transfer of shares to any person who, as a
result,  would  beneficially  own  shares in  excess of 9.8% of the  outstanding
capital stock and allow us to redeem shares held by any person in excess of 9.8%
of the outstanding  capital stock.  These  provisions may reduce market activity
for the shares and the  opportunity  for  shareholders  to receive a premium for
their shares.

     Fluctuations  in  Interest  Rates  May  Cause  the  Value of Our  Shares to
Fluctuate.  Prevailing market interest rates impact borrower decisions to obtain
new loans or to refinance existing loans, possibly having a negative effect upon
our ability to originate  mortgage  loans.  Fluctuations  in interest  rates may
cause the value of the shares to  fluctuate  unpredictably.  If  interest  rates
decrease and the economic  advantages of refinancing  mortgage  loans  increase,
then prepayments of higher interest mortgage loans in our portfolio would likely
reduce the portfolio's overall rate of return (yield).

     Interest  Payments to Certificate  Holders May Reduce Dividend  Payments on
Our Shares.  We are deploying the funds  received from the sale of  Certificates
into new loans at rates  that  provide a positive  interest  rate  spread.  This
spread,  however,  may be  materially  and  adversely  affected  by  changes  in
prevailing  interest rates which would reduce our net income. If this occurs, we
may not have sufficient net income after paying interest on the  certificates to
maintain dividends to shareholders at the levels paid in the past or even to pay
dividends at all. In addition,  because  dividends are directly  affected by the
yields  generated on the  Company's  portfolio of loans and bonds,  shareholders
dividends  can be  expected  to  fluctuate  significantly  with  interest  rates
generally.

Risks Related to the Certificates

     We May Incur More Indebtedness. We may incur additional indebtedness in the
future. We may assign or pledge some of our mortgage-secured promissory notes or
other collateral in connection with incurring this additional indebtedness.  Our
ability to incur additional  indebtedness  was previously  limited to 50% of our
Average Invested Assets by our bylaws. In May of 2004, our shareholders ratified
an amendment to our by-laws allowing us to incur  indebtedness up to 300% of our
shareholder   equity,  the  level  permitted  under  North  American  Securities
Administrators Association ("NASAA") guidelines.

     There Are Potential Adverse Effects Associated With Lending Borrowed Funds.
We are deploying the proceeds from the sale of Investor Saver  Certificates into
loans to churches and other  non-profit  religious  organizations.  We have also
used our line of credit with Beacon  Bank,  Shorewood,  Minnesota,  from time to
time,  to fund  loans,  and  intend to use our line of credit in this way in the
future.  Lending  borrowed funds is subject to greater risks than in unleveraged
lending. The profit we realize from lending borrowed funds is largely determined
by the  difference,  or  "spread,"  between  the  interest  rates  we pay on the
borrowed  funds and the interest rates that our borrowers pay us. Our spread may
be materially and adversely  affected by changes in prevailing  interest  rates.
Furthermore,  the financing costs  associated with lending  borrowed funds could
decrease the effective spread in lending  borrowed funds,  which could adversely
affect our ability to pay interest on and repay the certificates as they mature.
The Company's  management  believes that it is  advantageous to raise capital at
this  time  through  the  issuance  of  Investor  Saver   Certificates   due  to
historically low interest rates.

     There Is No Public Market for the Certificates.  There is no market for the
certificates.  It is unlikely that a market will  develop.  There are no current
plans to list on any  exchange  or qualify our  certificates  for  quotation  on
NASDAQ. In addition,  the market for REIT securities  historically has been less
liquid than other types of publicly-traded securities.

     There Is No  Sinking  Fund,  Insurance  or  Guarantee  Associated  With the
Certificates.  We do not contribute funds to a separate account,  commonly known
as a sinking  fund,  to repay  principal  or interest on the  certificates  upon
maturity or default. Our certificates are not certificates of deposit or similar
obligations of, or guaranteed by, any depository institution. Further, no


                                       12

<PAGE>

governmental or other entity insures or guarantees  payment on the  certificates
if we do  not  have  enough  funds  to  make  principal  or  interest  payments.
Therefore,  holders  of our  certificates  have  to  rely  on our  revenue  from
operations,  along  with  the  security  provided  by  the  collateral  for  the
certificates, for repayment of principal and interest on the certificates.

     The Collateral for the Certificates May Not Be Adequate If We Default.  The
certificates must at all times be secured by  mortgage-secured  promissory notes
and church bonds having an outstanding  principal balance equal to at least 100%
of the outstanding  principal balance of the certificates.  If we default in the
repayment of the certificates,  or another event of default occurs,  the trustee
will not be able to foreclose on the mortgages securing the promissory notes and
bonds in order to obtain funds to repay certificate holders. Rather, the trustee
will need to look to the revenue stream associated with our borrowers'  payments
on or repayment of the promissory  notes and bonds or revenue  derived from sale
of the promissory notes or bonds to repay  certificate  holders.  If the trustee
chooses to rely on revenues received from our borrowers, certificate holders may
face a delay in payment on  certificates  in the event of default,  as borrowers
will repay their  obligations to us in accordance  with  amortization  schedules
associated with their  promissory notes or bonds. If the trustee chooses to sell
promissory  notes or bonds in the event of our default,  the  proceeds  from the
sales may not be  sufficient  to repay our  obligations  on all  outstanding  or
defaulted certificates.

     The  Certificates  Are  Not  Negotiable  Instruments  and  Are  Subject  to
Restrictions on Transfer.  The certificates are not negotiable debt instruments.
Rights of record  ownership of the certificates may be transferred only with our
advisor's prior written consent.  Certificate  holders are not be able to freely
transfer the certificates.

     We Are  Obligated  To Redeem  Certificates  Only In Limited  Circumstances.
Certificate  holders  have no  right to  require  us to  prepay  or  redeem  any
certificate  prior to its  maturity  date,  except in the case of death or if we
replace our current advisor. Further, even in the event of death, we will not be
required  to  redeem  certificates  if we have  redeemed  at  least  $25,000  of
principal  amount of  certificates  during  the  calendar  quarter.  There is no
present intention to redeem certificates prior to maturity except in the case of
death of a certificate holder.

     We May Not Have  Sufficient  Available  Cash to Redeem  Certificates  If We
Terminate Our Advisory  Agreement With Our Current Advisor.  We will be required
to offer to redeem all  outstanding  certificates  if we terminate  our advisory
agreement with Church Loan Advisors,  Inc., our current advisor, for any reason.
If the holders of a significant principal amount of certificates request that we
redeem their certificates,  we may be required to sell a portion of our mortgage
loan and church bond portfolio to satisfy the redemption requests. Any such sale
would  likely be at a discount to the recorded  value of the mortgage  loans and
bonds being sold. Further, if we are unable to sell loans or church bonds in our
portfolio, we may be unable to satisfy the redemption obligations.

     The Indenture Contains Limited Protection For Holders of Certificates.  The
indenture  governing the  certificates  contains only limited  events of default
other than our failure to pay  principal  and  interest on the  certificates  on
time. Further, the indenture provides for only limited protection for holders of
certificates upon a consolidation or merger between us and another entity or the
sale or transfer of all or substantially all of our assets. If we default in the
repayment of the certificates under the indenture, certificate holders will have
to rely on the trustee to exercise  any  remedies on their  behalf.  Certificate
holders will not be able to seek remedies against us directly.

Risks Related to Management

     We Are Dependent Upon Our Advisor. Our advisor, Church Loan Advisors, Inc.,
manages us and selects our  investments  subject to general  supervision  by our
board of directors and compliance with our lending policies.  We depend upon our
advisor and its  personnel  for most  aspects of our  business  operations.  Our
success  depends  on the  success  of our  advisor  in  locating  borrowers  and
negotiating loans upon terms favorable to us. Among others, our advisor performs
the following services for us:

<TABLE>
<CAPTION>
<S>  <C>                                                       <C>  <C>
..    mortgage loan marketing and procurement                   .    managing relationships with our accountants and attorneys
..    bond portfolio selection and investment                   .    corporate management
..    mortgage loan underwriting                                .    bookkeeping
..    mortgage loan servicing                                   .    reporting to state, federal, tax and other regulatory
..    money management                                                 authorities
..    developing and maintaining business relationships         .    reports to shareholders and shareholder relations
..    maintaining "goodwill"                                    .    loan enforcement and collections
</TABLE>

     Our  shareholders'  right to participate in management is generally limited
to the  election  of  directors.  Certificate  holders  will  have no  right  to
participate in our  management.  Certificate  holders must be willing to entrust
our management to our advisor and our board of directors.

                                       13

<PAGE>

     We Have Conflicts of Interest with Our Advisor and Affiliates. Affiliations
and conflicts of interests  exist among our officers and directors and the owner
and  officers  and  directors  of our  advisor and  affiliates.  Our advisor and
affiliates are both owned by our President,  Philip Myers. Our President and the
officers  and  directors  of our  advisor are  involved in the church  financing
business  through  their   affiliations  with  American   Investors  Group,  Inc
("American ").  American  originates,  offers and sells first mortgage bonds for
churches.  We may  purchase  first  mortgage  bonds  issued by churches  through
American in its capacity as underwriter for the issuing church,  or as broker or
dealer  on  the  secondary  market.  In  such  event,   American  would  receive
commissions  (paid by the issuing church) on original issue bonds, or "mark-ups"
in connection  with any secondary  transactions.  If we sell church bonds in our
portfolio,  the bonds  will be sold  through  American.  We would  pay  American
commissions in connection with such transactions,  but in no event, in excess of
those normally charged to customers.

     Our bylaws limit the amount of all commissions, mark-downs or mark-ups paid
to American. Our business dealings with our advisor and its affiliates also must
be approved by a majority of our board of directors, including a majority of our
independent directors.

     Generally, mortgage loans we originate are smaller than the bond financings
originated by American.  However,  there may be circumstances  where our advisor
and American could recommend either type of financing to a prospective borrower.
The decisions of our advisor and American could affect the credit quality of our
portfolio.

     Redemption  Obligations Relating to the Certificates May Affect Our Ability
to Replace our Advisor.  We will be required to offer to redeem all  outstanding
certificates  if we terminate our advisory  agreement with Church Loan Advisors,
Inc. Our  independent  directors are required to review and approve the advisory
agreement with our advisor on an annual basis. The redemption provision relating
to the  certificates  may have the effect of reducing our ability to replace our
current advisor.

Risks Related to Environmental Laws

     We May Face Liability Under  Environmental  Laws. Under federal,  state and
local laws and  regulations,  a secured  lender  (like us) may be liable,  under
certain  limited  circumstances,  for the costs of  removal  or  remediation  of
certain  hazardous or toxic  substances  and other costs  (including  government
fines and injuries to persons and adjacent  property).  Liability may be imposed
whether or not the owner or lender knew of, or was responsible for, the presence
of  hazardous  or toxic  substances.  The costs of  remediation  or  removal  of
hazardous or toxic substances, or of fines for personal or property damages, may
be  substantial  and  material  to our  business  operations.  The  presence  of
hazardous  or toxic  substances,  or the  failure  to  promptly  remediate  such
substances,  may adversely  affect our ability to resell real estate  collateral
after  foreclosure or could cause us to forego  foreclosure.  This is a changing
area of the law.  The  courts  have  found  both in  favor  and  against  lender
liability in this area under various factual scenarios.

     The   Collateral   For  Our  Loans  and  Our  Lenders  May  Be  Subject  to
Environmental  Claims. If there are environmental  problems  associated with the
real estate  securing any of our loans,  the  associated  remediation or removal
requirements  imposed by federal,  state and local laws could affect our ability
to realize value on our collateral or our borrower's ability to repay its loan.


                                       14

<PAGE>

Item 2.   Description of Property

     Our  operations  are located in the leased  offices of  American  Investors
Group, Inc., in Minnetonka,  Minnesota.  It is expected that for the foreseeable
future our  operations  will  continue  to be housed in these or similar  leased
premises along with American's  operations and those of the Advisor.  We are not
directly  charged for rent,  nor do we incur other costs relating to such leased
space, since the Advisor is including this expense in the Advisory Fee.

     Foreclosure was completed on a church located in Battle Creek, Michigan. We
have  determined  the fair  value of the  property  to be  $105,000.  The church
congregation has disbanded and the church's property is currently unoccupied. We
have  taken  possession  of the church and have  listed  the  property  for sale
through a local realtor.

Item 3.   Legal Proceedings.

     There are presently no legal actions  against us or our advisor  pending or
threatend.

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

         None.


                                     PART II

Item 5. Market for Common Equity, Related Stockholder Matters and Small Business
     Issuer Purchases of Equity Securities.

         Outstanding Securities

     As of  February  28,  2005,  2,551,568  shares  of  our  common  stock  and
$19,788,000  of investor  saver  certificates  were issued and  outstanding.  On
October 7, 2004, the Securities and Exchange  Commission  declared effective our
fifth public  offering of  $23,000,000 of investor  saver  certificates.  We are
currently   offering  investor  saver   certificates   under  this  registration
statement.

Lack of Liquidity and Absence of Public Market Price.

     There  is no  market  for our  common  shares.  It is not  expected  that a
material  market for the shares will  develop any time soon.  In  addition,  the
market for REIT  securities  historically  has been less  liquid  than  non-real
estate types of publicly-traded  equity securities.  Because of such illiquidity
and the fact  that the  shares  would be valued  by  market-makers  (if a market
develops)  based on market  forces which  consider  various  factors  beyond our
control,  there can be no  assurance  that the market value of the shares at any
given time would be the same or higher  than the  public  purchase  price of our
shares.  In addition,  the market price,  if any develops,  could decline if the
yields from other competitive investments exceed the actual dividends paid by us
on our shares.  Our common stock is not listed on any exchange and is not quoted
on the National  Association of Securities  Dealers,  Inc.  Automated  Quotation
System  ("NASDAQ").  However,  we have  valued our shares at $10 per share since
this has been the public offering price for our shares.

Repurchase of Our Shares

     Although our common shares are not redeemable by us, we may at our complete
discretion,   repurchase  shares  offered  to  us  from  time  to  time  by  our
shareholders.  In such  event,  we may pay  whatever  price  the  Advisor  deems
appropriate  and   reasonable,   and  any  such  shares   repurchased   will  be
re-designated  as  "unissued,"  will no longer be  entitled to  distribution  of
dividends and will cease to have voting rights.














                                       15

<PAGE>



     We repurchased  the following  shares as outlined in the table below during
fiscal year of 2004:
<TABLE>
<CAPTION>
       Period                     Number of Shares            Average Price Paid Per Share
<S>                          <C>                              <C>
============================ ===============================  =================================
1st Quarter 2005                          3,750                             $9.00
2nd Quarter 2004                          5,259                             $9.05
3rd Quarter 2004                           635                              $9.40
4th Quarter 2004                          None                                -
Totals:                                   9,644                             $9.15
============================ ===============================  =================================
</TABLE>

     We are under no obligation to purchase shares from  shareholders.  However,
any shares we purchase and the price we pay to shareholders  for their shares is
at complete  discretion  of our  advisor.  Shares  purchased  were not part of a
publicly  announced  plan to  repurchase  shares  nor does the  Company  plan or
anticipate any stock repurchase plans.

Holders of Our Common Shares

     As of February 28, 2005, we had 1,099 record holders of our $.01 par common
stock,  including our first Shareholder,  Apostle Holdings Corp. (formerly known
as: DRM Holdings,  Inc.), a Minnesota  corporation and affiliate of the Advisor,
which owns 20,000 shares for which it paid $200,000 ($10.00 per share).

Dividends

     We paid  dividends  for the  prior  fiscal  years  on our  common  stock as
follows:


<TABLE>
<CAPTION>
     For Quarter                Dollar Amount Distributed                  Annualized Yield Per $10
       Ended:                          Per Share:                             Share Represented:
                                2004                   2003                  2004               2003


<S>        <C>                 <C>                   <C>                    <C>                <C>
     March 31st                $.1625                $.165625               6.50%              6.625%
      June 30th               $.153125                $.1625                6.125%              6.50%
   September 30th             $.165625               $.153125               6.625%             6.125%
    December 31st              $.1875                $.16875                7.50%               6.75%
</TABLE>

     As a Real Estate Investment Trust, we make regular quarterly  distributions
to  shareholders.  The amount of distributions to them equal at least 90% of our
"real estate  investment trust taxable income."  Shareholder  distributions  are
estimated for our first three  quarters  each fiscal year and adjusted  annually
based  upon  our  audited  year-end   financial   report.   Cash  available  for
distribution to our Shareholders is derived  primarily from the interest portion
of monthly mortgage  payments we receive from churches  borrowing money from us,
from origination and other fees paid to us by borrowers in connection with loans
we make, interest income from mortgage-backed  securities issued by churches and
other non-profit religious organizations purchased and held by us for investment
purposes,  and  earnings on any  permitted  temporary  investments  made us. All
dividends  are paid by us at the  discretion  of the Board of Directors and will
depend upon our earnings and  financial  condition,  maintenance  of real estate
investment  trust  status,   funds  available  for   distribution,   results  of
operations,  economic  conditions,  and  such  other  factors  as our  Board  of
Directors deems relevant.

     During any period  where our shares of common  stock are being  offered and
sold and the proceeds therefrom  accumulated for the purpose of funding loans to
be made  by us,  the  relative  yield  generated  by such  capital,  and,  thus,
dividends (if any) to  shareholders,  could be less than expected  until we have
fully  invested such funds into loans.  We intend to combat to the extent we can
the  possibility of low yields during the periods in which we are selling shares
by (i) collecting  from borrowers an origination fee at the time a loan is made,
(ii) timing our lending activities to coincide as much as possible with sales of
our  securities,  and  (iii)  investing  our  undeployed  capital  in  Permitted
Temporary  Investments  that offer the highest  yields  together with safety and
liquidity. However, there can be no assurance that these strategies will improve
current yields to our  Shareholders  in periods of our business  operations when
capital is being raised through the sale of additional  securities.  In order to
qualify for the beneficial tax treatment  afforded real estate investment trusts
by the Internal Revenue Code, we are required to pay dividends to holders of our
Shares in  annual  amounts  which are equal to at least 90% of our "real  estate
investment trust taxable income." For the fiscal year ended December 31, 2004 we
distributed  substantially  all of our taxable income to our Shareholders in the
form of quarterly dividends.



                                       16

<PAGE>

We  intend  to  continue  distributing  virtually  all  of  such  income  to our
Shareholders  on a  quarterly  basis,  subject  to (i)  limitations  imposed  by
applicable state law, and (ii) the factors  identified above. The portion of any
dividend  that exceeds our  earnings and profits will be  considered a return of
capital and will not  currently  be subject to federal  income tax to the extent
that such dividends do not exceed a Shareholder's basis in their Shares.

     Funds available to us from the repayment of principal  (whether at maturity
or  otherwise)  of loans  made by us, or from sale or other  disposition  of any
properties  or any of our other  investments,  may be  reinvested  in additional
loans to churches,  invested in mortgage-backed securities issued by churches or
other non-profit  organizations,  or in Permitted Temporary Investments,  rather
than  distributed  to the  shareholders.  We can pass  through the capital  gain
character  of any  income  generated  by  computing  its net  capital  gains and
designating a like amount of our  distribution  to our  shareholders as "capital
gain  dividends." The  distribution  requirement to maintain  qualification as a
real estate investment trust does not require distribution of net capital gains,
if generated. Thus, if we have a choice of whether to distribute any such gains,
undistributed  net  capital  gains (if any) will be  taxable to us. The Board of
Directors,  including a majority of the  Independent  Directors,  will determine
whether and to what extent the proceeds of any  disposition  of property will be
distributed to our shareholders.


Item 6.  Management's Discussion and Analysis or Plan of Operation.

     The following  discussion regarding our financial statements should be read
in conjunction with the financial  statements and notes thereto included in this
Report beginning at page F-1.

Financial Condition

     Our total  assets  increased  from  $37,138,987  at  December  31,  2003 to
$43,054,734 at December 31, 2004 and increased from  $29,235,738 at December 31,
2002 to $37,138,987 at December 31, 2003. The primary reason for the increase in
total assets from  December  31, 2002 through  December 31, 2004 was a result of
the sale and  issuance  of our  common  stock and  investor  saver  certificates
pursuant to our fourth and fifth  public  offerings,  the proceeds of which were
(and continue to be) deployed into new mortgage loans. Shareholders' Equity rose
from  $21,864,907  at December 31, 2003 to  $22,716,922 at December 31, 2004 for
the same reasons.  Our liabilities  for both periods are largely  comprised of a
"Deferred  Income" item,  reflecting our practice of recognizing our origination
income -- fees charged to borrowers at the commencement of its loans -- over the
life  of each  loan.  Another  material  liability  for  both  periods  includes
dividends  declared as of the end of the period  reported  on, but which are not
paid until the 30th day of the ensuing month. Our primary  liability at December
31,  2004 and 2003 is our long term  notes  payable,  which is  $19,185,000  and
$14,257,000 respectively.

Results of Operations

     Since our inception,  we have  experienced our highest  quarterly  dividend
payment for the quarter  ended  December  31,  1997 and  experienced  our lowest
quarterly  dividend  payment for the quarters ended  September 30, 2003 and June
30, 2004. The quarterly  dividend paid for each share held of record on December
31, 1997 was $.25625 per share  representing an annualized yield of 10.25%.  The
quarterly  dividend  payment for each share held of record on September 30, 2003
and June 30, 2004 was $.153125  representing an annualized yield of 6.125%.  The
dividend payment for December 31, 1997 was significantly higher than the average
dividend amount due to the large number of loans funded during the quarter and a
corresponding high level of origination  income earned during the quarter.  Each
loan funded  during the quarter  generates  origination  income which is due and
payable to shareholders as "Taxable Income" even though  origination  income was
not  recognized  in  its  entirety  for  the  period  under  generally  accepted
accounting  principles  ("GAAP").  By way of further  comparison,  the  dividend
payment made to September 30, 2003 and June 30, 2004  shareholders of record was
significantly  lower than the average dividend amount due directly to large cash
balances we received from our fourth public offering of stock and investor saver
certificates  and held in money market  instruments  pending  deployment  in new
loans to  churches.  Because  interest  earned in our money  market  account  at
present  yields is  substantially  lower than  interest  earned on our  mortgage
loans,  interest  income earned was lower than is  anticipated to be earned once
the offering proceeds are fully deployed into new loans.

     Net income for our fiscal year ended  December 31, 2004 was  $1,598,200  on
total  revenues  of  $3,153,104  compared  to  $1,300,754  on total  revenues of
$2,459,254 for the year ended December 31, 2003.  Interest  income earned on the
Company's  portfolio  of loans was  $2,354,762  for the year ended  December 31,
2004, compared to $1,906,051 for 2003. This increase was due to the fact that 24
new loans were originated in fiscal year ended December 31, 2004.  Excluded from
revenue for the year ended December 31, 2004 is $183,651 of origination  income,
or "points," we received. Recognition of origination income under "GAAP" must be
deferred over the expected  life of each loan.  However,  under tax  principles,
origination  income is recognized in the period received.  Accordingly,  because
our status as a real estate investment trust requires,  among other things,  the
distribution to Shareholders of at least 90% of "Taxable  Income," the dividends
declared and paid to our  Shareholders  for the  quarters  ended March 31, 2004,
June 30, 2004,  September  30, 2004 and December 31, 2004  included  origination
income  even  though it was not  recognized  in its  entirety  as income for the
period under GAAP. Our operating expenses for our fiscal year ended December 31,
2004 were $625,375  compared to $466,362 for our fiscal year ended  December 31,
2003.



                                       17

<PAGE>

     Our Board of  Directors  declared  dividends  of $.1625  for each  share of
record on March 31,  2004,  $.153125  for each  share held of record on June 30,
2004,  $.165625 for each share held of record  September 30, 2004 and $.1875 for
each share held of record on December 31, 2004. Based on the four quarters ended
March 31, 2004,  June 30, 2004,  September  30, 2004 and December 31, 2004,  the
dividends paid represented an 6.50%, 6.125%,  6.625% and 7.50 % annualized yield
to shareholders,  respectively, for an effective overall annual yield of 6.6875%
in 2004. In 2004,  and  especially in the second  quarter of 2004,  our dividend
yield was  significantly  lower than in prior periods.  This decrease results in
part from the large cash  balances  we  received  from our public  offerings  of
common stock and investor  saver  certificates,  which were held in money market
instruments  pending  deployment in new loans.  Because  interest  earned in our
money market account is substantially lower than interest earned on our mortgage
loans,  interest income earned was lower than in prior periods.  Dividend yields
in 2004 were also  largely  influenced  by the  prepayment  by churches of older
higher  interest  rate loans in our  portfolio,  and the funding of numerous new
loans at interest rates significantly lower than those funded in earlier years.

Liquidity and Capital Resources

     Our revenue is derived  principally from interest income,  and secondarily,
from origination fees and renewal fees generated by mortgage loans that we make.
We also earn income  through  interest on funds that are invested  pending their
use in funding mortgage loans or distributions of dividends to our Shareholders,
and on income  generated  on church  bonds we may  purchase and own. We generate
revenue through (i) permitted temporary investments of the net proceeds from the
sale of the  shares,  and (ii)  implementation  of our  business  plan of making
mortgage loans to churches and other  non-profit  religious  organizations.  Our
principal  expenses are advisory fees,  legal and auditing fees,  communications
costs  with our  Shareholders,  and the  expenses  of our  transfer  agents  and
registrar.

     In  addition,  we are  able to  borrow  funds  in an  amount  up to 300% of
shareholder equity in order to increase our lending capacity.  We currently have
a $2,000,000 secured line of credit with Beacon Bank, Shorewood,  Minnesota.  As
of February 28, 2005 we have no outstanding  balance against our line of credit.
This credit line is secured by the pledge of $2,401,000  in principal  amount of
our Church Bonds.  Interest on our line of credit is payable to Beacon Bank on a
monthly  basis.  We believe  that the rate at which we lend funds will always be
higher than the cost at which we borrow the funds  (currently  our rate at which
we can borrow funds under this line of credit is prime interest rate plus 1/2%).
However,  there can be no  assurance  that we can always lend funds out at rates
higher  than  the  rate at  which  we  borrow  the  funds.  When we do  carry on
outstanding  balance  on this line of credit we plan to  "pay-down"  any  future
borrowings  on our line of credit by (i) selling  additional  securities  in our
public  offering and (ii) applying the proceeds from  principal  payments on our
current loan portfolio payments and any loan re-payments. Increases or decreases
in the prime  lending  rate as well as the  increase  or decrease in the rate of
interest  charged on our loans has and likely will  continue to impact  interest
income we will earn and, accordingly,  influence dividends declared by our Board
of Directors.

     On  October  7,  2004  the  Securities  and  Exchange  Commission  declared
effective our registration  statement to sell to the public  $23,000,000 of debt
securities,  which we call  "Investor  Saver  Certificates."  Our future capital
needs are expected to be met by (i) our current and future  public  offerings of
our shares and/or our  certificates;  (ii) the repayment of existing loans;  and
(iii) borrowing under our line of credit.

     We may incur  indebtedness up to 300% of our shareholder  equity, the level
permitted under North American Securities  Administrators  Association ("NASAA")
guidelines.  The objective of our current  offering of  certificates is to raise
intermediate  term funds that we can deploy into new loans at rates that provide
a positive spread.  This additional loan development will further  diversify our
loan  portfolio  while  generating  origination  income to the  advantage to our
shareholders.  The cost of this capital is expected to be lower than if borrowed
directly from banks at variable rates of interest.

Loan Loss Reserve Policy

     We follow a loan loss reserve policy on our portfolio of loans outstanding.
This critical policy requires complex  judgements and the need to make estimates
of future  events,  which may or may not  materialize  as  planned.  This policy
reserves for principal  amounts  outstanding on a particular  loan if cumulative
interruptions  occur in the normal  payment  schedule of a loan. Our policy will
reserve for the outstanding  principal  amount of a loan in our portfolio if the
amount is in doubt of being collected.

     We have  three  first  mortgage  loans that are three or more  payments  in
arrears.  The first loan has an outstanding  balance of approximately  $401,152.
The church has not made a mortgage  payment  since October 2003. We have engaged
legal counsel to foreclose on the church's property.  The second loan is a first
mortgage loan with an outstanding balance of $339,095. The church has not made a
mortgage  payment  since  November  2003.  We have engaged legal counsel and are
currently  foreclosing on the property.  The third loan is a first mortgage loan
with an  outstanding  balance of  $403,378.  The  church  missed  five  mortgage
payments in 2003. We have reserved for this loan and are continuing to work with
the church to bring their mortgage current.


                                       18

<PAGE>
<TABLE>
<CAPTION>
Listed below is our current loan loss reserve policy:

  Incident      Percentage of Loan                                          Status of Loan
                     Reserved
<S>           <C>                    <C>
============= ====================== ============================================================================================
1.                                   None Loan is current, no interruption in
                                     payments during history of the loan,
                                     ("interruption" means receipt by us more
                                     than 30 days after scheduled payment date).
2.            None                   Loan current, previous interruptions experienced, but none in the last six month period.
3.            None                   Loan current, previous interruptions experienced, but none in the last 90 day period.
4.            1.00%                  Loan serviced regularly, but 2 or 3 payments cumulative in arrears. Delinquency notice been
                                     sent.
5.            2.00%                  Loan serviced regularly, but 4 or 5 payments cumulative in arrears.
6.            5.00%                  Loan more than 5 payments cumulative in arrears, loan servicing intermittent during the last
                                     90 days.
                                     Ability of obligor to continue to service
                                     the loan at scheduled levels in doubt.
                                     Restructuring contemplated or imminent.
7.            The Greater Of: (I)    Loan is declared to be in default. Foreclosure proceeding underway or imminent. Reserve amount
              Accumulate reserve     dependent on value of collateral. All expenses related to enforcing loan agreements are
              during default period  expensed.
              equal to principal loan
              balance in excess of
              65% of original
              collateral value; or (ii)
              1% of the remaining
              principal balance each
              quarter during which
              the default remains in
              effect
</TABLE>

Loan loss reserves are recorded on a quarterly basis.

Critical Accounting Policies and Estimates

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

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

     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 and bond portfolio  involve a high degree
of judgment.  We estimate the fair value of our mortgage loans  receivable to be
the same as the carrying value because of minimal  changes in interest rates and
quality of the underlying  collateral  since initial  purchase.  We estimate the
fair value of the bond  portfolio to be the same as the carrying  value because,
even  though  there is no ready  public  market  for  these  bonds,  the cost is
current.  We do not consider  future cash flows,  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 or  bond in  estimating  fair  value.  In
addition, the loan loss policy,  previously discussed,  is a critical accounting
policy.

Item 7.  Financial Statements.

     Financial  Statements  required by this item can be found beginning on page
F-1 of this Form-10KSB and are deemed incorporated herein by reference.


Item 8.   Changes in and Disagreements With Accountants on Accounting and
               Financial Disclosure.

          None


                                       19

<PAGE>

Item 8A. Controls and Procedures

     (a)  Evaluation of disclosure controls and procedures

     Under the supervision and with the  participation of management,  including
its  President  and Chief  Financial  Officer,  an  independent  director of the
Company  evaluated  the  effectiveness  of  the  design  and  operation  of  its
disclosure  controls  and  procedures  (as defined in Rule  13a-14(c)  under the
Exchange Act).  Based upon that  evaluation,  the President and Chief  Financial
Officer of American Church Mortgage Company concluded that, as of the end of the
period  covered by this report,  the  disclosure  controls and procedures of the
Company  are  adequately  designed  to ensure  that  information  required to be
disclosed  by us in the  reports  we file or submit  under the  Exchange  Act is
recorded,  processed,  summarized and reported within the time periods specified
in applicable rules and forms.

     (b)  Changes in internal controls

     There were no significant  changes made in the Company's  internal controls
during the most  recent  period  covered  by this  report  that have  materially
affected,  or are reasonably likely to materially affect, the Company's internal
control over financial reporting.

Item 8B. Other Information

Not Applicable

                                    PART III


Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
     With Section 16(a) of the Exchange Act.

     The  information  set forth under the  captions  "Nominees,"  "How does the
Board operate?" and "Section 16(a) beneficial ownership reporting compliance" in
the definitive proxy statement for the annual meeting of shareholders to be held
on or  about  May 27,  2005,  to be  filed  with  the  Securities  and  Exchange
Commission on or before April 15, 2005, is incorporated by this reference.

     The  Company  has not  adopted a Code of  Business  Conduct and Ethics that
applies  to  all  directors,  officers  and  employees  of  the  Company.  Since
inception,  the Company has not had employees and the Company's  activities have
been  directed by the Advisor.  In addition,  the  Company's  and the  Advisor's
activities  have  been  governed  by the  Company's  by-laws  and  the  Advisory
Agreement.  Both of these documents  comply with the NASAA REIT Guidelines which
include  substantive  limitations on, among other things,  conflicts of interest
and related party transactions.

Item 10.  Executive Compensation

     The   information   set  forth  under  the  caption   "How  are   directors
compensated?"  in the  definitive  proxy  statement  for the  annual  meeting of
shareholders  to be  held on or  about  May  27,  2005,  to be  filed  with  the
Securities  and Exchange  Commission no later than 120 days after the end of the
fiscal year covered by this report.

Item 11.  Security Ownership of Certain Beneficial Owners and Management

     The information set forth under the caption "Security  Ownership of Certain
Beneficial  Owners and  Management"  in the definitive  proxy  statement for the
annual meeting of  shareholders to be held on or about May 27, 2005, to be filed
with the Securities and Exchange Commission no later than 120 days after the end
of the fiscal year covered by this report.


Item 12.  Certain Relationships and Related Transactions

     The  information  set forth under the caption  "Certain  Relationships  and
Related Party  Transactions"  in the definitive  proxy  statement for the annual
meeting of  shareholders  to be held on or about May 27, 2005,  to be filed with
the Securities and Exchange  Commission not later than 120 days after the end of
the fiscal year covered by this report.



                                       20

<PAGE>


Item 13.       Exhibits

Exhibit        Title
No.

3.1 Amended and Restated Articles of Incorporation........................   3

3.2 Third Amended and Restated Bylaws.....................................   5

4.1 Specimen Common Stock Certificate.....................................   3

4.2 Trust Indenture between the Company and The Herring Nationl Bank......   5

10.1 Amended and Restated REIT Advisory Agreement Between the Company
     and Church Loan Advisory,Inc.........................................   4

10.2 Amendment No. 1 to Advisory Agreement Between the Company and
     Church Loan Advisors, Inc............................................   1

10.3 Line of Credit Agreement with Beacon Bank dated March 18, 2002.......   2

10.4 $2,000,000 Promissory Note and Combined Security Agreement
     between the Company and Beacon Bank dated March 18, 2002.............   2

10.5 Security Agreement between the Company and The Herring National
     Bank, as Trustee.....................................................   5

31.1 Certification Pursuant to Section 302 of Sarbanes Oxley Act of
     2002.................................................................   6

32.1 Certification Pursuant to 18 U.S.C. Section 1350, as adopted
     pursuant to Section 906 of the Sarbanes Oxley Act of 2002............   6


(1)  Incorporated herein by reference to the Company's Registration Statement on
     Form S-11 filed June 29, 1999.
(2)  Incorporated herein by reference to the Company's Registration Statement on
     Form S-11/A filed April 26, 2002.
(3)  Incorporated herein by reference to the Company's Registration Statement on
     Form 8-A filed April 30, 1999.
(4)  Incorporated herein by reference to the Company's Registration Statement on
     Form S-11 filed December 21, 2001.
(5)  Incorporated herein by reference to th Company's  Registration Statement on
     Form S-11/A filed September 28, 2004.
(6)  Filed herewith

Item 14. Principal Accountants Fees and Services

     Before the Independent  Auditors are engaged by the Company to render audit
or  non-audit  services,  the  engagement  is approved  by Mr.  Philip J. Myers,
President and a Directo of ours and a majority of our independent directors.  Th
Company does not have an audit committee.

Audit Fees

     The aggregate fees billed by the Company's  principal  accountant,  Boulay,
Heutmaker,  Zibell & Co. P.L.L.P.  for  professional  services  rendered for the
audit of the  Company's  annual  financial  statements  and review of  financial
statements included in the Company's forms 10-QSB, or services that are normally
provided by the accountant in connection  with statutory and regulatory  filings
or engagements, were $41,518 and $31,328 in 2004 and 2003, respectively.

Audit-Related Fees

     Consists of fees for  assurance and related  services  that are  reasonably
related to the  performance  of the audit or review of financial  statements and
are not  reported  under  "Audit  Fees." These  services  include  consultations
concerning  financial   accounting  and  reporting  standards.   There  were  no
audit-related fees in 2004 or 2003.

Tax Preparation Fees

     Consists of fees for products and services othe than the services  reported
above. The tax preparation fees were $1,800 in 2004 and 2003.

All Other Fees

     There  were no fees  billed  in  2004  or  2003 by th  Company's  principal
accountant  for products or services  provided  other than those included in the
"Audit Fee" and "Tax Fees" above.



                                       21

<PAGE>





-------------------------------------------------------------------------------


                                   SIGNATURES

In accordance  with Section 13 or 15(d) of the Exchange Act, the  registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


                                                AMERICAN CHURCH MORTGAGE COMPANY

Dated: March 30, 2005
                                                By: /s/ Philip J. Myers
                                                    ---------------------------
                                                    Philip J. Myers, President,
                                                    Treasurer
                                                   (Chief Executive Officer and
                                                    Chief Accounting Officer)

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities indicated.

By: /s/ Philip J. Myers                         Date:   03/30/05
----------------------------------                      ---------------
Philip J. Myers
President, Treasurer and Director

By: /s/ Dennis J. Doyle                         Date:   03/30/05
-----------------------------------                     --------------
Dennis J. Doyle, Director

By: /s/ Michael G. Holmquist                    Date:   03/30/05
-----------------------------------                     --------------
Michael G. Holmquist, Director

By: /s/ Robert O. Naegele, Jr.                  Date:   03/30/05
-----------------------------------                     --------------
Robert O. Naegele, Jr., Director

By: /s/ Kirbyjon H. Caldwell                    Date:   03/30/05
-----------------------------------                     --------------
Kirbyjon H. Caldwell, Director




                                       22

<PAGE>

                                                                    Exhibit 31.1


                             OFFICER'S CERTIFICATE

                            PURSUANT TO SECTION 302

I, Philip J. Myers,  Chief  Executive  Officer  and Chief  Financial  Officer of
American Church Mortgage Company (the "Company") certify that:

1.   I have  reviewed  this form  10-KSB of th Company for the fiscal year ended
     December 31, 2004:

2.   Based on my knowledge, this report doe not contain any untrue statements of
     a material  fact or omit to state a  material  fact  necessary  to make the
     statements made, in light of the circumstances  under which such statements
     we made, not misleading with respect to the period covered by this report;

3.   Based  on my  knowledge,  the  financial  statements  and  other  financial
     information included in this report fairly present in all material respects
     the  financial  condition,  results  of  operations  and cash  flows of the
     Company as of and for, the periods presented in this report:

4.   I am responsible for establishing and maintaining  disclosure  controls and
     procedures  (as defined in Exchange Act Rules  13a-5(e) and 15d-15 (e)) for
     the Company and have:

     (a)  Designed  such  disclosure  controls  and  procedures,  or cause  such
          disclosure   control  and   procedures   to  be  designed   under  our
          supervision, to ensure that material information relating to the small
          business issuer, including its consolidated subsidiaries is made known
          to me by others within those entities,  particularly  during the perio
          in which this report is being prepared:

     (b)  Omitted in accordance with SE Release Nos. 33-8238 and 34- 47986

     (c)  Evaluated the  effectiveness o the Company's  disclosure  controls and
          procedures  and  presented  in this report our  conclusions  about the
          effectiveness of the disclosure controls and procedures,  as of th end
          of the period covered by this report based on such evaluation; and

     (d)  Disclosed in this report any change in the Company's  internal control
          over  financial  reporting  that occurred  during the  Company's  most
          recent fiscal quarter that has materially  affected,  or is reasonably
          likely to  materially  affect,  the  Company's  internal  contro  over
          financial reporting, and

5.   I have disclosed,  based on my most recent  evaluation of internal controls
     over financial reporting, to the Company's auditors and the audit committee
     of th Company's  board of directors (or persons  performing  the equivalent
     functions):

     (a)  All significant  deficiencies and material  weaknesses in th design or
          operation of internal  controls  over  financial  reporting  which are
          reasonabl  likely  to  adversely  affect  th small  business  issuer's
          ability  to  record,   process,   summarized   and  report   financial
          information; and

     (b)  any fraud, whether or not material,  that involves management or other
          employees who have a significant  role i the small  business  issuer's
          internal control over financial reporting.

Dated: March 30, 2005
-------------------


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



                                       23

<PAGE>


                                                                    Exhibit 32.1

                            CERTIFICATION PURSUANT TO
                              18 U.S.C. SECTION1350
                            AS ADOPTED PURSUANT TO TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection  with the Annual Report of America  Church  Mortgage  Company
(the  "Company")  on Form 10-KSB for the fiscal year ended  December 31, 2004 as
filed with the  Securities  and  Exchange  Commission  on the date  hereof  (the
"Report"), the undersigned,  in the capacities and on the dates indicated below,
hereby  certifies  pursuant to 18 U.S.C.  Section 1350,  as adopted  pursuant to
Section of the Sarbanes-Oxley Act of 2002, that to this knowledge:

     1.   The Report fully  complies with the  requirements  of Section 13(a) or
          15(d) of the Securities Exchange Act of 1934 and

     2.   The  information  contained  in  the  Repor  fairly  presents,  in all
          material respects, the financial condition and results of operation of
          the Company.

Dated: March 30, 2005                           By: /s/ Philip J. Myers
       --------------                               -------------------
                                                    Chief Executive Officer and
                                                    Chief Financial Officer


                                       24

<PAGE>

















                        AMERICAN CHURCH MORTGAGE COMPANY

                              Minnetonka, Minnesota

                              Financial Statements

                           December 31, 2004 and 2003


<PAGE>





             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




Board of Directors
American Church Mortgage Company
Minnetonka, Minnesota

     We have audited the accompanying  balance sheet of American Church Mortgage
Company  as of  December  31,  2004  and  2003  and the  related  statements  of
operations,  stockholders' equity and cash flows for the years then ended. These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

     We  conducted  our audits in  accordance  with the  standards of the Public
Company  Oversight Board (United States).  Those standards  require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

     In our opinion,  the financial statements referred to above present fairly,
in all material  respects,  the financial position of the Company as of December
31, 2004 and 2003,  and the results of its operations and its cash flows for the
years  then  ended,  in  conformity  with  U.S.  generally  accepted  accounting
principles.


                                   /s/ Boulay, Heutmaker & Zibell & Co. P.L.L.P.
                                            Certified Public Accountants

Minneapolis, Minnesota
February 24, 2005




                                      F-1
<PAGE>


                        AMERICAN CHURCH MORTGAGE COMPANY

                                  Balance Sheet




<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
                                                                                                December 31
                 ASSETS                                                                   2004                  2003
-----------------------------------------------------------------------------------------------------------------------------
Current Assets
<S>                                                                                   <C>                 <C>
    Cash and equivalents                                                              $ 2,183,735         $  4,368,769
    Accounts receivable                                                                    59,844               61,423
    Interest receivable                                                                   139,809              135,648
    Current maturities of mortgage loans receivable, net of
          allowance of $70,000 and $52,111 at
          December 31, 2004 and 2003                                                      645,338              919,859
    Current maturities of bond portfolio                                                   50,000               54,000
                                                                                        ---------            ---------
            Total current assets                                                        3,078,776            5,539,699


Mortgage Loans Receivable, net of current maturities                                   30,630,292           25,383,192

Real-Estate Held for Sale                                                                 105,000              156,352

Deferred Investors Saver Certificates Offering Costs,
    net of accumulated amortization of $317,483 and
    $143,339 at December 31, 2004 and 2003                                                732,715              568,458

Bond Portfolio, net of current maturities                                               8,448,001            5,431,286


Other                                                                                      60,000               60,000
                                                                                       ----------          -----------

            Total assets                                                              $43,054,734          $37,138,987
                                                                                       ==========           ==========
</TABLE>

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

                                      F-2

<PAGE>


                        AMERICAN CHURCH MORTGAGE COMPANY

                                  Balance Sheet

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
                                                                                                    December 31
        LIABILITIES AND STOCKHOLDERS' EQUITY                                                  2004                2003
-----------------------------------------------------------------------------------------------------------------------------
Current Liabilities
<S>                                                                                    <C>                <C>
    Current maturities of investor saver certificates                                  $   1,321,000      $     684,000
    Accounts payable                                                                          23,278             17,296
    Loan proceeds payable                                                                     37,726
    Deferred income                                                                           37,479             31,630
    Dividends payable                                                                        478,420            411,481
                                                                                           ---------          ---------
            Total current liabilities                                                      1,897,903          1,144,407


Deferred Income, net of current maturities                                                   575,909            556,673


Investors Saver Certificates, Series A                                                    13,243,000         13,573,000
Investors Saver Certificates, Series B                                                     4,621,000

Stockholders' Equity
    Common stock, par value $.01 per share
        Authorized, 30,000,000 shares
        Issued and outstanding, 2,551,568 at December 31, 2004
            and 2,452,277 shares at December 31, 2003                                         25,516             24,523
    Additional paid-in capital                                                            23,416,468         22,471,234
    Accumulated deficit                                                                     (725,062)          (630,850)
                                                                                          ----------         -----------
            Total stockholders' equity                                                    22,716,922         21,864,907
                                                                                          ----------         ----------

            Total liabilities and equity                                                 $43,054,734        $37,138,987
                                                                                          ==========         ==========
</TABLE>



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


                                      F-3
<PAGE>


                        AMERICAN CHURCH MORTGAGE COMPANY

                             Statement of Operations




<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
                                                                                             Years Ended December 31
                                                                                            2004               2003
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                                                      <C>                <C>
Interest Income                                                                          $3,153,104         $2,459,254

Operating Expenses
  Other operating expenses                                                                  574,023            406,362
  Real-estate impairment loss                                                                51,352             60,000
                                                                                          ---------          ---------
     Total operating expenses                                                               625,375            466,362
                                                                                          ---------          ---------

Operating Income                                                                          2,527,729          1,992,892

Other Expense
    Interest expense                                                                        929,529            692,138

Income Taxes                                                                                  -                  -
                                                                                          ---------          ---------

Net Income                                                                               $1,598,200         $1,300,754
                                                                                          =========          =========

Basic and Diluted Income Per Common Share                                                $      .63         $      .55
                                                                                         ==========          =========

Weighted Average Common Shares Outstanding                                                2,522,852          2,345,604
                                                                                         ==========         ==========


Notes to Financial Statements are an integral part of this Statement.
</TABLE>

                                      F-4
<PAGE>


                        AMERICAN CHURCH MORTGAGE COMPANY

                        Statement of Stockholders' Equity

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
                                                                                       Additional
                                                           Common Stock                  Paid-In           Accumulated
                                                         Shares      Amount              Capital             Deficit
-----------------------------------------------------------------------------------------------------------------------------
<S>               <C> <C>                              <C>           <C>               <C>               <C>
Balance, December 31, 2002                             2,205,568     $22,056           $20,182,798       ($   407,543)

    Issuance of 263,292 shares of
        common stock, net of offering
        costs                                            263,292       2,633             2,439,755

    Redemption of 16,583 shares of
        common stock                                     (16,583)       (166)             (151,319)

    Net income                                                                                              1,300,754

    Dividends declared                                                                                     (1,524,061)
                                                       ---------      ------            ----------          ---------

Balance, December 31, 2003                             2,452,277      24,523            22,471,234           (630,850)

    Issuance of 108,935 shares of
         common stock, net of offering
         costs                                           108,935       1,089             1,027,285

    Redemption of 9,644 shares of
         common stock                                     (9,644)        (96)              (82,051)

    Net income                                                                                              1,598,200

    Dividends declared                                                                                     (1,692,412)
                                                      ---------       ------          ---------             ---------

Balance, December 31, 2004                            2,551,568      $25,516         $23,416,468          ($  725,062)
                                                      =========       ======          ==========            =========
</TABLE>

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

                                      F-5
<PAGE>


                        AMERICAN CHURCH MORTGAGE COMPANY

                             Statement of Cash Flows

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
                                                                                            Years Ended December 31
                                                                                          2004                 2003
-----------------------------------------------------------------------------------------------------------------------------
Cash Flows from Operating Activities
<S>                                                                                  <C>                  <C>
    Net income                                                                       $  1,598,200         $  1,300,754
    Adjustments to reconcile net income to net cash
        from operating activities:
        Impairment loss on real-estate                                                     51,352               60,000
        Provision for losses on mortgage loans receivable                                  17,889              (60,000)
        Amortization of deferred bond offering costs                                      174,144              113,464
        Deferred income                                                                    25,085              223,334
        Change in assets and liabilities
            Accounts receivable                                                             1,579                2,179
            Interest receivable                                                            (4,161)             (41,263)
            Accounts payable                                                                5,982              (22,394)
                                                                                        ---------            ---------
            Net cash from operating activities                                          1,870,070            1,576,074

Cash Flows from Investing Activities
    Investment in mortgage loans receivable                                           (12,180,264)         (14,596,927)
    Collections of mortgage loans receivable                                            7,227,522            3,325,417
    Investment in bond portfolio                                                       (4,089,000)          (2,763,890)
    Proceeds from bond portfolio called/sold                                            1,076,285            1,635,241
                                                                                       ----------          -----------
            Net cash used for investing activities                                     (7,965,457)         (12,400,159)

Cash Flows from Financing Activities
    Proceeds from investor saver certificates                                           5,360,000            6,829,000
    Payments on investor saver certificate maturities                                    (432,000)                   0
    Proceeds from stock offering, net of offering costs                                 1,028,374            2,442,392
    Payments for deferred saver certificate offering costs                               (338,401)            (304,752)
    Stock redemptions                                                                     (82,147)            (151,485)
    Dividends paid                                                                     (1,625,473)          (1,474,521)
                                                                                        ---------            ---------
            Net cash from financing activities                                          3,910,353            7,340,634
                                                                                        ---------            ---------

Net Decrease in Cash and Equivalents                                                   (2,185,034)          (3,483,451)

Cash and Equivalents - Beginning of Year                                                4,368,769            7,852,220
                                                                                        ---------            ---------

Cash and Equivalents - End of Year                                                   $  2,183,735         $  4,368,769
                                                                                        =========            =========
</TABLE>


                                                          - Continued -

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

                                      F-6
<PAGE>


                                              AMERICAN CHURCH MORTGAGE COMPANY

                                             Statement of Cash Flows - Continued

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
                                                                                          Years Ended December 31
                                                                                         2004                   2003
-----------------------------------------------------------------------------------------------------------------------------
Supplemental Schedule of Noncash Financing and
    Investing Activities
    Offering costs reclassified and charged to additional
<S>                                                                                  <C>                    <C>
        paid-in capital                                                              $     10,557           $    49,478
                                                                                          =======               =======
    Dividends payable                                                                $    478,420           $   411,481
                                                                                          =======               =======
    Reclassification of mortgage receivable to
        real-estate held for sale                                                                           $   216,352
                                                                                                                =======

Supplemental Cash Flow Information
    Cash paid during the year for
        Interest                                                                       $  929,529           $   692,138
                                                                                          =======               =======
</TABLE>

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

                                      F-7
<PAGE>


                        AMERICAN CHURCH MORTGAGE COMPANY

                          Notes to Financial Statements

                           December 31, 2004 and 2003




1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

American Church Mortgage Company, a Minnesota  corporation,  was incorporated on
May 27, 1994.  The Company was organized to engage  primarily in the business of
making  mortgage loans to churches and other nonprofit  religious  organizations
throughout  the United  States,  on terms  that it  establishes  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 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

The  Company  considers  all  highly  liquid  debt  instruments  purchased  with
maturities of three months or less to be cash equivalents.

The Company maintains its 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 December 31, 2004 and 2003, such
investments  were  $1,409,532  and $361,055,  respectively.  The Company has not
experienced any losses in such accounts.

Bond Portfolio

The Company accounts for its bond portfolio under Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity Securities."


                                      F-8
<PAGE>



                        AMERICAN CHURCH MORTGAGE COMPANY

                          Notes to Financial Statements

                           December 31, 2004 and 2003




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 that their cost approximates
their fair value. During 2004, the Company did not sell any of its bonds. During
2003,  the Company sold $56,000 of its bonds below par (which was the  Company's
cost),  to an affiliate of the Advisor (see Note 4). There were no losses on the
sale of the bonds in 2003.

Allowance for Mortgage Loans Receivable

The Company  records its loans at their  estimated  net  realizable  value.  The
Company's loan policy  provides an allowance for estimated  uncollectible  loans
based on its evaluation of the current status of its 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 policy
will reserve for the  outstanding  principal  amount of a loan in the  Company's
portfolio  if the  amount  is in  doubt  of being  collected.  Additionally,  no
interest  income is  recognized  on impaired  loans.  At December 31, 2004,  the
Company  reserved  $70,000  for  three  mortgage  loans  that are  three or more
mortgage  payments  in  arrears,  two  of  which  are in the  process  of  being
foreclosed.

At December 31, 2003, the Company reserved $52,111 for three mortgage loans that
are three or more mortgage payments in arrears.  The total impaired loans, which
are loans that have been foreclosed or are no longer  performing,  were $740,247
and $0 at December 31, 2004 and 2003, respectively.

Real-Estate Held for Sale

Foreclosure  was completed on a church located in Battle Creek,  Michigan valued
at  $105,000.  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.

Deferred Offering Costs

Deferred equity offering costs are charged to  stockholders'  equity when equity
subscriptions are received.

Deferred investors saver certificates offering costs are amortized over the term
of the  certificates  using the  straight  line method  which  approximates  the
effective interest method.


                                      F-9
<PAGE>


                        AMERICAN CHURCH MORTGAGE COMPANY

                          Notes to Financial Statements

                           December 31, 2004 and 2003

Revenue Recognition

Interest  income on mortgage loans is recognized as earned.  Interest  income on
the bond portfolio is recognized on the interest payable date.

Deferred income represents loan origination fees, which are recognized over the
life of the loan as an adjustment to the yield on the loan.

Dividend Re-investment Plan

Dividends  re-invested  to purchase  common stock were $231,140 and $266,850 for
the  years  ended  December  31,  2004  and  2003,  respectively.  The  dividend
re-investment plan was discontinued in 2004.

Income Taxes

Income taxes are provided  for the tax effects of  transactions  reported in the
financial  statements  and consist of taxes  currently due plus  deferred  taxes
related  primarily to differences in recognition of income from loan origination
fees for financial and income tax reporting.

The Company has elected to be taxed as a Real Estate  Investment  Trust  (REIT).
Accordingly, the Company will not be subject to Federal income tax to the extent
of  distributions  to its shareholders if the Company meets all the requirements
under the REIT provisions of the Internal Revenue Code.

Income Per Common Share

No adjustments  were made to income for the purpose of calculating  earnings per
share.

Newly Issued Pronouncements

The Company has considered the accounting  pronouncements  issued after December
2003 and has determined that none of these  pronouncements  will have a material
impact on its financial statements.

Repurchase of Common Stock

Although  our common  shares are not  redeemable  by us, we may at our  complete
discretion   repurchase   shares  offered  to  us  from  time  to  time  by  our
shareholders.  In such  event,  we may pay  whatever  price  the  Advisor  deems
appropriate  and   reasonable,   and  any  such  shares   repurchased   will  be
re-designated  as  "unissued,"  will no longer be  entitled to  distribution  of
dividends and will cease to have voting rights. Shares that may be purchased are
not part of a publicly  announced plan to repurchase shares nor does the Company
plan or anticipate any stock repurchase plans.

                                      F-10
<PAGE>

                        AMERICAN CHURCH MORTGAGE COMPANY

                          Notes to Financial Statements

                           December 31, 2004 and 2003




2.  MORTGAGE LOANS AND BOND PORTFOLIO

At December 31, 2004, the Company had first mortgage loans  receivable  totaling
$31,345,630.  The loans bear interest ranging from 6.75% to 12.00%.  At December
31, 2003, the Company had first mortgage loans receivable  totaling  $26,355,162
that bore interest ranging from 6.00% to 12.00%.

The Company  also had a portfolio  of secured  church bonds at December 31, 2004
and 2003, which are carried at cost plus amortized  interest  income.  The bonds
pay either  semi-annual or quarterly  interest ranging from 3.50% to 12.00%. The
combined principal of $8,533,790 at December 31, 2004 is due at various maturity
dates between May 1, 2005 and March 1, 2029.  Five bond issues  comprised 87% of
the Company's bond portfolio at December 31, 2004. Six bond issues comprised 84%
of the Company's bond portfolio at December 31, 2003.

The maturity schedule for mortgage loans and bonds receivable as of December 31,
2004, is as follows:
<TABLE>
<CAPTION>
                                                                      Mortgage Loans       Bond Portfolio

<S>        <C>                                                      <C>                      <C>
           2005                                                     $     645,388            $     50,000
           2006                                                           754,591                  89,000
           2007                                                           814,841                 184,000
           2008                                                           890,969                  89,000
           2009                                                           924,912                  73,000
           Thereafter                                                  27,314,929               8,048,790
                                                                       ----------               ---------
                                                                       31,345,630               8,533,790
           Less loan loss reserves                                        (70,000)
           Less discount from par                                                                 (35,789)
                                                                     ------------             -----------

                       Totals                                         $31,275,630              $8,498,001
                                                                       ==========               =========
</TABLE>

                                      F-11


<PAGE>


                        AMERICAN CHURCH MORTGAGE COMPANY

                          Notes to Financial Statements

                           December 31, 2004 and 2003

3.  INVESTORS SAVER CERTIFICATES

Investors saver certificates (see Note 6) are collateralized by certain mortgage
loans  receivable  of  approximately   the  same  value  as  the   certificates.
Additionally,  the Company incurred  deferred offering costs related to the debt
offering. The maturity schedule for the investors saver certificates at December
31, 2004 is as follows:

                                                         Investor Saver
                                                          Certificates
                                                      --------------------

           2005                                        $     1,321,000
           2006                                              2,249,000
           2007                                              2,900,000
           2008                                              2,374,000
           2009                                              4,604,000
           Thereafter                                        5,737,000
                                                           -----------

                      Totals                               $19,185,000
                                                            ==========

Interest expense related to these Certificates for the years ended December 31,
2004 and 2003, respectively, is $929,529 and $692,138, and is included in other
expenses.

4.  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.

Under the terms of the  Advisory  Agreement,  the  Company  pays the  Advisor an
annual base management fee of 1.25 percent of average invested assets (generally
defined as the  average of the  aggregate  book value of the assets  invested in
securities  and equity  interests in and loans secured by real estate) up to $35
million,  1.00  percent  of assets  from $35  million to $50  million,  and 0.75
percent on assets in excess of $50 million, which is payable on a monthly basis.
The  Advisor  will  also  receive  one-half  of the  origination  fees paid by a
mortgage loan borrower in connection with a mortgage loan made or renewed by the
Company.   The  Company  paid  Advisor   management  and  origination   fees  of
approximately $450,000 and $545,000 during 2004 and 2003, respectively.

The Advisor and the Company are  related  through  common  ownership  and common
management. See Notes 1 and 6 for additional transactions.

                                      F-12

<PAGE>

                        AMERICAN CHURCH MORTGAGE COMPANY

                          Notes to Financial Statements

                           December 31, 2004 and 2003


5.  INCOME TAXES

As discussed in Note 1, a REIT is subject to taxation to the extent that taxable
income exceeds dividend distributions to its shareholders.  In order to maintain
its status as a REIT,  the Company is required to distribute at least 90% of its
taxable  income.  In 2004,  the  Company  had pretax  income of  $1,598,200  and
distributions  to shareholders  in the form of dividends  during the tax year of
$1,692,412.  The expected tax expense to the Company,  pre-dividends  would have
been  $543,388.  In 2003,  the  Company  had  pretax  income  subject  to tax of
$1,300,754 and distributions to shareholders in the form of dividends during the
tax year of $1,524,061. The expected tax expense to the Company,  pre-dividends,
would have been $442,256 in 2003.

The  following  reconciles  the income tax benefit with the  expected  provision
obtained by applying statutory rates to pretax income:

                                                       2004              2003
                                                       ----              ----

         Expected tax expense                        $543,388          $442,256
         Benefit of REIT distributions               (575,420)         (518,181)
         Valuation allowance                           32,032            75,925
                                                      -------           -------

                     Totals                          $    -            $   -
                                                      =======           =======


The components of deferred income taxes are as follows:

                                                       2004              2003
                                                       ----              ----

         Loan origination fees                      $208,552          $200,023
         Loan loss allowance                          23,800            17,718
         Real-estate impairment                       37,860            20,400
         Valuation allowance                        (210,212)         (178,141)
                                                     -------           -------

                                                   $  60,000         $  60,000
                                                     =======           =======

The total deferred tax assets are as follows:

                                                       2004              2003
                                                       ----              ----

         Deferred tax assets                       $270,212          $238,141
         Deferred tax asset valuation allowance    (210,212)         (178,141)
                                                    -------           -------

                     Net deferred tax asset        $ 60,000          $ 60,000
                                                    =======           =======

The change in the valuation allowance was $32,074 and $75,934 for 2004 and 2003,
respectively.

                                      F-13

<PAGE>

                        AMERICAN CHURCH MORTGAGE COMPANY

                          Notes to Financial Statements

                           December 31, 2004 and 2003


6.  PUBLIC OFFERINGS OF THE COMPANY

In December 2001, the Company filed a Registration Statement with the Securities
and Exchange Commission for a fourth public offering of its common stock and its
first public  offering of debt  securities,  which the  Securities  and Exchange
Commission  declared effective April 26, 2002. In May 2003, the Company extended
the  offering  period to May 2004.  The  Company  concluded  its  fourth  public
offering on April 30, 2004. The Company offered  1,500,000  shares of its common
stock at a price of $10 per share and $15,000,000 principal amount of its Series
A investor saver certificates.  Certificates may be purchased in any multiple of
$1,000.  The offering was  underwritten  by an underwriter  (an affiliate of the
Advisor) on a Abest efforts@ basis, and no minimum sale of stock or certificates
was required. As of December 31, 2004 and 2003,  respectively,  the Company sold
763,471 and 671,450 shares of common stock and  $15,000,000  and  $14,257,000 of
its Series A investor saver certificates.

The Company filed a  Registration  Statement  with the  Securities  and Exchange
Commission  for a second  public  offering  of debt  securities.  The Company is
offering $23,000,000 principal amount of Series B secured investor certificates.
This offering became  effective on October 7, 2004. As of December 31, 2004, the
Company has sold  $4,621,000 of its Series B investor  saver  certificates.  The
terms of the  Series A and  Series B public  offerings  of debt  securities  are
essentially identical,  differing only in maturity dates of the certificates and
the interest rates paid on them.

Pursuant  to the  terms of the  Underwriting  Agreement,  the  Company  incurred
expense to the managing underwriter and participating broker-dealers commissions
and non-reimbursable expenses of approximately $286,988 and $449,154 during 2004
and 2003, respectively, in connection with these public offerings.

7.  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 December 31, 2004 and 2003:
<TABLE>
<CAPTION>

                                                                2004                                 2003
                                                    Carrying             Fair             Carrying            Fair
                                                     Amount              Value             Amount             Value
                                                   --------------------------------------------------------------------

<S>                                               <C>                <C>               <C>                <C>
      Cash and equivalents                        $  2,183,735       $  2,183,735      $  4,368,769       $  4,368,769
      Accounts receivable                               59,844             59,844            61,423             61,423
      Interest receivable                              139,809            139,809           135,648            135,648
      Mortgage loans receivable                     31,275,630         31,275,630        26,303,051         26,303,051
      Bond portfolio                                 8,498,001          8,498,001         5,485,286          5,485,286
      Investors saver certificates                  19,185,000         19,185,000        14,257,000         14,257,000
</TABLE>

                                      F-14

<PAGE>

                        AMERICAN CHURCH MORTGAGE COMPANY

                          Notes to Financial Statements

                           December 31, 2004 and 2003


The carrying value of cash and equivalents approximates fair value. The carrying
value of the mortgage loans  receivable  approximates  fair value because of the
substantial  turnover and activity in this portfolio.  The carrying value of the
bond portfolio  approximates  fair value because of minimal  changes in interest
rates and quality of the  underlying  collateral  since  initial  purchase.  The
carrying  value of the  investor  saver  certificates  approximates  fair  value
because  the  interest  rates that the  certificates  have been sold at have not
changed significantly in the past year.

8.  LINE OF CREDIT

The Company obtained a $1,000,000 line of credit with its bank on July 22, 1999,
which  was  increased  to  $2,000,000  on March 18,  2002,  subject  to  certain
borrowing base limitations,  through August 1, 2005. Interest is charged at 1/2%
over the prime rate  totaling  5.75% and 4.50% at  December  31,  2004 and 2003,
respectively. The line of credit is collateralized by the mortgage secured bonds
held by the Company.  There was no balance  outstanding at December 31, 2004 and
2003.  There was no interest  expense related to the line of credit for December
31, 2004 and 2003, respectively.