UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-K














[X] Annual Report Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year Ended
December 31, 2016



or



[ ] Transition Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Transition Period
from ------------to------------
















Commission File Number 000-25919



American Church Mortgage Company

(Exact name
of registrant as specified in its charter)



Minnesota 	 	 	 41-1793975

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



10237 Yellow Circle Drive Minnetonka, MN	 55343

(Address of principal executive offices)	 (Zip Code)



(952) 945-9455

(Registrant’s telephone number,
including area code)



Securities registered pursuant to Section
12(b) of the Act:

|Title of each class: |  | Name of each exchange on
        which registered:
|-------------------- |  | --------------------------------------------------
|None                 |  | None                                              
|                     |  |                                                   

Securities registered pursuant to Section
12(g) of the Act:

Common Shares, par value $.01 per share



Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act. 		Yeso  Nox

Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or 15(d) of the Act.

Yeso  Nox



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



Indicate by check mark whether
the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x
No o



Indicate by check mark if disclosure
of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not 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-K or any amendment to this Form 10-K.o



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













|Large accelerated filer o                                                     | Accelerated filer                  o
|----------------------------------------------------------------------------- | ------------------------------------
|Non-accelerated filer o
        (Do not check if a smaller reporting company) | Smaller reporting company  x        



Indicate by check mark whether
the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes
o No x



The aggregate
market value of the common stock of the registrant held by non-affiliates on June 30, 2016 (the last business day of the registrant’s
most recently completed second fiscal quarter) was $3,959,603, based upon the closing sales price of the registrant’s common
stock on such date as quoted by the Pink OTC Markets Inc. (the “Pink Sheets”).



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

|Class                                   |  | Outstanding at March 30, 2016
|--------------------------------------- |  | -----------------------------
|Common Stock, $0.01 par value per share |  | 1,677,798 shares             



Documents Incorporated by Reference



Portions of the Company’s Proxy Statement
to be delivered to its shareholders in connection with the Company’s 2017 Annual Meeting of Shareholders, which the Company
plans to file with the Securities and Exchange Commission within 120 days of the end of the fiscal year covered by this report,
are incorporated by reference in Part III of this report (Items 10, 11, 12, 13 and 14).









|           | INDEX                                                                                                        |                 
|---------- | ------------------------------------------------------------------------------------------------------------ | ----------------
|           |                                                                                                              | Page
        No.
|           | PART 1                                                                                                       |                 
|           |                                                                                                              |                 
|Item 1.    | Business                                                                                                     | 4               
|           |                                                                                                              |                 
|Item 1A.   | Risk Factors                                                                                                 | 12              
|           |                                                                                                              |                 
|Item 1B.   | Unresolved Staff Comments                                                                                    | 18              
|           |                                                                                                              |                 
|Item 2.    | Properties                                                                                                   | 18              
|           |                                                                                                              |                 
|Item 3.    | Legal Proceedings                                                                                            | 19              
|           |                                                                                                              |                 
|Item 4.    | Mine Safety Disclosures                                                                                      | 19              
|           |                                                                                                              |                 
|           | PART II                                                                                                      |                 
|           |                                                                                                              |                 
|Item 5.    | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 20              
|           |                                                                                                              |                 
|Item 6.    | Selected Financial Data                                                                                      | 21              
|           |                                                                                                              |                 
|Item 7.    | Management’s Discussion and Analysis of Financial Condition and Results of Operations                        | 22              
|           |                                                                                                              |                 
|Item 7A.   | Quantitative and Qualitative Disclosures About Market Risk                                                   | 28              
|           |                                                                                                              |                 
|Item 8.    | Financial Statements and Supplementary Data                                                                  | 28              
|           |                                                                                                              |                 
|           | Report of Independent Registered Public Accounting Firm                                                      | F-1             
|           | Balance Sheets as of December 31, 2016 and 2015                                                              | F-2             
|           | Statements of Operations for the Years Ended December 31, 2016 and 2015                                      | F-4             
|           | Statements of Stockholders’ Equity
        for the Years Ended
        December 31, 2016 and 2015            | F-5             
|           | Statements of Cash Flows for the Years Ended December 31, 2016 and 2015                                      | F-6             
|           | Notes to Financial Statements                                                                                | F-8             
|           |                                                                                                              |                 
|Item 9.    | Changes in and Disagreements With
        Accountants on Accounting and Financial Disclosure                 | 28              
|           |                                                                                                              |                 
|Item 9A.   | Controls and Procedures                                                                                      | 28              
|           |                                                                                                              |                 
|Item 9B.   | Other Information                                                                                            | 29              
|           |                                                                                                              |                 
|           | PART III                                                                                                     |                 
|           |                                                                                                              |                 
|Item 10.   | Directors, Executive Officers and Corporate Governance                                                       | 29              
|           |                                                                                                              |                 
|Item 11.   | Executive Compensation                                                                                       | 29              
|           |                                                                                                              |                 
|Item 12.   | Security Ownership of Certain Beneficial Owners and
        Management and Related Stockholder Matters       | 29              
|           |                                                                                                              |                 
|Item 13.   | Certain Relationships and Related Transactions and Director Independence                                     | 29              
|           |                                                                                                              |                 
|Item 14.   | Principal Accounting Fees and Services                                                                       | 29              
|           |                                                                                                              |                 
|           | PART IV                                                                                                      |                 
|           |                                                                                                              |                 
|Item 15.   | Exhibits, Financial Statement Schedules                                                                      | 30              
|           |                                                                                                              |                 
|Signatures |                                                                                                              | 31              







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 any 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 affect the relative yield of our loan portfolio and our ability to compete in making loans to borrowers; payment default
on loans made or bonds purchased by us, which could adversely affect our ability to make distributions to our shareholders or payments
due on our secured investor certificates; 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 in Item 1A.



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. | Business.
| | ------- | ---------



General



We are a Minnesota
corporation incorporated 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 December 31, 2016, we have made 190 loans to 160 churches approximating
$97,592,503, with the average principal amount of such loans being $514,000. Of the 190 loans we have made, 103 loans totaling
$57,412,727 have been repaid early by the borrowing churches. We also own, as of December 31, 2016, $11,941,000 principal amount
of Church Bonds (hereinafter defined). At no time have we paid a premium for any of the bonds in our portfolio. Subject to the
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., (“American”) a FINRA member broker-dealer, which has served as underwriter of the public offerings
of our common stock, as well as our public offerings of secured investor certificates.



The Company’s Business Activities



Our business is managed
by the Advisor. We have no employees but we do have two executive officers. The Advisor's affiliate, American has been engaged
since 1987 in the business of underwriting first mortgage bonds for churches throughout the United States. In underwriting church
bonds, American reviews financing proposals, analyzes prospective borrowers’ financial capability, and structures, markets
and sells, mortgage-backed securities which are debt obligations (bonds) of such borrowers to the investing general public. Since
its inception, American has underwritten approximately 287 church bond financings, in which approximately $546,350,000 in first
mortgage bonds have been sold to public investors. The average size of single church bond financings underwritten by American since
its inception is approximately $1,904,000.



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 that are not always favorable or available to them, due to the historic
reluctance 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





4









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. All of our loans belong to one portfolio segment. We attempt to apply 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:



| | · | offering terms of up to 30 years, generating the highest yields possible
under current market conditions;
| | - | ---------------------------------------------------------------------------------------------------------





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



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



| | · | purchasing 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 (hereinafter defined) 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 is defined as 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 one to thirty 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.
For its services, the Advisor is entitled to receive a management fee equal to 1.25% annually of the Company's Average Invested
Assets, plus one-half of any origination fee charged to borrowers on mortgage loans we make. The management 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, the U.S. Treasury
10-Year Notes, or another generally recognized reference index, and having various terms to maturity, origination fees and other
terms and conditions. The terms of loans we offer may be changed by our Advisor as a result of such factors as (i) the credit quality
and experience of the borrowers; (ii) the terms of loans in our portfolio; (iii) competition from other lenders; (iv) anticipated
need to increase the overall yield on our mortgage loan portfolio; (v) local and national economic factors; and (vi) actual experience
in borrowers’ demand for the loans. We currently offer the loan types described in the table below. This table describes
certain material terms of loans available from us. The table does not purport to identify all possible terms, rates, and fees we
may offer. We may modify the terms identified below or offer loan terms different than those identified below at any time. Many
loans are individually negotiated and differ from the terms described below.





5









|Loan Type                 | Interest Rate (1)                 | Origination Fee (2)
|------------------------- | --------------------------------- | -------------------
|25/30 Year Term (3)       | Fixed @ 8.75%/8.95% respectively  | 3.5%               
|20 Year Term (3)          | Variable Annually @ Prime + 2.50% | 3.5%               
|3 Year Renewable Term (4) | Fixed @ 8.25%                     | 3.0%               
|Construction 1 Year Term  | Fixed @ 9.00%                     | 2.0%               



| | (1) | “Prime” means the prime rate of interest charged to preferred customers, as published
by a federally chartered bank chosen by us. We may also tie our offered interest rates to other indices.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | These are “target” fees and negotiation of these fees with borrowers can occur. Origination
fees are generally based on the original principal amount of the loan and are collected from the borrower at the origination and
renewal of loans, one-half of which is payable directly to our Advisor.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| | (4) | Renewable term loans are repaid based on a 25-year amortization schedule, and are renewable at
the conclusion of their initial term for additional like terms up to an aggregated maximum of 25 years. We charge a fee of 1% upon
the date of each renewal. If renewed by the borrower, the interest rate is adjusted upon renewal to Prime plus a specified percentage
“spread.”
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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:



| | · | applications containing key information concerning the prospective
borrowers;
| | - | -----------------------------------------------------------------------------



| | · | project description;
| | - | --------------------



| | · | financial statements in accordance with our Financing Policies;
| | - | ---------------------------------------------------------------



| | · | corporate records and other organizational documents of the borrower;
| | - | ---------------------------------------------------------------------



| | · | preliminary title report or commitment for mortgagee title insurance;
and
| | - | -------------------------------------------------------------------------



| | · | a real estate appraisal in accordance with the Financing Policies.
| | - | ------------------------------------------------------------------



All appraisals are prepared
by independent third-party professionals who we approve based on their experience, reputation and education. All financial statements
are prepared by independent third-party professionals or a qualified accountant that we hire that is independent of the borrower.
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 Chief Financial Officer and Treasurer and certain members 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 that meet
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, an 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.



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





6







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 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) are funded with available cash.



Currently, we have no
borrowings with a commercial lender or bank. However, we may borrow up to 300% of our stockholders’ equity (in the absence
of a satisfactory showing that a higher level of borrowing is appropriate; any excess in borrowing over such 300% level must be
approved by a majority of the Independent Directors and disclosed to shareholders in the next quarterly report along with justification
for such excess) 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 secured investor 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 any future sales of our common stock, secured investor certificates (if any) or other debt securities,
(i) principal repayments from borrowers on loans made by us and (ii) funds borrowed under any line of credit arrangement.



Public Offerings - Secured Investor Certificates



In July 2014, we filed
a registration statement with the Securities and Exchange Commission to offer $10,000,000 worth of Series D secured investor certificates
(File No. 333-154831). The offering was declared effective by the SEC on August 12, 2014 and was subsequently renewed with an effective
date of September 23, 2016. The Series D certificates are offered in multiples of $1,000 with interest rates ranging from 4.00%
to 6.50%, subject to changing market rates, and maturities from 5 and 7 to 15 years. At December 31, 2016, approximately 7,296
Series D certificates had been issued for $7,296,000.



Previously, we offered
Series A, Series B and Series C secured investor certificates, at various maturities and interest rates. The weighted average interest
rate on all outstanding certificates was 6.47% and 6.44% at December 31, 2016 and 2015, respectively. Holders of the secured investor
certificates may renew certificates at the current rates and terms upon maturity at the Company’s discretion. Renewals upon
maturity are considered neither proceeds from nor issuance of secured investor certificates. Renewals of secured investor certificates
totaled approximately $831,000 and $958,000 for the years ended December 31, 2016 and 2015, respectively. There were no Series
A secured investor certificates outstanding as of December 31, 2016 and 2015. There were $13,808,000 and $16,012,000 representing
13,808 and 16,012 in outstanding Series B secured investor certificates as of December 31, 2016 and 2015, respectively and there
were $6,820,000 and $6,905,000 representing 6,820 and 6,905 in outstanding Series C secured investor certificates at December 31,
2016 and 2015, respectively. All secured investor certificates are collateralized by certain mortgage loans receivable or secured
church bonds of approximately the same stated value as the certificates. In addition, the secured investor certificates have certain
financial and non-financial covenants, as set forth in each Series’ respective trust indenture.



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





7







operations.
We have no employees but we do have two executive officers. All of our personnel needs are met through the personnel and expertise
of the Advisor and its affiliates. Among other things, the Advisor:



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



| | · | advises and selects Church Bonds to be purchased and held for investment
by us;
| | - | -------------------------------------------------------------------------------



| | · | services all mortgage loans we make;
| | - | ------------------------------------



| | · | provides marketing and advertising and generates loan leads directly
and through its affiliates;
| | - | ------------------------------------------------------------------------------------------------



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



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



| | · | provides office space and personnel as required for the performance
of the foregoing services; and
| | - | --------------------------------------------------------------------------------------------------



| | · | 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.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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 and proxy solicitation expenses 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. The Advisory
Agreement was last approved by the Board of Directors (including a majority of the Independent Directors) as of April 21, 2016.
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 possesses sufficient qualifications to perform the advisory function for
us and justify the compensation provided for in its contract with us.







Pursuant to the Advisory
Agreement, 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 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; unreimbursed costs directly relating to closing of loan transactions; and costs relating to the enforcement of loan agreements
and/or foreclosure proceedings.



In the event that our
Total Operating Expenses exceed in any calendar year the greater of (a) 2% of our Average Invested Assets or (b) 25% of our net
income, 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. Total operating expenses as defined in the Advisory
Agreement exclude expenses of raising capital, interest payments, taxes, non-cash expenditures (including, but not limited to,
depreciation, amortization and bad debt reserves), incentive fees and property operation and disposition costs. 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. The
Advisory Agreement was renewed for a one-year period as of April 21, 2016, and the reasonableness of our Advisor’s compensation
was reviewed as of this date as well. Factors to be considered in reviewing





8







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 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 is 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.
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (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 its last three (3) complete fiscal years and current financial statements for the period within ninety (90) days of the loan
closing date. A borrower must have the last complete fiscal year financial statements reviewed by a certified public accountant
(CPA) engaged by the borrower and who is independent of the borrower. On loans in excess of $500,000 our Advisor may require the
last complete fiscal year be audited by a CPA engaged by the borrower and who is independent of the borrower. In lieu of the above
requirement, we or our Advisor may employ a qualified accountant. The qualified accountant we employ would be required to be independent
of the borrower. Our employed qualified accountant would not be independent of us. Compiled financial statements of the borrower
are acceptable from our employed qualified accountant. Along with the compiled financial statements of the borrower, our employed
qualified accountant would perform partial and targeted review examination procedures for borrowers. On loans in excess of $500,000,
the Advisor may require partial and targeted audit examination procedures for borrowers.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (vii) | Borrowers in existence for less than three (3) fiscal years must provide financial statements since
their inception. No loan will be extended to a borrower in operation less than two (2) calendar years absent express approval by
our Board of Directors.
| | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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





9









| | (ix) | 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.
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (x) | 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.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (xi) | 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).
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (xii) | 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 below 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;



(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, must be reasonable in relation
to the Stockholders’ Equity of the corporation and must be reviewed by the Independent Directors at least quarterly. The
maximum amount of such borrowings cannot exceed 300% of shareholder’s equity in the absence of a satisfactory showing that
a higher level of borrowing is appropriate. Any excess in borrowing over such 300% level must be approved by a majority of Independent
Directors and disclosed to shareholders in the next quarterly report along with justification for such excess;
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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





10







| | (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,
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.



Under Performing and Non-Performing Loans



As of December 31, 2016,
we had twelve first mortgage loans totaling approximately $5,302,000 that are three or more monthly payments in arrears. We may
incur a loss if these borrowers are unable to bring their payments current and we are compelled to foreclose on their properties.
We may be unable to dispose of the foreclosed properties on terms that enable us to recoup our expenses and outstanding balances.
We have initiated foreclosure proceedings on two of these loans and expect to take possession of these two churches and list their
property for sale. In addition, we have foreclosed and have taken possession of two properties, and one property via deed in lieu
of foreclosure, with loan balances outstanding totaling approximately $618,000 and have listed the properties for sale through
local realtors. The fair value of the properties, which represents the carrying value, was $340,000 at December 31, 2016 after
an impairment reserve of approximately $277,000.



As of December 31, 2015,
we had eighteen first mortgage loans totaling approximately $5,503,000 that were three or more monthly payments in arrears. In
addition, we had foreclosed and had taken possession of four properties, and one property via deed in lieu of foreclosure, with
loan balances outstanding totaling approximately $1,497,000 and had listed the properties for sale through local realtors. The
fair value of the properties was approximately $697,000 at December 31, 2015.



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, 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. Our competitive “specialty” is in offering fixed-rate, long-term
loans, which few of our competitors make available to churches.



11









Employees



We have no employees but
we have two executive officers: Philip J. Myers, our Chief Executive Officer and President, and Scott J. Marquis, our Chief Financial
Officer and Treasurer. Our daily operations and other material aspects of our business are managed by Church Loan Advisors, Inc.
(the “Advisor”) on a “turn-key” basis using employees of the Advisor and/or its Affiliates. At present,
certain officers and directors of the Advisor are providing services to us at no charge and which will not be reimbursed to them.
These services include, among others, legal and analytic services relating to the execution of our business plan, development and
preparation of reports to be filed under the Securities Exchange Act, and utilization of proprietary forms and documents utilized
by the Advisor in connection with our business operations.



Subject to the supervision
of the Board of Directors, our business is managed by the Advisor, which provides us investment advisory and administrative services.
Philip J. Myers, our Chief Executive Officer, President and a Director, is President of the Advisor and President of American Investors
Group, Inc., the underwriter of our past public offerings. The Company utilizes two employees of the Advisor on a full-time basis
and one member of its staff on a part-time or other basis. The Company does not presently expect to directly employ anyone in the
foreseeable future, since all of our administrative functions and operations are contracted through the Advisor. However, legal,
accounting and certain other services are provided to us by outside professionals and paid by us directly.



Operations



Our operations currently
are located in the 1,500 square foot offices of the Advisor’s affiliate, American Investors Group, Inc., 10237 Yellow Circle
Drive, Minnetonka, Minnesota 55343. These facilities are being leased by American Investors Group, Inc. The lease expires December
31, 2017. We are not separately charged any rent for our use of these facilities, or for our use of computers, 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. However, we do pay postage service for costs associated with the distribution of dividends and proxy materials
to our shareholders.



Item 1A. Risk Factors.



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:





|·low demand for mortgage loans
        ·interest rate and real estate valuation fluctuations
        ·changes in the level of consumer confidence
        ·availability of credit-worthy borrowers
        ·national and local economic conditions
        ·demographic and population patterns
        ·zoning regulations
        ·taxes and tax law changes | ·availability of alternative financing and competitive conditions
        ·factors affecting specific borrowers
        ·losses associated with default, foreclosure of a mortgage, and sale of the mortgaged property
        ·state and federal laws and regulations
        ·bankruptcy or insolvency of a borrower
        ·borrower’s misrepresentation(s) and/or fraud
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





Losses Associated with
Default, Foreclosure of a Mortgage and Sale of Mortgaged Property Pose Additional Risks. We have experienced losses associated
with default, foreclosure of mortgages, and sales of mortgaged properties. The time frame to foreclose on a property varies from
state to state, and delays can occur due to backlog in court dockets; we have experienced delays from 12 to 36 months. Such delays
have and can cause the value of the mortgaged property to further deteriorate due to lack of maintenance. Theft and vandalism have
also occurred on certain of our foreclosed properties. Some borrowers have removed fixtures and furnishings including sound systems,
chairs, pulpits, appliances, mechanical and electrical systems prior to vacating the facility which further reduces the value of
our collateral. The properties also incur operating expenses pending their sale (resale marketing, property insurance, security,
repairs and maintenance) and these expenses could be substantial if we cannot readily dispose of the property. Expenses related
to the foregoing and diminution in value could prevent us from recovering the full value of a loan in the event of foreclosure,
which shortfall would decrease the value of assets held by the





12









Company
and could negatively impact the Company’s ability to pay interest on its outstanding secured investor certificates or dividends
to shareholders.



Real Estate Taxes Resulting
from a Foreclosure May Prevent Us from Recovering the Full Value of a Loan. If we foreclose on a mortgage and take legal title
to a church’s real estate, real estate taxes could be levied and assessed against the property since the property would no
longer be owned by a non-profit entity. These expenses would be our financial responsibility, and could be substantial in relation
to our prior loan if we cannot readily dispose of the property. Such expenses could prevent us from recovering the full value of
a loan in the event of foreclosure, which shortfall would decrease the value of assets held by the Company.



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, or reduced collateral value
may reduce or eliminate our security.



Fixed and Variable-Rate
Debt Can Result in Yield Fluctuations. Fixed and variable-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 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 current average holding period of our debt is approximately four and a half years, which has
mitigated this risk in yield fluctuations.



The Mortgage Banking
Industry Is Highly Competitive. We compete with a wide variety of lenders, including banks, credit unions, 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 Generate New Loans. 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 foreclosure rates during economic downturns. In addition, because we provide mortgages to churches and other religious
organizations who generally receive financing through charitable contributions, our financial results are subject to fluctuations
based on a lack of consumer confidence or a severe or prolonged national or regional recession. As a result of these and other
circumstances, our potential borrowers may decide to defer or terminate plans for financing their properties. In addition, during
such economic times we may be unable to locate as many credit-worthy borrowers. In addition, we believe the risks associated with
our business are more severe during periods of economic slowdown or recession if these periods are accompanied by declining values
in real estate. For example, declining real estate values would likely reduce the level of new loan originations, since borrowers
often use increases in the value of their existing properties to support the purchase of or investment in additional properties.
Borrowers may also be less able to pay principal and interest on our loans if the real estate economy is weak, which could result
in higher default rates. Higher default rates could adversely affect the Company’s results of operations, which could negatively
impact the Company’s ability to pay interest on the certificates and dividends to shareholders. Further, declining real estate
values significantly increase the likelihood that we will incur losses in the event of default because the value of our collateral
may be insufficient to cover our basis in the investment.



The Company Faces Certain
Risks and Uncertainties Related to Financing and Liquidity, and These Volatilities Could Have an Impact on Its Operations and Its
Ability to Maintain its Long-term Capital Needs and/or Secure Additional Financing. The Company faces certain risks and uncertainties,
particularly during volatile market conditions. In addition, liquidity can be tight in all financial markets, including the debt
and equity markets. These volatilities could have an impact on operations to the extent that the Company experiences slower maturities
or repayment of mortgage loans, illiquid markets for our bond portfolio, or a higher redemption rate on our secured investor certificates
than has been the case historically.





13









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. Although the broader economic indicators suggest there
has been notable improvement in key indicators the economic recovery has been less noticeable in the communities in which the majority
of our loans and properties are located. Because our borrowers are churches and other religious organizations who generally receive
financing through charitable contributions, if their members experience a decrease in pay or lose their jobs and are unable to
secure new ones, they may make fewer or no contributions to our borrowers, which could result in the borrower’s inability
to make mortgage payments or make them on time. In those situations, we may be forced to foreclose on the mortgage and take legal
title to the real estate and incur expenses related to the foreclosure and disposition of the property. Such increased expenses
paired with possible lower real estate values (having been reduced by the foregoing expenses) could adversely affect the Company’s
results of operations.



We Have Fluctuating
Earnings.As a mortgage lender, we make provision for losses relating to our loan portfolio and sometimes take impairment charges
due to our borrowers defaulting or declaring bankruptcy. Since the economic recovery has not dramatically affected the communities
in which we lend, increases in the occurrence of such events resulted in greater fluctuation of our earnings, which reduced our
net income. Our earnings are also impacted by non-performing assets and the carrying cost of maintaining such assets (taxes, insurance
and maintenance). Inconsistent earnings could adversely affect the Company’s financial condition and results of operations.



Risks Related to Mortgage Lending to Churches



Churches Rely on Member
Contributions to Repay Our Loans. Churches typically rely on member contributions for their primary source of income. As such,
member contributions are the primary source 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, 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 a 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. These
factors may influence our decision to restructure the terms of a non-performing loan rather than foreclose on a church property
which may decrease the amount of the loan we recover.



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 resale marketing, property
insurance, utilities, 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.





14









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 (“REIT”). 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 continue 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 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.



Consistent with our qualification
as a REIT for federal income tax purposes, we do not file state income tax returns in all states in which the collateral securing
our loans is located. Since our inception, no state has ever asserted a claim for income taxes on any amount of our earnings or
any aspect of our operations. Although we believe our position as it relates to state income taxes is appropriate, there can be
no assurance that in the future any state tax jurisdiction will not pursue payment of some amount of state income taxes.



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



Lack of Liquidity and
Inconsistent Public Market Price.Our common stock is not currently listed or traded on any exchange. “Pink Sheet”
price quotations for our stock under the symbol “ACMC” were made at certain isolated times during 2016 by other broker-dealers
at prices as low as $1.61 per share and as high as $2.90 per share. 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 material market develops) based on market forces which consider various factors
beyond our control, there can be no assurance that the market value of the shares at any given time would be the same or higher
than the public purchase price of our shares. In addition, the market price, if a material market develops, could decline if the
yields from other competitive investments exceed the actual dividends paid by us on our shares.



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 increase and we are unable to
deploy funds into higher yielding mortgage loans, the dividends we pay may be less than other organizations which may have investment
objectives similar to our own.



Interest Payments to
Certificate Holders May Reduce Dividend Payments on Our Shares. We attempt to deploy our capital 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





15







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 Indebtedness/Certificates



We May Be Unable to
Generate Sufficient Cash Flow to Service Our Debt Obligations. Our ability to make payments on our indebtedness and to fund
our operations depends on our ability to generate cash in the future. Our ability to generate future cash is subject to general
economic, industry, financial, competitive, operating, legislative, regulatory and other factors that are beyond our control. As
such, we cannot assure you that our business will generate sufficient cash flow from operations or that future borrowings will
be available to us under a credit arrangement in an amount sufficient to enable us to pay amounts due on our indebtedness or to
fund our other liquidity needs.



Our ability to obtain
additional financing, if needed, will depend on, among other things: (i) our financial condition at the time; (ii) restrictions
on outstanding indebtedness; and (iii) other factors, including the condition of the financial markets or the real estate and real
estate lending markets. If we do not generate sufficient cash flow from operations, and additional borrowings or proceeds of asset
sales are not available to us, we may not have sufficient cash to enable us to meet all of our obligations, which could affect
our tax status as a REIT.



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 any additional indebtedness. Under our Bylaws, as amended, we may incur indebtedness
up to 300% of our shareholder’s equity, the level permitted under North American Securities Administrators Association (“NASAA”)
guidelines, in the absence of a satisfactory showing that a higher level of borrowing is appropriate; any excess in borrowing over
such 300% level must be approved by a majority of the Independent Directors and disclosed to shareholders in the next quarterly
report along with justification for such excess.



There Are Potential
Adverse Effects Associated with Lending Borrowed Funds. In the past, we have deployed the proceeds from the sale of secured
investor certificates into loans to, and bonds issued by, churches and other non-profit religious organizations. We have also used
a credit facility from time to time to fund loans and purchase bonds. 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.



There Is No Public
Market for the Secured Investor Certificates. There is no market for the secured investor certificates. It is unlikely that
a market will develop. There are no current plans to list the secured investor certificates on any exchange or for a broker-dealer
to make a market in the secured investor certificates. In addition, the market for REIT securities historically has been less liquid
than the markets for other types of publicly-traded securities.



There Is No Sinking
Fund, Insurance or Guarantee Associated With the Secured Investor Certificates. We do not contribute funds to a separate account,
commonly known as a sinking fund, to repay principal or interest on the secured investor certificates upon maturity or default.
Our secured investor certificates are not certificates of deposit or similar obligations of, or guaranteed by, any depository institution.
Further, no governmental or other entity insures or guarantees payment on the secured investor certificates if we do not have enough
funds to make principal or interest payments. Therefore, holders of our secured investor certificates have to rely on our revenue
from operations, along with the security provided by the collateral for the secured investor certificates, for repayment of principal
and interest on them.



The Collateral for
the Secured Investor Certificates May Not Be Adequate If We Default. The secured investor 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 secured investor certificates. If we default in the repayment of the secured investor
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





16









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 secured investor certificates.



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



We Are Obligated To
Redeem Secured Investor 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 secured investor certificates if we have redeemed at least $25,000
of principal amount of certificates for the benefit of estates during the calendar quarter. There is no present intention to redeem
secured investor certificates prior to maturity except in the case of death of a certificate holder.



We May Not Have Sufficient
Available Cash to Redeem Secured Investor Certificates If We Terminate Our Advisory Agreement with Our Current Advisor. We
will be required to offer to redeem all outstanding secured investor certificates if we terminate our advisory agreement with Church
Loan Advisors, Inc., our Advisor, for any reason. If the holders of a significant principal amount of secured investor 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 could 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 Secured Investor Certificates. The indenture governing the secured investor 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 secured investor
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:



|·mortgage loan marketing and procurement
        ·bond portfolio selection and investment
        ·mortgage loan underwriting
        ·mortgage loan servicing
        ·money management
        ·developing and maintaining business relationships
        ·maintaining “goodwill” | ·managing relationships with our accountants and attorneys
        ·corporate management
        ·bookkeeping
        ·reporting to state, federal, tax and other regulatory authorities
        ·reports to shareholders and shareholder relations
        ·loan enforcement and collections
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Our shareholders’
right to participate in management is generally limited to the election of directors. Certificate holders 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.



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 controlled by our Chief Executive
Officer and President, Philip J. 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





17







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 outside
of the ordinary course of our activities are subject to approval 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 Secured Investor Certificates May Affect Our Ability to Replace Our Advisor. We will be required to offer to
redeem all outstanding secured investor 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 secured investor 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 borrowers’ ability to repay their loans.



Item 1B. Unresolved Staff Comments.



Not applicable.



Item 2. Properties.



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, because our Advisor includes
these expenses in the Advisory Fee.



Real Estate Held for Sale/Description of
Properties Acquired through Foreclosure



As of December 31, 2016,
we have two properties acquired through foreclosure, and one via deed in lieu of foreclosure, with outstanding loan balances totaling
approximately $618,000. We have listed the properties for sale through local realtors except for the property for which we received
a deed in lieu of foreclosure. The property we received a deed in lieu of foreclosure is available for sale, however it is currently
not listed as we have allowed the church to either obtain financing from another source or list the property for sale. None of
these properties are generating revenue except for one where the Church is still occupying the property and paying rent while trying
to either sell the building or obtain refinancing. Each foreclosed property is valued based on its current listing price less any
anticipated selling costs, including, for example, realtor commissions. The property we received a deed in lieu of foreclosure
is being carried at the fair market value. The fair value of our real estate held for sale, which represents the carrying value,
is approximately $341,000 as of December 31, 2016 after an impairment reserve of approximately $277,000. Once a property is acquired
by us, comparable sales information is obtained and a local realtor is engaged to determine demand for our properties. The situation
with respect to each property is reviewed





18







periodically
with our realtors. The general competitive conditions surrounding the potential sale of our properties are tied, in large part,
to the fact that they are special-use properties with variable zoning restrictions. We principally lend to churches, which are
commonly exempt from zoning restrictions. However, while a church property may be exempt from zoning restrictions, if it is located
in a residential area, it still may only be used as a church, thereby limiting the pool of potential buyers. On the other hand,
a church or other property that is zoned for commercial use generally experiences higher demand, as potential buyers can convert
the property to their own business use. As such, our properties that are located in residential areas typically experience less
demand than those zoned for commercial use. Descriptions of the four properties we have acquired through foreclosure, and one
via deed in lieu of foreclosure, are listed below.



Foreclosure of a $216,000
loan was completed on a church located in Battle Creek, Michigan in May 2004. The church congregation has disbanded and the church’s
property, which consists of a single church building, is currently unoccupied. We have taken possession of the church property
and have listed the property for sale through a local realtor. The property is reflected in Real Estate Held for Sale at $0. This
property is located in a residential area.



Foreclosure of a $164,000
loan was completed on a church located in Detroit, Michigan in March 2016. The Company has taken possession of the property and
has listed it for sale through a local realtor. The property is included in Real Estate Held for Sale at December 31, 2016 at $115,000.
The property is zoned as a commercial property.



In 2008, we received a
deed in lieu of foreclosure on a church located in Pine Bluff, Arkansas and have recorded the deed in the county where the church
is located. Due to the value of the property ($360,000) versus the amount owed to us ($238,000), we have allowed the church to
either obtain financing from another source or list the property for sale in hopes of recovering some of its equity. The church
is paying us monthly rent until the property is refinanced or sold. We have included this property in Real Estate Held for Sale
at $226,000 at December 31, 2015. This property is located in a residential area.



Item 3. Legal Proceedings.



There are presently no
legal actions against us, pending or threatened.



Item 4. Mine Safety Disclosures



Not applicable.

19





PART II





Item 5. Market for Registrant’s
Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.



Outstanding Securities



As of March 31, 2017,
1,677,798 shares of our common stock and $27,902,000 of secured investor certificates were issued and outstanding.



Lack of Liquidity and Absence of Public
Market Price.



There is virtually 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 a market
develops, could decline if the yields from other competitive investments exceed the actual dividends paid by us on our shares.
Our common stock is not currently listed or traded on any exchange or market.



Our Common Stock, $.01
par value per share, occasionally trades on the over-the-counter market Pink Sheets under the symbol “ACMC.PK”. The
following table sets forth the high bid quotation and the low bid quotation as quoted by the Pink Sheets in 2016 and 2015. Such
over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily
represent actual transactions. We did not purchase or sell any common stock shares in 2016 or 2015.



|                   | High  | Low  
|------------------ | ----- | -----
|Calendar Year 2016 |       |      
|First Quarter      | $2.50 | $2.15
|Second Quarter     | $2.60 | $2.10
|Third Quarter      | $2.90 | $2.13
|Fourth Quarter     | $2.75 | $1.61
|                   |       |      
|Calendar Year 2015 |       |      
|First Quarter      | $4.49 | $3.86
|Second Quarter     | $4.29 | $4.00
|Third Quarter      | $4.00 | $3.32
|Fourth Quarter     | $3.70 | $2.10



Holders of Our Common
Shares



As of March 31, 2017,
we had 619 record holders of our common stock, $.01 par value per share (excluding shareholders for whom shares are held in a “nominee”
or “street” name).



We paid dividends on our
common stock for the fiscal years ended December 31, 2016 and 2015 as follows:





|For Quarter Ended: | Dollar Amount Distributed
        Per Share: | Annualized Yield Per $10
        Share Represented:
|------------------ | -------------------------------------------- | ---------------------------------------------------
|                   | 2016                                         | 2015                                               
|March 31           | $.060                                        | $.090                                              
|June 30            | $.060                                        | $.050                                              
|September 30       | $.060                                        | $.040                                              





20











|            | 2016  | 2015  | 2016  | 2015 
|----------- | ----- | ----- | ----- | -----
|December 31 | $.060 | $.075 | 2.40% | 3.00%
|Totals:     | $.255 | $.255 | 2.40% | 2.50%



As a Real Estate Investment
Trust, we make regular quarterly distributions to shareholders. The amount of distributions to our shareholders must equal at least
90% of our “real estate investment trust taxable income” in order for us to retain REIT status. Shareholder distributions
are estimated for our first three quarters of each fiscal year and adjusted annually based upon our final 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 by us. All dividends are paid
by us at the discretion of the Board of Directors and will depend upon our earnings and financial condition, maintenance of REIT
status, funds available for distribution, results of operations, economic conditions, and such other factors as our Board of Directors
deems relevant.



From time to time we offer
the sale of shares of our common stock or secured investor certificates, the proceeds of which are typically used to fund loans
to be made by us. Until we have fully invested such funds into loans, the relative yield generated by sales of our shares, and
thus, dividends (if any) to shareholders, could be less than expected. We seek to address this issue by (i) collecting from borrowers
an origination fee at the time a loan is made, (ii) timing our lending activities to coincide as much as possible with sales of
our securities, and (iii) investing our un-deployed 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 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, 2016, we distributed 100% of our taxable income
to our shareholders in the form of quarterly dividends. 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. 100% of
the dividends paid to shareholders for the tax year 2016 were non-dividend distributions due to the realized (carry-forward) loss
totaling approximately $807,000 and additional carry forward losses on three first mortgage loans totaling approximately $767,000
in 2016. We expect dividends paid in 2017 to be 100% non-dividend distributions due to the realized (carry-forward) loss totaling
approximately $1,829,000.



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. However, if we
decide 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.



Equity Compensation Plans



We do not have any equity
compensation plans under which equity securities of the Company are authorized for issuance.



Item 6. Selected Financial Data.



As a smaller reporting
company, as defined in Rule 12b-2 of the Securities Exchange Act of 1934 (the “Exchange Act”), we are not required
to provide the information required by this item.





21









Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations.



The following discussion
regarding our financial statements should be read in conjunction with the financial statements and notes thereto included in this
Annual Report beginning at page F-1 and our forward-looking statement disclosure at the beginning of Part I to this Annual Report.



Financial Condition



Our total assets decreased
from $40,646,151 at December 31, 2015 to $39,566,638 at December 31, 2016. The primary reason for the decrease in total assets
from December 31, 2015 through December 31, 2016 was a decrease in mortgage loans outstanding. Stockholders’ equity decreased
from $12,244,898 at December 31, 2015 to $11,505,019 at December 31, 2016. This was primarily due to distributions in the form
of dividends in aggregate, totaling approximately $403,000 and a net loss of ($337,207). Our primary liabilities at December 31,
2016 and 2015 were our secured investor certificates, which were $27,924,000 and $28,246,000, respectively. We also had dividends
declared as of the end of the period reported on, but which are not paid before the 30th day of the ensuing month. We
anticipate that funds from maturing loans will equal or exceed obligations due on our certificates during 2017. To the extent necessary,
we will seek short-term financing or a new working capital facility to meet any short-term cash requirements, which we currently
expect would be minimal. We expect to use any extra cash available to us to fund new loans.



Comparison of the Fiscal Years ended December 31, 2016 and 2015



The following table shows the results of our operations for fiscal
2016 and 2015:



|                                                                  | For the Year Ended December 31, |  |           
|----------------------------------------------------------------- | ------------------------------- |  | ----------
|                                                                  |                                 |  |           
|Statement of Operations Data                                      | 2016                            |  | 2015      
|                                                                  |                                 |  |           
|Interest and other income                                         | $2,698,186                      |  | $2,936,326
|Interest expense                                                  | 2,025,000                       |  | 1,997,249 
|Net interest income                                               | 673,186                         |  | 939,077   
|Total provision for losses on mortgage loans and bonds            | 155,056                         |  | 188,634   
|Net interest income after provision for mortgage and bonds losses | 518,130                         |  | 750,443   
|Operating expenses                                                | 855,337                         |  | 792,730   
|Total operating expenses                                          | 855,337                         |  | 792,730   
|Operating loss                                                    | (337,207)                       |  | (42,287)  
|Other income                                                      | -                               |  | 4,053     
|Net loss                                                          | $(337,207)                      |  | $(38,234) 
|Basic and diluted loss per share                                  | $(0.20)                         |  | $(0.02)   



Results of Operations



Since we began active
business operations on April 15, 1996, we have paid 83 consecutive quarterly dividend payments to shareholders. These dividend
payments have resulted in an average annual return of 5.685% to shareholders who purchased shares at $10 per share in our public
offerings of stock. Each loan funded during the quarter generates origination income of which one-half is due and payable to shareholders
as taxable income even though origination income is not recognized in its entirety for the period under accounting principles generally
accepted in the United States of America (“GAAP”). The other one-half of any origination income generated is due to
our Advisor. We anticipate distributing all of our taxable income in the form of dividends to our shareholders in the foreseeable
future to maintain our REIT status and to provide income to our shareholders.



Net (loss) for our year
ended December 31, 2016 was $(337,207) on total interest and other income of $2,698,186 compared to net loss of $(38,234) on total
interest and other income of $2,936,326 for the year ended December 31, 2015. The increase in net (loss) was primarily due to the
payoff of first mortgage loans, which reduced our interest-earning assets during 2016.



Net interest income earned
on the Company's portfolio of loans was $673,186 for the year ended December 31, 2016, compared to $939,077 for 2015. The decrease
in net interest income was due to the decrease in interest income of approximately $238,000. Excluded from revenue for the year
ended December 31, 2016 is $13,160 of origination income, or





22







“points,”
we received. Recognition of origination income under GAAP must be deferred over the expected life of each loan. However, under
tax principles, origination income is recognized in the period received. Accordingly, because our status as a REIT requires, among
other things, the distribution to shareholders of at least 90% of taxable income, the dividends declared and paid to our shareholders
for the quarters ended March 31, 2016, June 30, 2016, September 30, 2016 and December 31, 2016 included origination income even
though it was not recognized in its entirety as income for the period under GAAP.



Our operating expenses
for our fiscal year ended December 31, 2016 were $565,887 compared to $792,730 for our fiscal year ended December 31, 2015. The
decrease in operating expenses was primarily a result of a decrease in overall operating expenses involving legal, accounting and
our real estate impairment reserve totaling approximately $195,000.



Our Board of Directors
declared dividends of $.060 for each share of record on May 1, 2016, $.060 for each share of record on July 30, 2016, $.060 for
each shares of record on October 28, 2016 and $.060 for each shares of record on January 28, 2017. Based on the quarters ended
March 31, 2016, June 30, 2016, September 30, 2016 and December 31, 2016 and assuming a share purchase price of $10.00, the dividends
paid represented a 2.50% annual yield in 2016. 100% of the dividends paid to shareholders for the tax year 2016 were non-dividend
distributions due to the realized (carry-forward) loss of $806,753 and additional realized losses of $1,062,576 on three first
mortgage loans of which two were provided seller financing by us and one was sold for cash. We expect dividends paid in 2017 to
be 100% non-dividend distributions due to the realized (carry-forward) losses totaling approixmately $1,829,000 for the period
ended December 31, 2016.



We choose to distribute
income from ongoing operations in the form of dividends to shareholders. As a Real Estate Investment Trust we are required to distribute
up to 90% of our taxable income. The table below reflects taxable income, net income from operations, dividend distributions and
the effect of the distributions to shareholders for the periods ended December 31, 2016 and 2015. Any amount distributed to shareholders
in excess of income from ongoing operations is deemed to be return of principal which results in a reduction of our shareholder
equity.



|                                          |  | December 31, 2016 |           | December 31, 2015
|----------------------------------------- |  | ----------------- | --------- | -----------------
|                                          |  |                   |           |                  
|Net Taxable Income                        |  | $                 | 40,077    |                  
|Net Income From Operations (before items) |  | $                 | 215,572   |                  
|Total Dividend Distributions              |  | $                 | 402,672   |                  
|Principal Distribution                    |  | $                 | 187,100   |                  
|Number of Shares Outstanding              |  |                   | 1,667,798 |                  
|Amount of Principal Distributed per Share |  | $                 | 0.11      |                  



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 cash, and (ii) making mortgage loans to churches and other non-profit religious organizations.
Our principal expenses are advisory fees, legal and auditing fees, communications costs with our shareholders, and the expenses
of our transfer agent and registrar.



Our loan portfolio consists
primarily of long-term fixed rate loans. We currently do not have any short-term variable rate loans or renewable loans in our
portfolio. Historically, loans in our portfolio are outstanding for an average of approximately six years. Our borrowers are typically
small independent churches with little or no borrowing history. Once a church establishes a payment history with us, they often
look to re-finance their loan with a local bank, credit union or other financial institution that is willing to provide financing
since the borrower has established a payment history and has demonstrated they can meet their mortgage debt obligations.



Currently, our bond portfolio
comprises 30% of our assets under management. The total principal amount of mortgage- secured debt securities we purchase from
churches and other non-profit religious organizations is limited to 30% of our Average Invested Assets. The total principal amount
outstanding is approximately $11,941,000 as of December 31, 2016 and was approximately $10,713,000 as of December 31, 2015. We
earned approximately $715,000 on our bond portfolio in 2016 and approximately $625,000 in 2015.



In
addition, we are able to borrow funds in an amount up to 300% of shareholder’s equity (in the absence of a satisfactory
showing that a higher level of borrowing is appropriate; any excess in borrowing over such 300% level must be approved



23







by
a majority of the Independent Directors and disclosed to shareholders in the next quarterly report along with justification for
such excess) in order to increase our lending capacity.



In July 2014, the Company
filed a registration statement with the Securities and Exchange Commission to offer $10,000,000 of Series “D” Secured
Investor Certificates. The Securities and Exchange Commission declared our registration statement effective on August 12, 2014.
The offering was subsequently renewed with an effective date of September 23, 2016. The certificates are being offered in multiples
of $1,000 with interest rates ranging from 4.00% to 6.50%, subject to changing market rates. Certificates are being offered with
maturities from 5 and 7 to 15 years. The certificates are collateralized by certain mortgage loans receivables approximately the
same value. Our future capital needs are expected to be met by (i) future public offerings of our shares and/or our certificates;
and (ii) the repayment of existing loans and bonds and potential sale of bonds. We continually review the market for other sources
of capital such as a new line of credit.



We anticipate that funds
from maturing loans will equal or exceed obligations due on our certificates during 2017. To the extent necessary, we will seek
short-term financing or a new working capital facility to meet any short-term cash requirements, which we currently expect would
be minimal. We expect to use any extra cash available to us to fund new loans.



The table below shows
the principal amount of loans and bonds to be paid during 2017 and the number of secured investor certificates maturing in 2017.
We have approximately $3,383,000 in cash on hand to pay maturing certificates. We may need to obtain additional funds from other
sources to meet our certificate maturity obligations. One source is the potential sale of bonds in our portfolio or future public
offerings of our share and/or our certificates.



|                                                            |  |   | Fiscal Year 2017 | 
|----------------------------------------------------------- |  | - | ---------------- | 
|                                                            |  |   |                  | 
|Contractual maturity schedule mortgage loans                |  | $ | 789,363          | 
|Contractual maturity schedule bond portfolio                |  |   | 111,000          | 
|Total                                                       |  | $ | 900,363          | 
|                                                            |  |   |                  | 
|Contractual maturity schedule secured investor certificates |  | $ | 2,803,000        | 
|Additional funds required to pay maturing certificates      |  | $ | 1,902,637        | 



Holders of our secured
investor certificates may renew certificates at the current rates and terms upon maturity at our discretion. Renewals upon maturity
are considered neither proceeds from nor issuance of secured investor certificates. Renewals totaled approximately $831,000 and
$958,000 during 2016 and 2015, respectively. These renewals represent 27% and 41% of the maturing certificates. We believe that
renewals we offer to maturing certificate holders will reduce the amount of cash needed to pay maturing certificates in fiscal
year 2017. In addition, at December 31, 2016 we have approximately $3,383,000 in cash on hand to pay maturing certificates which
we believe will be sufficient to support any shortfall arising for the mismatch between contractual maturities of assets and liabilities.



Loan Loss Reserve Policy



We follow a loan loss
reserve policy on our portfolio of loans outstanding. This critical policy requires complex judgments and estimates. We record
mortgage loans receivable at their estimated net realizable value, which is the unpaid principal balance less the allowance for
mortgage loans. Our loan policy provides an allowance for estimated uncollectible loans based on an evaluation of the current status
of the loan portfolio. This policy reserves for principal amounts outstanding on a particular loan if cumulative interruptions
occur in the normal payment schedule of a loan. Our policy will reserve for the outstanding principal amount of a loan in our portfolio
if the amount is in doubt of being collected. Additionally, no interest income is recognized on impaired loans that are declared
to be in default and are in the foreclosure process.



The Company will declare
a loan to be in default and will place the loan on non-accrual status when the following thresholds have been met: (i) the borrower
has missed three consecutive mortgage payments; (ii) the borrower has not communicated to the Company any legitimate reason for
delinquency in its payments to the Company and has not arranged for the re-continuance of payments; (iii) lines of communication
to the borrower have broken down such that any reasonable prospect of rehabilitating the loan and return of regular payments is
gone.



The Company’s policies
on payments received and interest accrued on non-accrual loans are as follows: (i) The Company will accept payments on loans that
are currently on non-accrual status when a borrower has communicated to us that they intend to meet their mortgage obligations.
A payment made on a non-accrual loan is considered a good faith deposit as to the intent to resume their mortgage payment obligation.
This good faith deposit is credited back to interest first then principal as





24









stated
in the mortgage loan documentation. (ii) A letter outlining the re-payment terms or the restructure terms (if any) of the loan
is provided to the borrower. This letter will be signed by the Senior Pastor and all board members of the borrower. This letter
resumes the obligation to make payments on non-accrual loans. (iii) The borrower must meet all its payment obligations for the
next 120 days without interruption in order to be removed from non-accrual status.



When a loan is declared
in default according to the Company’s policy or deemed to be doubtful of collection, the loan committee of the Advisor to
the Company will direct the staff to charge-off the uncollectable receivables.



At December 31, 2016,
we reserved $1,311,983 against seventeen mortgage loans, of which twelve churches were three or more mortgage payments in arrears.
Three of these loans were declared to be in default and two loans are in the process of being foreclosed. At December 31, 2015,
we reserved $1,204,833 against eighteen mortgage loans, of which thirteen churches were three or more mortgage payments in arrears.



The total value of impaired
loans, which are loans that are in the foreclosure process or are declared to be in default, was approximately $1,853,000 and $1,779,000
at December 31, 2016 and 2015, respectively. We believe that the total amount of non-performing loans is adequately secured by
the underlying collateral and the allowance for mortgage loans.



Of the twelve loans which
were three or more payments in arrears, the first impaired loan has an outstanding balance of approximately $166,000. The church
is located in Detroit, Michigan. This loan is in the foreclosure process. We plan to foreclose on this property in the first quarter
of 2017 and list the property for sale through a local realtor. The church is located in a commercial area. Therefore, the facility
can be converted and used other than as a church.



The second impaired loan
has an outstanding balance of $461,000. The church is located in Atlanta, Georgia. This loan is in the foreclosure process. We
plan to take possession of the property in 2017 and list the property for sale through a local developer. The church is located
in a residential area.



The third impaired loan
has an outstanding balance of approximately $460,000. The church is located in Miami, Florida. This loan has been declared to be
in default. The church has resumed making monthly interest only payments. We plan on restructuring this loan in 2017 if the church
continues to make monthly payments. The church is located in a residential area.



The fourth impaired loan
has an outstanding balance of approximately $544,000. This loan has been declared in default. The church is located in Detroit,
Michigan and is located in an area suffering from urban blight and high crime. We are continually assessing our options with a
local realtor. This church is located in a commercial area. Therefore, the facility can be converted and used other than as a church.



The fifth impaired loan
has an outstanding balance of $222,000. The church is located in Atlanta, Georgia. The Church has defaulted on their monthly mortgage
payments. The Church is making sporadic interest only payments while occupying and maintaining the building. We are continually
assessing our options with a local developer.



The sixth impaired loan
has an outstanding balance of $383,000. The church is located in Raleigh, North Carolina. The church has missed six mortgage payments
since the loan was funded in November 2004. However, the church did not miss any payments in 2016. We are working with the church
to bring its payments current.



The seventh impaired loan
has an outstanding balance of $295,000. The church is located in Seagoville, Texas. The church has missed seven payments since
the loan was funded in August 2006 of which one payment was missed in 2016. We are working with the church to bring its payments
current.



The eighth impaired loan
has an outstanding balance of $681,000. The church is located in Dallas, Texas. The church has missed three payments since the
loan was funded in September 2008. However, the church did not miss any payments in 2016. We are working with the church to bring
its payments current.



The ninth impaired loan
has an outstanding balance of $653,000. The church is located in Linton, Indiana. The church has missed three payments since the
loan was funded in September 2007. However, the church did not miss any payments in 2016. We are working with the church to bring
its payments current.



The tenth impaired loan
has an outstanding balance of $460,000. The church is located in Cincinnati, Ohio. The church has missed six payments since the
loan was funded in April 2011, of which two payments were missed in 2016. We are working with the church to bring its payments
current.





25







The eleventh impaired
loan has an outstanding balance of $731,000. The church is located in Richmond Hills, Texas. The church has missed six payments
since the loan was funded in November 2004, of which two payments were missed in 2016. We are working with the church to bring
its payments current.



The twelfth impaired loan has an outstanding
balance of $245,000. The church is located in Kirbyville, Texas. The church has missed three payments since the loan was funded
in June 2003. However, the church did not miss any payments in 2016. We are working with the church to bring its payments current.



We presently expect our
allowance for mortgage loans to be adequate to cover all losses incurred and probable. Listed below is our current loan loss reserve
policy:



|Incident | Percentage of Loan Reserved                                                                                                                                                                                                                         | Status of Loan                                                                                                                                                                                                                                 
|-------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1.       | None                                                                                                                                                                                                                                                | Loan is current, no interruption in payments during history of the loan, (“interruption” means receipt by us more than 30 days after scheduled payment date).                                                                                  
|2.       | None                                                                                                                                                                                                                                                | Loan current, previous interruptions experienced, but none in the last six month period.  Applies to restructured loans or loans given forbearance.                                                                                            
|3.       | None                                                                                                                                                                                                                                                | Loan current, previous interruptions experienced, but none in the last 90 day period.                                                                                                                                                          
|4.       | 1.00%                                                                                                                                                                                                                                               | Loan serviced regularly, but 2 or 3 payments cumulative in arrears.  Delinquency notice has been sent.                                                                                                                                         
|5.       | 5.00%                                                                                                                                                                                                                                               | Loan serviced regularly, but 4 or 5 payments cumulative in arrears. Repayment plan requested.                                                                                                                                                  
|6.       | 10.00%                                                                                                                                                                                                                                              | Loan is declared to be in default.  Legal counsel engaged to begin foreclosure.  Additional accrual of overdue payments and penalties ceased.                                                                                                  
|7.       | The greater of: (i) accumulated reserve during default period equal to principal loan balance in excess of 65% of original collateral value; or (ii) 1% of the remaining principal balance each quarter during which the default remains in effect. | Foreclosure proceeding underway.  Accrual of all overdue interest and principal payments including penalties to be expensed.  Reserve amount dependent on value of collateral.  All expenses related to enforcing loan agreements are expensed.



The Company’s Advisor,
on an ongoing basis, will review reserve amounts under the policy stated above and determine the need, if any, to reserve amounts
in excess of its current policy. Any additional reserve amounts will be equal to or greater than its current reserve policy. Allowance
for mortgage loans are calculated on the remaining principal balance on the date of calculation and recorded on a quarterly basis.



We expect to foreclose
on two properties in 2017 and will incur costs to secure and prepare these properties for sale. We seek to exhaust all options
available to us to before proceeding to foreclosure.



Our borrowers are typically
small independent churches with little or no borrowing history. Small independent churches have limited resources to pay missed
mortgage payments. We continually monitor these missed payments and determine on a case by case basis if a restructure of the current
loan terms will help the church recover from its payment issues or by communication with the church, or lack thereof, if we should
foreclose on the property. We did not see a substantial increase in delinquent payments in 2016. We contribute this to a more stable
economy and lower unemployment. However, we can provide no assurance that delinquent loan payments will be paid or a restructure
of the loan will result in the borrowing church to meet their payment obligations.



Our loan loss reserve
policy requires removal of a borrower from accrual status if the borrowing church misses three payments over a twenty four month
period.





26







Bond Loss Policy



Other than the temporary
impairment, the impairment on bonds is estimated by management and is determined by reviewing: (i) payment history, (ii) our experience
with defaulted bond issues, (iii) the issuer’s payment history as well as (iv) historical trends.



We currently own $538,000
First Mortgage Bonds and $488,000 Second Mortgage Bonds issued by Agape Assembly Baptist Church located in Orlando, Florida. Agape
defaulted on its payment obligations to bondholders in September 2010. The aggregate amount of the defaulted bonds equals $7,915,000;
the total principal amount of First Mortgage Bonds issued by Agape is $7,200,000 and the total principal amount of Second Mortgage
Bonds issued is $715,000.



Agape is currently performing
under a loan modification agreement. In October 2012, a minimum of 80% of the bondholders of Agape agreed to a modification in
the terms of their bonds which has resulted in the resumption of both principal and interest payments to both the first and second
mortgage bond holders. Both the First Mortgage Bonds and Second Mortgage Bonds have been modified to a fully amortized fixed rate,
quarterly interest payment of 6.25% with a new maturity date of September 2037 for all the issued and outstanding bonds. Agape
failed to make all of their weekly mortgage payments to the Trustee in 2016 resulting in no interest payments to the bondholders
in 2016. The Company, along with all other bondholders, has a superior lien over all other creditors. We have recorded an impairment
of $480,000 and $200,000 against the $1,026,000 Agape bonds we own at December 31, 2016 and 2015, respectively. This impairment
reserve effectively reduces the bonds to the fair value amount management believes will be recovered. We are investors in the bonds
issued by Agape, not the loan originator. We are not accruing any missed interest payments from the bonds.



Critical Accounting Policies and Estimates



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



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



Management uses estimates
and assumptions in preparing these financial statements in accordance with generally accepted accounting principles generally accepted
in the United States. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates. The
most sensitive estimates relate to the realizability of the mortgage loans receivable and the valuation of the bond portfolio and
real estate held for sale. It is at least reasonably possible that these estimates could change in the near term and that the effect
of the change, if any, may be material to the financial statements.



We estimate the value
of real estate we hold pending re-sale based on a number of factors. We look at the current condition of the property as well as
current market conditions in determining a fair value, which will determine the listing price of each property. Each property is
valued based on its current listing price less any anticipated selling costs, including for example, realtor commissions. Since
churches are single use facilities the listing price of the property may be lower than the total amount owed to us. Attorney fees,
taxes, utilities along with real estate commission fees will also reduce the amount we collect from the sale of a property we have
acquired through foreclosure. The fair value of the real estate held for sale includes estimates of expenses related to the sale
of the real estate.

27









Off Balance Sheet Arrangements



We have no off-balance
sheet arrangements, that have or are reasonably likely to have a current or future effect that is material to investors on our
financial condition, revenues or expenses, results of operations, liquidity, capital resources or capital expenditures.





Item 7A. Quantitative and Qualitative Disclosures
about Market Risk.



As a smaller reporting
company, as defined in Rule 12b-2 of the Securities Exchange Act of 1934 (the “Exchange Act”), we are not required
to provide the information required by this item.



Item 8. Financial Statements and Supplementary
Data.



Financial Statements required
by this item can be found at pages F-1 through F-18 of this Form 10-K and are deemed incorporated herein by reference.



Item 9. Changes in and Disagreements With
Accountants on Accounting and Financial Disclosure.



None.



Item 9A. Controls and Procedures.



Evaluation of Disclosure Controls and Procedures



An evaluation was carried
out under the supervision and with the participation of the Company’s management, including the Principal Executive Officer
and the Principal Accounting Officer, of the effectiveness of the Company’s disclosure controls and procedures as of the
end of the period covered by this report. Based on that evaluation, the Principal Executive Officer and the Principal Accounting
Officer concluded that the Company’s disclosure controls and procedures were effective to provide reasonable assurance that
information required to be disclosed by the Company in reports that it files or submits under the Securities and Exchange Commission
is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and
forms and that information required to be disclosed in reports that we file or submit under the Exchange Act is accumulated and
communicated to our management, including our Principal Accounting Officer, to allow timely decisions regarding required disclosure.



Management’s Report on Internal Control over Financial
Reporting



Our management is responsible
for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule
13a-15(f).  Internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles.  Internal control over financial reporting includes those policies and procedures that
(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions
of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only
with proper authorizations; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
use or disposition of our assets that could have a material effect on the financial statements.



Because of its inherent
limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate.



Our management, under
the supervision of and with the participation of the Chief Executive Officer and Chief Financial Officer, assessed the effectiveness
of our internal control over financial reporting as of December 31, 2016 based on criteria for effective control over financial
reporting set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in “Internal Control—Integrated
Framework, 2013 Framework.” Based on this assessment, our management concluded that, as of the evaluation date, we maintained
effective internal control over financial reporting.





28







Internal control over
financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations.
Internal control over financial reporting is a process that involves human diligence and is subject to lapses in judgment or breakdowns
resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management
override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely
basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting
process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.



This Annual Report does
not include an attestation report of our registered public accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the Securities
and Exchange Commission that permit us to provide only management’s report in this Annual Report.



Changes in Internal Control over Financial
Reporting



There were no changes
in our internal control over financial reporting, that occurred during the last fiscal quarter of the period covered by this report
that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.



Item 9B. Other Information.



None.



PART III



Item 10. Directors, Executive Officers
and Corporate Governance.



The information required
by Item 10 will be included in the Company’s definitive proxy statement for the annual meeting of shareholders to be held
on or about June 15, 2017, 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 and is incorporated herein by reference.



Item 11. Executive Compensation.



The information required
by Item 11 will be included in the Company’s definitive proxy statement for the annual meeting of shareholders to be held
on or about June 15, 2017, 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 and is incorporated herein by reference.



Item 12. Security Ownership of Certain Beneficial
Owners and Management and Related Stockholder Matters.



The information required
by Item 12 will be included in the Company’s definitive proxy statement for the annual meeting of shareholders to be held
on or about June 15, 2017, 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 and is incorporated herein by reference.



Item 13. Certain Relationships and Related
Transactions, and Director Independence.



The information required
by Item 13 will be included in the Company’s definitive proxy statement for the annual meeting of shareholders to be held
on or about June 15, 2017, 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 and is incorporated herein by reference.



Item 14. Principal
Accounting Fees and Services.



The information required
by Item 14 will be included in the Company’s definitive proxy statement for the annual meeting of shareholders to be held
on or about June 15, 2017, 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 and is incorporated herein by reference.



29





PART IV



Item 15. Exhibits, Financial Statement Schedules.



|
|



|Exhibit
        No. | Title                                                                                                                                                 |  
|------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------- | -
|3.1                 | Amended and Restated Articles of Incorporation                                                                                                        | 1
|3.2                 | Third Amended and Restated Bylaws                                                                                                                     | 2
|4.1                 | Specimen Common Stock Certificate                                                                                                                     | 1
|4.3                 | Supplemental Trust Indenture between the Company and The Herring National Bank dated September 28, 2004                                               | 3
|4.5                 | First Supplemental Indenture to 2004 Indenture dated July 2, 2007                                                                                     | 2
|4.6                 | Trust Indenture between the Company and Herring Bank dated April 1, 2009                                                                              | 4
|4.7                 | Trust Indenture between the Company and Herring Bank dated August 12, 2014                                                                            | 5
|10.1                | Amended and Restated REIT Advisory Agreement with Church Loan Advisors, Inc. dated January 22, 2004                                                   | 7
|10.3                | Supplemental Security Agreement between the Company and The Herring National Bank, as Trustee dated September 28, 2004                                | 3
|10.4                | Security Agreement between the Company and the Herring National Bank, as Trustee dated April 1, 2009                                                  | 8
|10.5                | Security Agreement between the Company and Herring Bank, as Trustee dated August 12, 2014                                                             | 6
|31.1                | Certification of the Chief Executive Officer Pursuant to Section 302 of Sarbanes Oxley Act of 2002                                                    | 9
|31.2                | Certification of the Chief Financial Officer Pursuant to Section 302 of Sarbanes Oxley Act of 2002                                                    | 9
|32.1                | Certification of the Chief Executive Officer Pursuant to 19 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 | 9
|32.2                | Certification of the Chief Financial Officer Pursuant to 19 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002 | 9



| | (1) | Incorporated herein by reference to the Company’s Registration Statement on Form 8-A (File
No. 000-25919), filed April 30, 1999.
| | --- | --------------------------------------------------------------------------------------------------------------------------------

| | (2) | Incorporated herein by reference to the Company’s Current Report on Form 8-K, filed July
3, 2007.
| | --- | -------------------------------------------------------------------------------------------------

| | (3) | Incorporated herein by reference to the Company’s Registration Statement on Form S-11/A (File
No. 333-116919), filed September 29, 2004.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------

| | (4) | Incorporated herein by reference to Exhibit 4.1 of the Company’s Prospectus Supplement (filed
April 1, 2009) to Registration Statement on Form S-11 (File No. 333-154831), filed October 30, 2008.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (5) | Incorporated herein by reference to Exhibit 4.1 of the Company’s Registration Statement on
Form S-11 (File No. 333-197326), filed August 12, 2014.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------

| | (6) | Incorporated herein by reference to Exhibit 10.5 of the Company’s Registration Statement
on Form S-11 (File No. 333-197326), filed August 12, 2014.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------

| | (7) | Incorporated herein by reference to the Company’s Current Report on Form 8-K/A, filed August
1, 2007.
| | --- | -----------------------------------------------------------------------------------------------------

| | (8) | Incorporated herein by reference to Exhibit 10.5 of the Company’s Prospectus Supplement (filed
April 1, 2009) to Registration Statement on Form S-11 (File No. 333-154831), filed October 30, 2008.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (9) | Filed herewith.
| | --- | ---------------

30











| | 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.



|Dated:  March 31, 2017 | AMERICAN CHURCH MORTGAGE COMPANY
|---------------------- | --------------------------------
|                       | By:                             
|                       |                                 
|                       |                                 
|                       |                                 
|                       | By:                             
|                       |                                 
|                       |                                 





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: | 03/31/2017
|--- | ----------------------------------------------- | ----- | ----------
|    | Philip J. Myers                                 |       |           
|    | Chief Financial Officer, President and Director |       |           
|    |                                                 |       |           
|By: | /s/ Dennis J. Doyle                             | Date: | 03/31/2017
|    | Dennis J. Doyle, Director                       |       |           
|    |                                                 |       |           
|By: | /s/ Michael G. Holmquist                        | Date: | 03/31/2017
|    | Michael G. Holmquist, Director                  |       |           
|    |                                                 |       |           
|By: | /s/ Kirbyjon H. Caldwell                        | Date: | 03/31/2017
|    | Kirbyjon H. Caldwell, Director                  |       |           







31





















AMERICAN CHURCH MORTGAGE COMPANY



Minnetonka, Minnesota



Financial Statements



As of and for the Years Ended December 31, 2016
and 2015



























REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM







To the Shareholders and Board of Directors

American Church Mortgage Company

Minnetonka, MN



We have audited the accompanying balance sheets of American Church
Mortgage Company (the “company”) as of December 31, 2016 and 2015, and the related statements of operations, stockholders'
equity, and cash flows for the years then ended. These financial statements are the responsibility of the company's management.
Our responsibility is to express an opinion on these financial statements based on our audits.



We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have,
nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of
its internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting.
Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.



In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of American Church Mortgage Company as of December 31, 2016 and 2015 and
the results of its operations and cash flows for the years then ended, in conformity with United States generally accepted accounting
principles.







/s/ Baker Tilly Virchow Krause, LLP



Minneapolis, Minnesota

March 31, 2017



F-1









|AMERICAN CHURCH MORTGAGE COMPANY                                     
|---------------------------------------------------------------------
|                                                                     
|Balance Sheets                                                       
|                                                                     
|                                                                     
|ASSETS                                                               
|                                                                     
|Current Assets                                                       
|Cash and equivalents                                                 
|Accounts receivable                                                  
|Interest receivable                                                  
|Investments                                                          
|Current maturities of mortgage loans receivable, net of              
|allowance of $41,912 and $57,663 and deferred                        
|origination fees of $22,444 and $23,406 at December                  
|31, 2016 and 2015, respectively                                      
|Current maturities of bond portfolio                                 
|Prepaid expenses                                                     
|Total current assets                                                 
|                                                                     
|                                                                     
|Mortgage Loans Receivable, net of current maturities,                
|allowance of $1,270,071 and $1,147,170 and deferred                  
|origination fees of $276,055 and $311,938 at December                
|31, 2016 and 2015, respectively                                      
|                                                                     
|Bond Portfolio, net of current maturities                            
|                                                                     
|Real Estate Held for Sale                                            
|                                                                     
|Deferred Offering Costs, net of accumulated amortization             
|of  $1,101,441 and $974,991 at December 31, 2016 and                 
|2015, respectively                                                   
|Total Assets                                                         
|                                                                     
|                                                                     
|Notes to Financial Statements are an integral part of this Statement.





F-2









|AMERICAN CHURCH MORTGAGE COMPANY                                     
|---------------------------------------------------------------------
|                                                                     
|Balance Sheets                                                       
|                                                                     
|                                                                     
|LIABILITIES AND STOCKHOLDERS’ EQUITY                                 
|                                                                     
|Current Liabilities                                                  
|Current maturities of secured investor certificates                  
|Accounts payable                                                     
|Dividends payable                                                    
|Total current liabilities                                            
|                                                                     
|Deposit on real estate held for sale                                 
|                                                                     
|Secured Investor Certificates, Series B, net of current maturities   
|Secured Investor Certificates, Series C, net of current maturities   
|Secured Investor Certificates, Series D                              
|Total liabilities                                                    
|                                                                     
|Stockholders’ Equity                                                 
|Common stock, par value $.01 per share                               
|authorized, 30,000,000 shares,                                       
|issued and outstanding, 1,677,798 shares at                          
|December 31, 2016 and 2015                                           
|Additional paid-in capital                                           
|Accumulated deficit                                                  
|Total stockholders’ equity                                           
|                                                                     
|Total liabilities and stockholders' equity                           
|                                                                     
|                                                                     
|Notes to Financial Statements are an integral part of this Statement.







F-3











|AMERICAN CHURCH MORTGAGE COMPANY                                     
|---------------------------------------------------------------------
|                                                                     
|Statements of Operations                                             
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Interest and Other Income                                            
|                                                                     
|Interest Expense                                                     
|                                                                     
|Net Interest Income                                                  
|                                                                     
|Provision for losses on mortgage loans receivable                    
|                                                                     
|Net Interest Income after Provision for Mortgage                     
|                                                                     
|Operating Expenses                                                   
|Other than temporary impairment on bond portfolio                    
|Other operating expenses                                             
|                                                                     
|                                                                     
|Operating Loss                                                       
|                                                                     
|Other Income                                                         
|                                                                     
|Net Loss                                                             
|                                                                     
|Basic and Diluted Loss Per Share                                     
|                                                                     
|Dividends Declared Per Share                                         
|                                                                     
|Weighted Average Common Shares Outstanding -                         
|Basic and Diluted                                                    
|                                                                     
|                                                                     
|Notes to Financial Statements are an integral part of this Statement.







F-4









|AMERICAN CHURCH MORTGAGE COMPANY                                     
|---------------------------------------------------------------------
|                                                                     
|Statements of Stockholders’ Equity                                   
|                                                                     
|Years Ended December 31, 2016 and 2015                               
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Balance, December 31, 2014                                           
|                                                                     
|Net loss                                                             
|                                                                     
|Dividends declared                                                   
|                                                                     
|Balance, December 31, 2015                                           
|                                                                     
|Net loss                                                             
|                                                                     
|Dividends declared                                                   
|                                                                     
|Balance, December 31, 2016                                           
|                                                                     
|                                                                     
|Notes to Financial Statements are an integral part of this Statement.







F-5









|AMERICAN CHURCH MORTGAGE COMPANY                                     
|---------------------------------------------------------------------
|                                                                     
|Statements of Cash Flows                                             
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Cash Flows from Operating Activities                                 
|Net loss                                                             
|Adjustments to reconcile net loss to net cash                        
|from operating activities:                                           
|Net loss on sales and impairment on real estate held for sale        
|Provision for losses on mortgage loans receivable                    
|Other than temporary impairment on bond portfolio                    
|Accretion of deferred loan origination fees                          
|Amortization of deferred costs                                       
|Change in assets and liabilities                                     
|Accounts receivable                                                  
|Interest receivable                                                  
|Prepaid expenses                                                     
|Accounts payable                                                     
|Net cash provided by operating activities                            
|                                                                     
|Cash Flows from Investing Activities                                 
|Investment in mortgage loans                                         
|Collections of mortgage loans                                        
|Investments purchased                                                
|Investment in bonds                                                  
|Proceeds from bonds                                                  
|Proceeds from real estate held for sale                              
|Net cash (used for) provided by investing activities                 
|                                                                     
|Cash Flows from Financing Activities                                 
|Proceeds from secured investor certificates                          
|Payments on secured investor certificate maturities                  
|Payments for deferred costs                                          
|Dividends paid                                                       
|Net cash used for financing activities                               
|                                                                     
|Net (Decrease) Increase in Cash and Equivalents                      
|                                                                     
|Cash and Equivalents - Beginning of Year                             
|                                                                     
|Cash and Equivalents - End of Year                                   
|                                                                     
|Notes to Financial Statements are an integral part of this Statement.







F-6







|AMERICAN CHURCH MORTGAGE COMPANY                                     
|---------------------------------------------------------------------
|                                                                     
|Statements of Cash Flows - Continued                                 
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Supplemental Cash Flow Information                                   
|                                                                     
|Dividends payable                                                    
|                                                                     
|Loan origination fees                                                
|                                                                     
|Interest paid                                                        
|                                                                     
|Loans transferred to real estate held for sale                       
|                                                                     
|Non-cash investing activity:                                         
|Real estate held for sale financed through                           
|mortgage loans receivable                                            
|                                                                     
|Notes to Financial Statements are an integral part of this Statement.

















F-7









AMERICAN CHURCH MORTGAGE COMPANY



Notes to Financial Statements



December 31, 2016 and 2015





1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



Nature of Business



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



Accounting Estimates



Management uses estimates and assumptions in
preparing these financial statements in accordance with accounting principles generally accepted in the United States of America.
Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and
liabilities, and the reported revenues and expenses. Actual results could differ from those estimates. The most sensitive estimates
relate to the realizability of the mortgage loans receivable, the valuation of the bond portfolio and the valuation of real estate
held for sale. It is at least reasonably possible that these estimates could change in the near term and that the effect of the
change, if any, may be material to the financial statements.



Concentration of Credit Risk



The Company's loans have been granted to churches and other non-profit
religious organizations. The ability of the Company’s debtors to honor their contracts is dependent on member contributions
and the involvement in the church or organization of its senior pastor.



Cash and Equivalents



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



The Company maintains accounts primarily at
two financial institutions. At times throughout the year, the Company’s cash and equivalents balances may exceed amounts
insured by the Federal Deposit Insurance Corporation. Cash in money market funds is not federally insured. The Company had $14,841
and $2,233,533 in a money market fund account at December 31, 2016 and 2015, respectively. The Company has not experienced any
losses in such accounts.



Bond Portfolio



The Company accounts for the bond portfolio
under the Accounting Standards Codification (ASC) 320, Investments-Debt and Equity Securities. The Company classifies the bond
portfolio as “available-for sale” and measures the portfolio at fair value. While the bonds are generally held until
contractual maturity, the Company classifies them as available for sale as the bonds may be used to repay secured investor certificates
or provide additional liquidity or working capital in the short term. The Company has classified $111,000 and $84,000 in bonds
as current assets as of December 31, 2016





F-8









AMERICAN CHURCH MORTGAGE COMPANY



Notes to Financial Statements



December 31, 2016 and 2015





and 2015, respectively, based on management’s estimates for liquidity requirements
and contractual maturities of certain bonds maturing in 2016 and 2015, respectively.



Allowance for Mortgage Loans Receivable



The Company records mortgage loans receivable
at estimated net realizable value, which is the unpaid principal balances of the mortgage loans receivable, less the allowance
for mortgage loans and less deferred loan origination fees. The Company’s loan policy provides an allowance for estimated
uncollectible loans based on an evaluation of the current status of the loan portfolio with application of reserve percentages
to specific loans based on payment status. This policy reserves for principal amounts outstanding on a specific loan if cumulative
interruptions occur in the normal payment schedule of the loan, therefore, the Company recognizes a provision for losses and an
allowance for the outstanding principal amount of the loan in the Company’s portfolio if the amount is in doubt of collection.
Additionally, no interest income is recognized on impaired loans that are declared to be in default and are in the foreclosure
process. At December 31, 2016, the Company reserved $1,311,983 for seventeen mortgage loans. Twelve of these loans are three or
more mortgage payments in arrears of which three are declared to be in default and two are in the foreclosure process. The total
principal amount of these twelve loans totals approximately $5,302,000 at December 31, 2016. At December 31, 2015, the Company
reserved $1,204,833 for eighteen mortgage loans. Thirteen of these loans are three or more mortgage payments in arrears of which
two are declared to be in default and three loans are in the foreclosure process. The total principal amount of these thirteen
loans totals approximately $5,503,000



A summary of transactions in the allowance
for mortgage loans for the years ended December 31 is as follows:



|                                                  |  | 2016 |           | 2015
|------------------------------------------------- |  | ---- | --------- | ----
|Balance at beginning of year                      |  | $    | 1,204,833 |     
|Provision for losses on mortgage loans receivable |  |      | 155,056   |     
|Reclassified to real estate held for sale         |  |      | (29,806   | )   
|Charge-offs                                       |  |      | (18,100   | )   
|Balance at end of year                            |  | $    | 1,311,983 |     



The total impaired loans, which are loans that
are in the foreclosure process or are declared to be in default, were approximately $1,853,000 and $1,779,000 at December 31, 2016
and 2015, respectively, which the Company believes are adequately secured by the underlying collateral and the allowance for mortgage
loans. Approximately $663,000 of the Company’s allowance for mortgage loans was allocated to these loans at December 31,
2016. Approximately $581,000 of the Company’s allowance for mortgage loans was allocated to impaired loans at December 31,
2015.



The Company will declare a loan to be in default
and will place the loan on non-accrual status when the following thresholds have been met: (i) the borrower has missed three consecutive
mortgage payments; (ii) the borrower has not communicated to the Company any legitimate reason for





F-9









AMERICAN CHURCH MORTGAGE COMPANY



Notes to Financial Statements



December 31, 2016 and 2015







delinquency in its payments
to the Company and has not arranged for the re-continuance of payments; (iii) lines of communication to the borrower have broken
down such that any reasonable prospect of rehabilitating the loan and return of regular payments is gone.



The Company’s policies on payments received
and interest accrued on non-accrual loans are as follows: (i) The Company will accept payments on loans that are currently on non-accrual
status when a borrower has communicated to us that they intend to meet their mortgage obligations. A payment made on a non-accrual
loan is considered a good faith deposit as to the intent to resume their mortgage payment obligation. This good faith deposit is
credited back to interest first then principal as stated in the mortgage loan documentation. (ii) A letter outlining the re-payment
terms or the restructure terms (if any) of the loan is provided to the borrower. This letter will be signed by the Senior Pastor
and all board members of the borrower. This letter resumes the obligation to make payments on non-accrual loans. (iii) The borrower
must meet all its payment obligations for the next 120 days without interruption in order to be removed from non-accrual status.
No interest income was recognized on non-accrual loans for the years ended December 31, 2016 and 2015.



When a loan is declared in default according
to the Company’s policy or deemed to be doubtful of collection, the loan committee of the Advisor to the Company will direct
the staff to charge-off the uncollectable receivables.



Loans totaling approximately $3,449,000 and
$3,724,000 exceeded 90 days past due but continued to accrue interest as of December 31, 2016 and 2015, respectively. The Company
believes that continued interest accruals are appropriate because the loans are well secured, not deemed to be in technical default
and the Company is actively pursuing collection of past due payments.



Real Estate Held for Sale



As of December 31, 2016, the company has two
properties acquired through foreclosure, and one via deed in lieu of foreclosure, with net carrying balances totaling approximately
$341,000. We have listed the properties for sale through local realtors except for the property for which we received a deed in
lieu of foreclosure. The Church is still occupying the property and paying rent while trying to either sell the building or obtain
refinancing. Each property is valued based on its current listing price less any anticipated selling costs, including, for example,
realtor commissions. The Company records real estate held for sale at the estimated fair value, which is net of the expected expenses
related to the sale of the real estate. The fair value of our real estate held for sale, which represents the carrying value, is
approximately $341,000 as of December 31, 2016 after total impairment of approximately $277,000.



Foreclosure was completed in 2004 on a church
located in Battle Creek, Michigan. The church congregation disbanded and the church property is currently unoccupied. The Company
owns and took possession of the church and has listed the property for sale through a local realtor.



A deed in lieu of foreclosure was received
in 2008 from a church located in Pine Bluff, Arkansas. The Company owns and took possession of the church while the church attempts
to obtain financing from





F-10









AMERICAN CHURCH MORTGAGE COMPANY



Notes to Financial Statements



December 31, 2016 and 2015





another lender. If alternative financing cannot be obtained, the Company will list the church for sale
with a local realtor. The church is paying monthly rent until the property is refinanced or sold.



Foreclosure was completed in 2016 on a church
located in Detroit, Michigan. The Company took possession of the property in March 2016 and listed it for sale through a local
realtor.



Carrying Value of Long-Lived Assets



The Company tests long-lived assets or asset
groups for recoverability when events or changes in circumstances indicate that the carrying amount may not be recoverable. Circumstances
which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant
adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally
expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history
of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will
more likely than not be sold or disposed of significantly before the end of the estimated useful life.



Recoverability is assessed based on the carrying
amount of the asset compared to the sum of the undiscounted cash flows expected to result from the use and the eventual disposal
of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is
deemed not recoverable and exceeds fair value as determined through various valuation techniques including, but not limited to,
discounted cash flow models, quoted market values, and third party independent appraisals.



Revenue Recognition



Interest income on mortgage loans receivable
and the bond portfolio is recognized as earned per the terms of the specific asset. Other income included with interest represents
cash received for loan origination fees, which are recognized over the life of the loan as an adjustment to the yield on the loan.



Deferred Financing Costs



The Company defers the costs related to obtaining
financing. These costs are amortized over the life of the financing using the straight line method, which approximates the effective
interest method.



Income (loss) Per Common Share



No adjustments were made to income (loss) for
the purpose of calculating earnings (loss) per share, as there were no potential dilutive shares outstanding.





F-11









AMERICAN CHURCH MORTGAGE COMPANY



Notes to Financial Statements



December 31, 2016 and 2015







Income Taxes



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



The Company evaluated its recognition of income
tax benefits using a two-step approach to recognizing and measuring tax benefits when realization of the benefits is uncertain.
The first step is to determine whether the benefit meets the more-likely-than-not condition for recognition and the second step
is to determine the amount to be recognized based on the cumulative probability that exceeds 50%. Primarily due to the Company’s
tax status as a REIT, the Company does not have any significant tax uncertainties that would require recognition or disclosure.



Subsequent Events



The Company has evaluated events and transaction
through the date the financial statements were available to be issued. No material events or transactions occurred in the time
period referenced above requiring adjustment to or disclosure in the December 31, 2016 financial statements.



2. FAIR VALUE MEASUREMENT



The Company measures certain financial instruments
at fair value in our balance sheets. The fair value of these instruments is based on valuations that include inputs that can be
classified within one of the three levels of a hierarchy. Level 1 inputs include quoted market prices in an active market for identical
assets or liabilities. Level 2 inputs are market data, other than Level 1, that are observable either directly or indirectly. Level
2 inputs include quoted market prices for similar assets or liabilities, quoted market prices in an inactive market, and other
observable information that can be corroborated by market data. Level 3 inputs are unobservable and corroborated by little or no
market data.



Except for the bond portfolio, which is required
by authoritative accounting guidance to be recorded at fair value in our balance sheets, the Company elected not to record any
other financial assets or liabilities at fair value on a recurring basis. We recorded an aggregate other than temporary impairment
for losses on our Agape bonds (Note 3), which totaled $458,000 and $200,000 for the years ended December 31, 2016 and 2015, respectively.



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

|                  |  |   |            |  |  |   | Fair Value Measurement | 
|----------------- |  | - | ---------- |  |  | - | ---------------------- | 
|December 31, 2016 |  |   | Fair Value |  |  |   | Level 3                | 
|                  |  |   |            |  |  |   |                        | 
|Bond portfolio    |  | $ | 11,482,616 |  |  | $ | 11,482,616             | 





F-12









AMERICAN CHURCH MORTGAGE COMPANY



Notes to Financial Statements



December 31, 2016 and 2015





|                  |  |   |            |  |  |   | Fair Value Measurement | 
|----------------- |  | - | ---------- |  |  | - | ---------------------- | 
|December 31, 2015 |  |   | Fair Value |  |  |   | Level 3                | 
|                  |  |   |            |  |  |   |                        | 
|Bond portfolio    |  | $ | 10,513,428 |  |  | $ | 10,513,428             | 



We determine the fair value of the bond portfolio
shown in the table above by comparing it with similar instruments in inactive markets. The analysis reflects the contractual terms
of the bonds, which are callable at par by the issuer at any time, and the anticipated cash flows of the bonds and uses observable
and unobservable market-based inputs. Unobservable inputs include our internal credit rating and selection of similar bonds for
valuation.



The change in Level 3 assets measured at fair value
on a recurring basis is summarized as follows:

|                                | Bond Portfolio
|------------------------------- | --------------
|                                |               
|Balance at December 31, 2015    | $10,513,428   
|Purchases                       | 1,622,000     
|Proceeds                        | (394,812)     
|Other than temporary investment | (258,000)     
|Balance at December 31, 2016    | $11,482,616   
|                                |               

Real estate held for sale and impaired loans
are recorded at fair value on a nonrecurring basis. The fair value of real estate held for sale was based upon the listed sales
price less expected selling costs, which is a Level 3 input. The resulting impairment charges were $19,173 and $193,104 for the
years ended December 31, 2016 and 2015, respectively.



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

|                            |  | December 31, 2016
|--------------------------- |  | -----------------
|                            |  | Level 1          
|Impaired Loans              |  | $                
|Real estate held for resale |  |                  
|                            |  | $                



|               |  | December 31, 2015
|-------------- |  | -----------------
|               |  | Level 1          
|Impaired Loans |  | $                







F-13









AMERICAN CHURCH MORTGAGE COMPANY



Notes to Financial Statements



December 31, 2016 and 2015







|Real estate held for resale |  |   | — |  |  |   | — |  |  |   | 697,422   |  |  |   | 697,422   | 
|--------------------------- |  | - | - |  |  | - | - |  |  | - | --------- |  |  | - | --------- | 
|                            |  | $ | — |  |  | $ | — |  |  | $ | 1,894,724 |  |  | $ | 1,894,724 | 



The change in Level 3 assets measured at fair value
on a nonrecurring basis is summarized as follows:

|                             | Impaired Loans | Real Estate Held for Sale
|---------------------------- | -------------- | -------------------------
|                             |                |                          
|Balance at December 31, 2015 | $1,197,302     | $697,422                 
|Additions/Acquisitions       | 221,683        | 134,173                  
|Dispositions/Proceeds        | (134,173)      | (471,550)                
|Impairment                   | (111,362)      | (  19,173)               
|Balance at December 31, 2016 | $1,173,450     | $340,872                 



3. MORTGAGE LOANS RECEIVABLE AND BOND PORTFOLIO



At December 31, 2016, the Company had first
mortgage loans receivable totaling $24,732,280. The loans bear interest ranging from 0% to 10.25% with a weighted average of approximately
8.25% at December 31, 2016. The Company had first mortgage loans receivable totaling $25,354,876 that bore interest ranging from
1.00% to 10.25% with a weighted average of approximately 8.35% at December 31, 2015.



The Company has a portfolio of secured church
bonds at December 31, 2016 and December 31, 2015, which are carried at fair value. The bonds pay either semi-annual or quarterly
interest ranging from 2.75% to 9.75%. The aggregate par value of secured church bonds equaled approximately $11,940,616 at December
31, 2016 with a weighted average interest rate of 6.77% and approximately $10,713,428 at December 31, 2015 with a weighted average
interest rate of 6.92%. These bonds are due at various maturity dates through May 2046. The Company has recorded an aggregate other
than temporary impairment of $458,000 and $200,000 at December 31, 2016 and 2015, respectively, for the First Mortgage Bonds issued
by Agape Assembly Baptist Church. This bond series in the aggregate constitute approximately 8.50% and 10.00% of the bond portfolio
at December 31, 2016 and 2015, respectively. The Company had maturities and redemptions of bonds of approximately $395,000 and
$145,000 in 2016 and 2015, respectively.



The contractual
maturity schedule for mortgage loans receivable and the bond portfolio as of December 31, 2016, is as follows:



|     | Mortgage Loans | Bond Portfolio
|---- | -------------- | --------------
|     |                |               
|2017 | $    790,083   | $    111,000  
|2018 | 3,283,240      | 139,000       
|2019 | 1,326,144      | 144,000       
|2020 | 1,389,493      | 156,000       







F-14









AMERICAN CHURCH MORTGAGE COMPANY



Notes to Financial Statements



December 31, 2016 and 2015







|2021                                                                  | 814,392     | 221,000    
|--------------------------------------------------------------------- | ----------- | -----------
|Thereafter                                                            | 17,128,928  | 11,169,616 
|                                                                      | 24,732,280  | 11,940,616 
|Less loan loss and other than temporary impairment on bonds allowance | (1,311,983) | (458,000)  
|Less deferred origination income                                      | (298,499)   | ___-____   
|Totals                                                                | $23,121,798 | $11,482,616



The Company currently owns $529,000 First Mortgage
Bonds and $497,000 Second Mortgage Bonds issued by Agape Assembly Baptist Church located in Orlando, Florida. The total principal
amount of First Mortgage Bonds issued by Agape is $7,200,000, and the total principal amount of Second Mortgage Bonds issued is
$715,000. Agape defaulted on its payment obligations to bondholders in September 2010. The church subsequently commenced a Chapter
11 bankruptcy reorganization proceeding regarding the property that secures the First Mortgage Bonds in December 2010. Agape is
currently performing under a loan modification agreement. In October 2014, a minimum of 80% of the bondholders of Agape agreed
to a modification in the terms of their bonds which has resulted in the resumption of both principal and interest payments to both
the first and second mortgage bond holders. Both the First Mortgage Bonds and Second Mortgage Bonds have been modified to a fully
amortized fixed rate, quarterly interest payment of 6.25% with a new maturity date of September 2037 for all the issued and outstanding
bonds. The Company, along with all other bondholders, has a superior lien over all other creditors. The Company has an aggregate
other than temporary impairment of $458,000 and $200,000 for the First and Second Mortgage Bonds at December 31, 2016 and 2015,
respectively, which effectively reduces the bonds to the fair value amount management believes will be recovered.



4. SECURED INVESTOR CERTIFICATES



Secured investor certificates are collateralized
by certain mortgage loans receivable or secured church bonds of approximately the same value as the certificates. The weighted
average interest rate on the certificates was 6.47% and 6.44% at December 31, 2016 and 2015, respectively. Holders of the secured
investor certificates may renew certificates at the current rates and terms upon maturity at the Company’s discretion. Renewals
upon maturity are considered neither proceeds from nor issuance of secured investor certificates. Renewals totaled approximately
$831,000 and $958,000 during 2016 and 2015, respectively. The secured investor certificates have certain financial and non-financial
covenants identified in the respective series’ trust indentures.



The estimated maturity schedule for the secured
investor certificates at December 31, 2016 is as follows:



|     |              | 
|---- | ------------ | 
|2017 | $  2,803,000 | 
|2018 | 4,116,000    | 
|2019 | 2,333,000    | 
|2020 | 4,058,000    | 







F-15











AMERICAN CHURCH MORTGAGE COMPANY



Notes to Financial Statements



December 31, 2016 and 2015





|2021       | 1,928,000   | 
|---------- | ----------- | 
|Thereafter | 12,686,000  | 
|           |             | 
|Totals     | $27,924,000 | 



In July 2014, the Company filed a registration
statement with the Securities and Exchange Commission to offer $10,000,000 worth of Series D secured investor certificates. The
offering was declared effective by the SEC on August 12, 2014. The offering was renewed with an effective date of September 23,
2016. The certificates are being offered in multiples of $1,000 with interest rates ranging from 4.00% to 6.50%, subject to changing
market rates, and maturities from 5 and 7 to 15 years. The certificates are collateralized by certain mortgage loans receivable
and church bonds of approximately the same value. At December 31, 2016, approximately 7,296 Series D certificates had been issued
and were outstanding for $7,296,000.



5. TRANSACTIONS WITH AFFILIATES



The Company has an Advisory Agreement with
Church Loan Advisors, Inc. (the “Advisor”). The Advisor is responsible for the day-to-day operations of the Company
and provides office space and administrative services. The Advisor and the Company are related through common ownership and common
management. For its services, the Advisor is entitled to receive a management fee equal to 1.25% annually of the Company's Average
Invested Assets, plus one-half of any origination fee charged to borrowers on mortgage loans made by the Company. A majority of
the independent board members approve the Advisory Agreement on an annual basis. The Company paid the Advisor management and origination
fees of approximately $324,000 and $393,000 during the years ended December 31, 2016 and 2015, respectively.



6. INCOME TAXES



As discussed in Note 1, a REIT is subject to
taxation to the extent that taxable income exceeds dividend distributions to shareholders. In order to maintain status as a REIT,
the Company is required to distribute at least 90% of its taxable income. In 2016, the Company had pretax loss of $(337,207) and
distributions to shareholders in the form of dividends during the tax year of $402,672. The tax benefit based on statutory rates
to the Company, pre-dividends would have been $(114,650) in 2016. In 2015, the Company had pretax loss of $(38,234) and distributions
to shareholders in the form of dividends during the tax year of $469,783. The tax based on statutory rates to the Company, pre-dividends,
would have been $(13,000) in 2015. The Company paid out 100% of taxable income in dividends in 2016 and 2015.



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



|                                            |  | 2016 |          | 2015
|------------------------------------------- |  | ---- | -------- | ----
|                                            |  |      |          |     
|Tax based on statutory rates                |  | $    | (114,650 | )   
|Tax effect on realized losses on properties |  |      | (361,276 | )   





F-16











AMERICAN CHURCH MORTGAGE COMPANY



Notes to Financial Statements



December 31, 2016 and 2015





|Benefit of REIT distributions |  |   | 475,926 |  |  |   | 13,000 | 
|----------------------------- |  | - | ------- |  |  | - | ------ | 
|                              |  |   |         |  |  |   |        | 
|Total tax provision           |  | $ | —       |  |  | $ | —      | 



The components of deferred income tax assets
are as follows:



|                               |  | 2016 |          | 2015
|------------------------------ |  | ---- | -------- | ----
|                               |  |      |          |     
|Loan origination fees          |  | $    | 101,490  |     
|Loan and bond loss provisions  |  |      | 446,074  |     
|Real-estate impairment         |  |      | 94,254   |     
|Valuation allowance            |  |      | (641,818 | )   
|                               |  |      |          |     
|Deferred income tax asset, net |  | $    | —        |     



The change in the valuation allowance was approximately
$(222,000) and $(64,000) for 2016 and 2015, respectively.



7. FAIR VALUE OF FINANCIAL INSTRUMENTS



The Company is required to disclose the fair
value information about financial instruments, where it is practicable to estimate that value. Because assumptions used in these
valuation techniques are inherently subjective in nature, the estimated fair values cannot always be substantiated by comparison
to independent market quotes and, in many cases, the estimated fair values could not necessarily be realized in an immediate sale
or settlement of the instrument.



The fair value estimates presented herein are
based on relevant information available to management as of December 31, 2016 and 2015, respectively. Management is not aware of
any factors that would significantly affect these estimated fair value amounts. As these reporting requirements exclude certain
financial instruments and all non-financial instruments, the aggregate fair value amounts presented herein do not represent management’s
estimate of the underlying value of the Company.



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

|                              | December 31, 2016 | December 31, 2015
|----------------------------- | ----------------- | -----------------
|                              | Carrying          | Fair             
|                              | Amount            | Value            
|                              |                   |                  
|Cash and equivalents          | $   3,382,994     | $   3,382,994    
|Accounts receivable           | 219,352           | 219,352          
|Interest receivable           | 175,912           | 175,912          
|Mortgage loans receivable     | 24,732,280        | 25,646,901       
|Bond portfolio                | 11,940,616        | 11,940,616       
|Secured investor certificates | 27,924,000        | 35,415,944       







F-17









AMERICAN CHURCH MORTGAGE COMPANY



Notes to Financial Statements



December 31, 2016 and 2015





The following methods and assumptions were
used by the Company to estimate the fair value of each class of financial instrument for which it is practicable to estimate that
value:



Cash and equivalents



Due to their short-term nature, the carrying
amount of cash and cash equivalents approximates fair value.



Accounts receivable



The carrying amount of accounts receivable
approximates fair value.



Interest receivable



The carrying amount of interest receivable
approximates fair value.



Mortgage loans receivable



The fair value of the mortgage loans receivable
is currently more than the carrying value as the portfolio is currently yielding a higher rate than similar mortgages with similar
terms for borrowers with similar credit quality. The credit markets in which the Company conducts business have experienced an
increase in interest rates resulting in the fair value of the mortgage loans falling during the fiscal year ended December 31,
2016.



Bond portfolio



We determine the fair value of the bond portfolio
shown in the table above by comparing with similar instruments in inactive markets. The analysis reflects the contractual terms
of the bonds, which are callable at par by the issuer at any time, and the anticipated cash flows of the bonds and uses observable
and unobservable market-based inputs. Unobservable inputs include our internal credit rating and selection of similar bonds for
valuation.



Secured investor certificates



The fair value of the secured investor certificates
is currently greater than the carrying value due to higher interest rates than current market rates.





F-18