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, 2008

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:

                                                     Name of each exchange on
 Title of each class:                                     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.  Yes|_| No|X| Indicate by check mark
if the  registrant  is not  required to file  reports  pursuant to Section 13 or
15(d) of the Act. Yes|_| No|X|

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

Indicate by check mark 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.|_|

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

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

<PAGE>

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

     The aggregate  market value of the common stock of the  registrant  held by
non-affiliates  on June 30, 2008 (the last business day of the registrant's most
recently completed second fiscal quarter) was $8,925,000, based upon the closing
sales price of the registrant's  common stock on such date as quoted by the Pink
Sheets,  L.L.C.  Such over-the counter market  quotations  reflect  inter-dealer
prices,  without retail  mark-up,  mark-down or commission and may not represent
actual  transaction.  On June 30,  2008,  there  were  2,472,081  shares  of the
registrant's common stock outstanding.

     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 31, 2009
---------------------------------------    ------------------------------------
Common Stock, $0.01 par value per share           2,472,081 shares

                       Documents Incorporated by Reference

Portions of the Company's Proxy Statement to be delivered to its shareholders in
connection  with the Company's  2009 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).













                                       2


<PAGE>



                                      INDEX
<TABLE>
<CAPTION>

                                                                                              Page
                                                                                               No.

                       PART I

<S>           <C>                                                                               <C>
Item 1.       Description of Business.............................................................5

Item 1A.      Risk Factors.......................................................................13

Item 1B.      Unresolved Staff Comments..........................................................19

Item 2.       Description of Property............................................................19

Item 3.       Legal Proceedings..................................................................20

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

                       PART II

Item 5.       Market  for Common  Equity and  Related Stockholder Matters,
              and Small Business Issuer  Purchases of Equity Securities..........................20

Item 6.       Selected Financial Data............................................................22

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:..............................................................28

                  Report  of  Independent  Registered Public Accounting Firm....................F-1
                  Balance Sheets
                  December 31, 2008 and 2007....................................................F-2
                  Statements of Operations
                  Years Ended  December  31, 2008 and 2007......................................F-4
                  Statements of Stockholders' Equity
                  Years Ended  December  31, 2008 and 2007......................................F-5
                  Statements of Cash Flows
                  Years Ended  December  31, 2008 and 2007......................................F-6
                  Notes to Financial Statements.................................................F-8

Item 9.       Changes In and Disagreements With
              Accountants on Accounting and Financial Disclosure.................................28

Item 9A(T).   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.........................................30

Item 13.      Certain Relationships and Related Transactions, and Director Independence..........30


                                       3

<PAGE>

Item 14.      Principal Accountant Fees and Services.............................................30

                                     PART IV

Item 15.      Exhibits...........................................................................31

Signatures    ...................................................................................32
</TABLE>




                                       4
<PAGE>



                                                  PART I


     In connection with the "safe harbor"  provisions of the Private  Securities
Litigation  Reform  Act of  1995,  readers  of this  document  and any  document
incorporated by reference  herein,  are advised that this document and documents
incorporated  by  reference  into  this  document  contain  both  statements  of
historical facts and forward looking statements.  Forward looking statements are
subject to certain risks and uncertainties,  which could cause actual results to
differ  materially  from those  indicated  by the  forward  looking  statements.
Examples  of forward  looking  statements  include,  but are not  limited to (i)
projections  of  revenues,  income or loss,  earning or loss per share,  capital
expenditures,  dividends,  capital  structure and other  financial  items;  (ii)
statements  of  plans  and  objectives  of ours or our  management  or  Board of
Directors,  including  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 effect the
relative  yield of our loan portfolio and our ability to compete in making loans
to borrowers;  payment default on loans made by us, which could adversely affect
our  ability  to  make  distributions  to  our  shareholders;   the  actions  of
competitors;  the effects of government regulation;  and other factors which are
described herein and/or in documents incorporated by reference herein, including
the risks described at the end of Item 1.

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

Item 1.    Description of Business

General

     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 February 28, 2009, we have made 172
loans to 143 churches in the aggregate  amount of $88,528,677,  with the average
principal amount of such loans being $514,702. Of the 172 loans we have made, 80
loans totaling $37,343,158 have been repaid early by the borrowing churches.  We
also own, as of February 28, 2009,  $12,127,000 principal amount of Church Bonds
(hereinafter  defined),  which we purchased at a price of par value  ($1,000) or
less.  At no time have we paid a premium for any of the bonds in our  portfolio.
Subject  to  supervision  of our  Board of  Directors,  our day to day  business
operations  are managed by Church Loan  Advisors,  Inc. (the  "Advisor"),  which
provides investment  advisory and administrative  services to us. The principals
of  the  Advisor  include   principals  of  American   Investors   Group,   Inc.
("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.

Public Offerings

     On October 29, 2008 we filed a  registration  statement with the Securities
and Exchange  Commission for our sixth public  offering of $20,000,000  worth of
secured investor  certificates  under SEC file 333-154831.  The Offering will be
conducted  on a  "best-efforts"  basis  pursuant  to  applicable  rules  of  the
Securities  and  Exchange  Commission.  The  Offering  will be sold  through our
advisor's affiliate, American Investors Group, Inc., to public investors.

The Company's Business Activities

     Our business is managed by the Advisor. We have no employees. 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 239 church bond financings, in which approximately

                                       5

<PAGE>

$460,770,000  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 $1,928,000.

     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 and experience available at American and the Advisor, and taking
advantage of the marketing, advertising and general goodwill of American.

Financing Business

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

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

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

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

o    purchasing  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
Interest Rate  Origination  Fee ((1)) or  indirectly,  in loans (or interests in
loans) secured by real estate,  and first mortgage  bonds,  before  reserves for
depreciation or bad debts or other similar non-cash  reserves computed by taking
the average of such values at the end of each calendar month during such period.

     All  other  mortgage  loans  made  by us (or  Church  Bonds  purchased  for
investment) will be secured by a first mortgage (or deed of trust) lien in favor
of us.  Although we attempt to make mortgage  loans for various terms  typically
ranging from three to 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.  The  Advisor  conducts  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 1/4%
annually  of  the  Company's  Average  Invested  Assets,  plus  one-half  of any
origination  fee charged to borrowers on mortgage  loans we make. 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 of
interest or other generally recognized reference index, and having various terms
to maturity,  origination  fees and other terms and conditions.  The Loan Types,
interest  rates and fees  offered  and  charged by us may from  time-to-time  be
limited,  changed  or  otherwise  unilaterally  amended  by the  Advisor  in its
discretion  as a result of such  factors  (among  others) as (i) balance of Loan
Types in our portfolio;  (ii) competition from other lenders;  (iii) anticipated
need to increase the overall  yield to our mortgage loan  portfolio;  (iv) local
and national  economic  factors;  (v) actual experience in borrowers' demand for
the loans; and (vi) available funds. In addition,  we may make mortgage loans on
terms other than those

                                       6


<PAGE>

identified  in our  list of Loan  Types.  Subject  to  change,  modification  or
elimination at our complete discretion, the following is a list of the currently
available Loan Types we may offer to prospective borrowing institutions:
<TABLE>
<CAPTION>

                      Loan Type               Interest Rate                                 Origination Fee (1)
              --------------------------------------------------------------------------------------------------

<S>           <C>
              30 Year Term (2)                  Fixed @ 8.95%                                    3.5%
              --------------------------------------------------------------------------------------------------

              25 Year Term (2)                  Fixed @ 8.50%                                    3.5%
              --------------------------------------------------------------------------------------------------

              Renewable Term 5 Year (3)         Fixed @: 7.95%                                   2.5%
              ==================================================================================================
</TABLE>

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

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

     (3)  Renewable  term  loans  are  repaid  based on a  30-year  amortization
          schedule,  and are  renewable at the  conclusion of their initial term
          for additional like terms up to an aggregated  maximum of 30 years. We
          charge  a fee of 1/2% to the  borrower  upon  each  renewal  date.  If
          renewed by the borrower, the interest rate is adjusted to Prime plus a
          specified basis point "spread," i.e., 250 basis points.

     The above table describes  certain  material terms of Loan Types,  interest
rates and fees currently offered and charged by us. The table does not, however,
purport to identify all possible Loan Types,  terms, rates, and fees that we may
offer  from  time-to-time.  We may  determine  at any time to  modify  the terms
identified  above and/or offer loan terms  different than any of the Loan Types,
interest rates and fees identified above and do, in fact,  negotiate these terms
and fees with  certain of our  borrowers.  In  practice,  loan terms vary widely
depending  upon  quality  of the  prospective  borrowers,  our  working  capital
situation,  presence or absence of competitive influences on specific loans, and
general economic conditions.

Mortgage Loan Processing and Underwriting

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

     o    applications  containing key  information  concerning the  prospective
          borrowers;

     o    project description;

     o    financial statements in accordance with our Financing Policies;

     o    corporate records and other organizational documents of the borrower;

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

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

     All appraisals 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 employ 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  Vice-President  and  certain  members  of  its  staff
including  staff members of American.  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

                                       7
<PAGE>

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  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  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 resources and, at the discretion of the Advisor,  with borrowings
under a line of credit with a commercial lender or bank.

     The Company had a $15 million  revolving  credit facility with KeyBank that
was paid in full on September 15, 2008.  The credit  facility was replaced by an
$8 million line of credit with Beacon  Bank.  Advances on the line of credit are
available up to $4.5 million,  subject to borrowing base limitations,  until and
if Beacon Bank is able to secure  participants for the remaining  portion of the
facility up to $8 million.  Interest is charged at the prime rate with a minimum
interest rate of 5.00%.  When the prime rate is greater than 6.00%, the interest
rate is prime  less  .50%,  subject  to a minimum  interest  rate of  6.00%.  At
December 31, 2008,  the interest rate on the line of credit was 5.00% and we had
an outstanding  balance of $4,500,000.  The line of credit is secured by a first
priority  security  interest in substantially  all of the Company's assets other
than  collateral  pledged  to secure  the  Company's  Series  "A" and Series "B"
secured  investor  certificates.  Additionally,  the Company is required to meet
certain  financial  covenants  at each year end. As of December  31,  2008,  the
Company was in compliance with all required covenants.

     Currently,  we may  borrow up to 300% of our  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 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.

                                       8


<PAGE>

The Advisory Agreement

     We have entered into a contract with the Advisor (the "Advisory Agreement")
under which the Advisor  furnishes  advice and  recommendations  concerning  our
business  affairs,  provides  administrative  services  to us  and  manages  our
day-to-day operations.  We have no employees. All of our personnel needs are met
through the  personnel and  expertise of the Advisor and its  affiliates.  Among
other things, the Advisor:

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

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

     o    services all mortgage loans we make;

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

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

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

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

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

     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.  We may terminate the Advisory  Agreement
with  or  without  cause  upon 60  days  written  notice  to the  Advisor.  Upon
termination of the Advisory  Agreement by either party,  the Advisor may require
us to  change  our name to a name  that does not  contain  the word  "American,"
"America"  or the  name of the  Advisor  or any  approximation  or  abbreviation
thereof, and that is sufficiently dissimilar to the word "America" or "American"
or  the  name  of  the  Advisor  as  to  be  unlikely  to  cause   confusion  or
identification  with either the  Advisor or any person or entity  using the word
"American" or "America" in its name. Our Board of Directors shall determine that
any successor Advisor possess sufficient  qualifications to perform the advisory
function for us and justify the  compensation  provided for in its contract with
us.

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

                                       9

<PAGE>

     Our bylaws provide that the Independent Directors are to determine at least
annually the reasonableness of the compensation we pay to our Advisor.  On April
24,  2008,  our  Directors  reviewed  and  unanimously  approved  renewal of the
Advisory  Agreement for another year.  Factors to be considered in reviewing the
Advisory  Fee  include  the size of the fees of the  Advisor in  relation to the
size, composition and profitability of our loan portfolio,  the rates charged by
other investment advisors  performing  comparable  services,  the success of the
Advisor in generating  opportunities  that meet our investment  objectives,  the
amount of  additional  revenues  realized  by the  Advisor  for  other  services
performed for us, the quality and extent of service and advice  furnished by the
Advisor, the quality of our investments in relation to investments  generated by
the Advisor for its own account, if any, and the performance of our investments.

     The Advisory  Agreement  provides for  indemnification by us of the Advisor
and each of its directors and officers 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.

                                       10
<PAGE>

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

     (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  investments  policies  and
operating restrictions identified below and which are set forth in our Bylaws.

Investment Policies and Operating Restrictions

     Our Bylaws impose certain investment policies and operating restrictions on
our investment and financing 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  Shareholder's  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;

                                       11

<PAGE>

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

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

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

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

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

     We do not invest in the  securities  of other  issuers  for the  purpose of
exercising control, to engage in the purchase and sale of investments other than
as described in this Report, to offer securities in exchange for property unless
deemed  prudent by a majority of the Directors 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,  2008,  we have five  first  mortgage  loans  totaling
approximately  $2,188,000 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
one of these  loans and expect to take  possession  of this  church and list the
property for sale. In addition,  we have foreclosed and have taken possession of
six  properties  with total loan  balances  outstanding  totaling  approximately
$1,974,000 and have listed the properties for sale through local realtors. Three
of the properties  were acquired  through  foreclosure  proceedings in 2008. The
fair value of the properties was approximately $1,262,000 at December 31, 2008.

Competition

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

                                       12

<PAGE>

Employees

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

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

Operations

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


<TABLE>
<CAPTION>
<S>     <C>                                                      <C>      <C>
o        low demand for mortgage loans                           o        availability of alternative financing and competitive
                                                                          conditions
o        interest rate and real estate valuation fluctuations
                                                                 o        factors affecting specific borrowers
o        changes in the level of consumer confidence
                                                                 o        losses associated with default, foreclosure of a
o        availability of credit-worthy borrowers                          mortgage, and sale of the mortgaged property

o        national and local economic conditions                  o        state and federal laws and regulations

o        demographic and population patterns                     o        bankruptcy or insolvency of a borrower
                                                                 o        borrower's misrepresentation(s) and/or fraud
o        zoning regulations

o        taxes and tax law changes
</TABLE>




     Losses  Associated  with  Default,  Foreclosure  of a Mortgage  and Sale of
Mortgaged  Property Pose Additional Risks. We have experienced losses associated
with default,  foreclosure of mortgages, and sales of mortgaged properties.  The
time frame to foreclose on a property varies from state to state, and delays can
occur due to backlog in court dockets;  we have experienced delays from 12 to 18
months.  Such delays have and can cause the value of the  mortgaged  property to
further  deteriorate due to lack of  maintenance.  Theft and vandalism have also
occurred on our foreclosed properties.  Some borrowers have removed fixtures and
furnishings including sound systems, chairs, pulpits, appliances, mechanical and
electrical  systems  prior to vacating the facility  which  further  reduces the
value of our collateral.  The properties also incur operating  expenses  pending
their sale (property  insurance,  security,  repairs and  maintenance) and these
expenses  could be  substantial  if we cannot  readily  dispose of the property.
Expenses  related to the  foregoing  could prevent us from  recovering  the full
value of a loan in the event of

                                       13

<PAGE>

foreclosure,  which  shortfall  would  decrease  the value of assets held by the
Company and could negatively impact the Company's ability to pay interest on the
certificates 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  average  holding  period of our debt is less  than  three  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,  savings and loan associations,  insurance
companies,  pension funds and fraternal  organizations  for mortgage loans. Many
competitors have greater financial resources, larger staffs and longer operating
histories  than we have, and thus may be a more  attractive  lender to potential
borrowers.  We intend to compete by limiting our business  "niche" to lending to
churches  and other  non-profit  religious  organizations,  offering  loans with
competitive and flexible terms, and emphasizing our expertise in the specialized
industry  segment  of  lending  to  churches  and  other  non-profit   religious
organizations.

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

     The Company Faces Certain Risks and Uncertainties  Related to Financing and
Liquidity, and These Volatilities Could Have an Impact on Its Operations and Its
Ability to  Maintain  its  Long-term  Capital  Needs  and/or  Secure  Additional
Financing.  The Company  faces  certain  risks and  uncertainties,  particularly
during  volatile  market  conditions,  such as the dramatic  changes in interest
rates that have occurred recently.  In addition,  liquidity has tightened 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 rates on our secured  investor  certificates
than has been the case historically.

                                       14

<PAGE>

     Our Business May Be Adversely Affected if Our Borrowers Become Insolvent or
Bankrupt.  If any of our borrowers become insolvent or bankrupt,  the borrower's
mortgage  payments will be delayed and may cease entirely.  For example,  due to
the difficult and uncertain  national and economic  conditions,  many  companies
have  been  forced to cut  employee  salaries  and many  jobs  have been  either
temporarily  or permanently  eliminated.  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 mortgage lenders,  we make provision for
losses relating to our loan portfolio and sometimes take impairment  charges due
to our borrowers defaulting or declaring  bankruptcy.  As the national and local
economies  have  worsened,  increases  in the  occurrence  of such  events  have
resulted  in  greater  fluctuation  of our  earnings,  which can  reduce our net
income. Our earnings are also impacted by non-performing assets and the carrying
cost of maintaining such assets (taxes, insurance and maintenance). Inconsistent
earnings could adversely affect 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 church,  school or other  institutional  premises could be adversely affected
by, among other factors:  (i) its limited use nature;  (ii) the  availability on
the market of similar properties;  (iii) the availability and cost of financing,
rehabilitation or renovation to prospective  buyers; (iv) the length of time the
seller is willing to hold the property on the market; or (v) the availability in
the area of the mortgaged  property of  congregations or other buyers willing to
pay the fair value for a church facility. This factor may influence our decision
to restructure the terms of a non-performing loan rather than foreclosing on the
church property.

     Expenses of Foreclosure  May Prevent Us From Recovering the Full Value of a
Loan.  If we  foreclose  on a mortgage  and take legal title to a church's  real
estate,  real estate  taxes could be levied and  assessed  against the  property
until sold since the property  would no longer be owned by a non-profit  entity.
The  property  may also  incur  operating  expenses  pending  its sale,  such as
property insurance, 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.

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.

                                       15

<PAGE>

     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.  Because
interest paid to certificate  holders will be a deductible  business  expense to
us, loss of our REIT  status  would not  necessarily  impede our ability to make
interest payments to holders of certificates.

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

Risks Related to the Shares

     Lack of Liquidity and Inconsistent Public Market Price. Our common stock is
not  currently  listed or traded on any  exchange or market and is not quoted on
the National Association of Securities Dealers,  Inc. Automated Quotation System
("NASDAQ"),  and it is not expected  that a material  market for the shares will
develop any time soon.  "Pink  Sheet" price  quotations  for our stock under the
symbol  "ACMC"  were  made at  certain  isolated  times  during  2008  by  other
broker-dealers  at  prices  as low as $1.55  per  share and as high as $5.25 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
decrease and the economic  advantages of refinancing  mortgage  loans  increase,
then prepayments of higher interest mortgage loans in our portfolio would likely
reduce the portfolio's overall rate of return (yield).

     Interest  Payments to Certificate  Holders May Reduce Dividend  Payments on
Our  Shares.  We  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  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.

                                       16

<PAGE>

Risks Related to the Certificates

     We May Incur More Indebtedness. We may incur additional indebtedness in the
future. We may assign or pledge some of our mortgage-secured promissory notes or
other  collateral in connection  with  incurring this  additional  indebtedness.
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.
We have  deployed the proceeds  from the sale of secured  investor  certificates
into loans to churches and other  non-profit  religious  organizations.  We have
also used our line of credit from time to time, to fund loans, and intend to use
our line of credit in this way in the future.  Lending borrowed funds is subject
to greater risks than in unleveraged lending. The profit we realize from lending
borrowed funds is largely determined by the difference, or "spread," between the
interest  rates we pay on the  borrowed  funds and the  interest  rates that our
borrowers pay us. Our spread may be materially and adversely affected by changes
in prevailing interest rates.  Furthermore,  the financing costs associated with
lending  borrowed funds could decrease the effective  spread in lending borrowed
funds, which could adversely affect our ability to pay interest on and repay the
certificates as they mature.

     There Is No Public Market for the Certificates.  There is no market for the
certificates.  It is unlikely that a market will  develop.  There are no current
plans to list the  certificates on any exchange or for a broker-dealer to make a
market  in the  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
Certificates.  We do not contribute funds to a separate account,  commonly known
as a sinking  fund,  to repay  principal  or interest on the  certificates  upon
maturity or default. Our certificates are not certificates of deposit or similar
obligations  of, or  guaranteed  by, any  depository  institution.  Further,  no
governmental or other entity insures or guarantees  payment on the  certificates
if we do  not  have  enough  funds  to  make  principal  or  interest  payments.
Therefore,  holders  of our  certificates  have  to  rely  on our  revenue  from
operations,  along  with  the  security  provided  by  the  collateral  for  the
certificates, for repayment of principal and interest on the certificates.

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

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

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

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

                                       17

<PAGE>

and bonds being sold. Further, if we are unable to sell loans or church bonds in
our portfolio, we may be unable to satisfy the redemption obligations.

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

Risks Related to Management

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

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


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

     Our Bylaws limit the amount of all commissions, mark-downs or mark-ups paid
to American.  Our business dealings with our Advisor and its affiliates  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 Certificates May Affect Our Ability
to Replace our Advisor.  We will be required to offer to redeem all  outstanding
certificates  if we terminate our advisory  agreement with Church Loan Advisors,
Inc. Our  independent  directors are required to review and approve the advisory
agreement with our Advisor on an annual basis. The redemption provision relating
to the  certificates  may have the effect of reducing our ability to replace our
current Advisor.

                                       18

<PAGE>

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

     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 at this time.

Item 2.   Description of Property

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

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

     As  of  December  31,  2008,  we  have  six  properties   acquired  through
foreclosure. Each property is valued based on its current listing price less any
anticipated selling costs, including, for example, realtor commissions. The fair
value of our real  estate  held for re-sale is  approximately  $1,262,000  as of
December  31,  2008.  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 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 five properties
we have acquired through 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 is  currently  unoccupied.  We have taken  possession  of the
church and have listed the  property for sale  through a local  realtor.  Battle
Creek has a commercial store-front building and a single church building located
in a residential area.

     Foreclosure  of a $332,000 loan was completed on a church located in Tyler,
Texas in June 2005.  The church  congregation  has  disbanded  and the  church's
property is currently  unoccupied.  We have taken  possession  of the church and
have listed the  property  for sale through a local  realtor.  This  property is
located in a residential area.

     Foreclosure of a $420,000 loan was completed on a church located in Dayton,
Ohio in August  2006.  The church  congregation  is now  meeting in a  different
location and the church property is currently unoccupied.  The Company has taken
possession  of the church and has listed the  property  for sale through a local
realtor. This property is located in a residential area.

                                       19
<PAGE>

     Foreclosure  of a  $385,000  loan  was  completed  on a church  located  in
Anderson,  Indiana in May 2008. The Company has taken possession of the property
and has listed it for sale through a local realtor.  This property is located in
a residential area.

     Foreclosure  of a  $383,000  loan  was  completed  on a church  located  in
Lancaster,  Texas.  The Company took possession of the property in July 2008 and
has listed the property for sale. In order to obtain a certificate of occupancy,
a new parking lot must be completed,  as the previous owner began to replace the
parking lot without city approval.  The Company has factored the cost of the new
parking  lot into its fair  value  calculation.  This  property  is located in a
residential area.

     A deed in lieu of  foreclosure  of  $238,000  was  received  from a  church
located in Pine Bluff,  Arkansas in 2008.  The Company  took  possession  of the
church while it attempts to obtain financing from another lender. If alternative
financing  cannot be obtained,  the Company will list the church for sale with a
local realtor.

Item 3.   Legal Proceedings.

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

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

     None.

                                     PART II

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

Outstanding Securities

     As of  February  28,  2009,  2,472,081  shares  of  our  common  stock  and
$21,615,000 of secured investor certificates were issued and outstanding. We did
not sell any securities in 2008.

Holders of Our Common Shares

     As of February 28, 2009, we had 1,035 record holders of our $.01 par common
stock.

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  that  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 and is not quoted on the National  Association  of Securities
Dealers, Inc. Automated Quotation System ("NASDAQ").

     Our  Class A  Common  Stock,  $.01  par  value  per  share,  traded  on the
over-the-counter market pink sheets under the symbol "ACMC.PK" from September 4,
2007  through  December  31,  2008 The  following  table sets forth the high bid
quotation  and the low bid  quotation as quoted by the Pink Sheets in the fourth
quarter of 2007 and all four  quarters  of 2008.  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.

<TABLE>
<CAPTION>
<S>          <C>                                    <C>                <C>
             -------------------------------------- ------------------ ---------------
                                                          High               Low
             -------------------------------------- ------------------ ---------------
             -------------------------------------- ------------------ ---------------
             Calendar Year 2008
             -------------------------------------- ------------------ ---------------
             -------------------------------------- ------------------ ---------------
             First Quarter                                $4.94            $3.29
             -------------------------------------- ------------------ ---------------
             -------------------------------------- ------------------ ---------------
             Second Quarter                               $4.87            $3.65
             -------------------------------------- ------------------ ---------------
             -------------------------------------- ------------------ ---------------
             Third Quarter                                $5.25            $2.50
             -------------------------------------- ------------------ ---------------
             -------------------------------------- ------------------ ---------------
             Fourth Quarter                               $3.25            $1.20
             -------------------------------------- ------------------ ---------------
             -------------------------------------- ------------------ ---------------

                                       20

<PAGE>

                                                           High              Low
             -------------------------------------- ------------------ ---------------
             -------------------------------------- ------------------ ---------------
             Calendar Year 2007
             -------------------------------------- ------------------ ---------------
             -------------------------------------- ------------------ ---------------
             Fourth Quarter 2007                          $5.64            $4.23
             -------------------------------------- ------------------ ---------------

</TABLE>

     As of March 31, 2009 there were  2,472,081  shares of Class A Common  Stock
outstanding   held  by   approximately   1,033  holders  of  record   (excluding
shareholders for whom shares are held in a "nominee" or "street" name).

Repurchase of Our Shares

     Although our shares of common stock are not redeemable by us, we may at our
complete  discretion,  repurchase  shares offered to us from time to time by our
shareholders.  In such event,  we may pay whatever price the Advisor,  a related
party, deems appropriate and reasonable, and any such shares repurchased will be
re-designated  as  "unissued,"  will no longer be  entitled to  distribution  of
dividends and will cease to have voting rights. The Company's board of directors
has authorized the repurchase of shares subject to  availability  of capital and
generally  limited  to prices at which no  dilution  of equity  (book  value) is
experienced by remaining shareholders. We repurchased 21,514 shares at $5.25 per
share from American Investors Group, Inc. during fiscal year 2008.

Dividends

     We paid  dividends on our common stock for the fiscal years ended  December
31, 2008 and 2007 as follows:

<TABLE>
<CAPTION>

 ==============================================================================================================
      For Quarter Ended:             Dollar Amount Distributed                Annualized Yield Per $10
                                            Per Share:                           Share Represented:
 --------------------------------------------------------------------------------------------------------------
 --------------------------------------------------------------------------------------------------------------
                                    2008                2007                 2008                2007
 --------------------------------------------------------------------------------------------------------------
 --------------------------------------------------------------------------------------------------------------
<S>    <C>                          <C>                <C>                  <C>                  <C>
 March 31st                         $.100              $.1625               4.00%                6.50%
 --------------------------------------------------------------------------------------------------------------
 --------------------------------------------------------------------------------------------------------------
 June 30th                          $.100               $.025               4.00%                1.00%
 --------------------------------------------------------------------------------------------------------------
 --------------------------------------------------------------------------------------------------------------
 September 30th                     $.100               $.025               4.00%                1.00%
 --------------------------------------------------------------------------------------------------------------
 --------------------------------------------------------------------------------------------------------------
 December 31st                      $.050               $.050               2.00%                2.00%
 --------------------------------------------------------------------------------------------------------------
 --------------------------------------------------------------------------------------------------------------
 Totals:                            $.350              $.2625               3.50%               2.625%
 ==============================================================================================================
</TABLE>

     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  each fiscal year and adjusted  annually  based upon our audited
year-end  financial report.  Cash available for distribution to our shareholders
is derived  primarily from the interest portion of monthly mortgage  payments we
receive from churches  borrowing money from us, from  origination and other fees
paid to us by borrowers in connection  with loans we make,  interest income from
mortgage-backed  securities  issued by churches and other  non-profit  religious
organizations  purchased and held by us for investment purposes, and earnings on
any permitted temporary investments made us. All dividends are paid by us at the
discretion  of the Board of  Directors  and will  depend upon our  earnings  and
financial  condition,  maintenance of real estate investment trust status, funds
available for distribution, results of operations, economic conditions, and such
other factors as our Board of Directors deems relevant.

     During any period  where our shares of common  stock are being  offered and
sold and the proceeds there from accumulated for the purpose of funding loans to
be made  by us,  the  relative  yield  generated  by such  capital,  and,  thus,
dividends (if any) to  shareholders,  could be less than expected  until we have
fully  invested  such funds  into  loans.  We 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, 2008, we distributed substantially all 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

                                       21
<PAGE>


state law, and (ii) the factors  identified  above.  The portion of any dividend
that exceeds our earnings and profits will be considered a return of capital and
will not  currently  be subject to  federal  income tax to the extent  that such
dividends do not exceed a shareholder's basis in their shares.

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

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 at this time.

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
Report beginning at page F-1.

Financial Condition

     Our total assets decreased from  approximately  $47,656,000 at December 31,
2007 to $46,961,000 at December 31, 2008. The primary reason for the decrease in
total assets from December 31, 2007 through  December 31, 2008 was a decrease in
mortgage  loans  receivable  due to the payoff of loans and a  decrease  in real
estate held for sale,  offset by purchases of bonds. Our primary  liabilities at
December 31, 2008 and 2007 were our secured  investor  certificates,  which were
$21,638,000  and  $22,831,000  respectively,  and our line of credit,  which was
$4,500,000 and $3,350,000,  respectively.  Another  material  liability for both
periods includes dividends declared as of the end of the period reported on, but
which are not paid until the 30th day of the ensuing month. Shareholders' equity
decreased from  approximately  $21,254,000 at December 31, 2007 to approximately
$20,324,000 at December 31, 2008 primarily due to a stock repurchases,  decrease
in net income as well as declared dividends.

Comparison of the fiscal years ended December 31, 2008 and 2007

     The following table shows the results of our operations for fiscal 2008 and
2007:
<TABLE>
<CAPTION>

Statement of Operations Data                                                2008                  2007
                                                                       ---------------        --------------
                                                                       ---------------        --------------

<S>                                                                    <C>                    <C>
Interest and other income                                                  $3,690,434            $3,932,815
Interest expense                                                            2,066,432             1,988,594
                                                                       ---------------        --------------
                                                                       ---------------        --------------
Net Interest Income                                                         1,624,002             1,944,221
Total provision for losses on mortgage loans and bonds                        352,670               133,101
                                                                       ---------------        --------------
                                                                       ---------------        --------------
Net Interest Income after provision for mortgage and bonds losses           1,271,332             1,811,120
Operating expenses                                                            781,439               755,443
Real estate impairment losses                                                 460,865               217,362
                                                                       ---------------        --------------
                                                                       ---------------        --------------
Total operating expenses                                                    1,242,304               972,805
                                                                       ---------------        --------------
                                                                       ---------------        --------------
Operating income                                                               29,028               838,315
Other income                                                                   21,403                14,875
                                                                       ---------------        --------------
                                                                       ---------------        --------------
Net Income                                                                    $50,431              $853,190
                                                                       ===============        ==============
                                                                       ===============        ==============
Basic and diluted earnings per share                                            $0.02                 $0.34
                                                                       ===============        ==============
</TABLE>

                                       22

<PAGE>

Results of Operations

     Since we began active  business  operations on April 15, 1996, we have paid
50  consecutive  quarterly  dividend  payments to  shareholders.  These dividend
payments have resulted in an average annual return of 7.023% to shareholders who
purchased  shares in our public  offerings  at $10 per share.  Each loan  funded
during the  quarter  generates  origination  income  which is due and payable to
shareholders as taxable income even though origination income was not recognized
in its entirety for the period under generally  accepted  accounting  principles
("GAAP"). We anticipate distributing our taxable income in the form of dividends
to our shareholders in the foreseeable future to maintain our REIT status and to
provide a reliable income source to our shareholders.

     Our Board of Directors declared dividends of $.100 for each share of record
on March 31, 2008, $.10 for each share held of record on June 30, 2008, $.10 for
each share held of record  September  30,  2008 and $.050 for each share held of
record on December 31, 2008.  Based on the quarters  ended March 31, 2008,  June
30,  2008,  September  30,  2008 and  December  31,  2008,  the  dividends  paid
represented a 4.00%,  4.00%,  4.00% and 2.00%  annualized yield to shareholders,
respectively,  for an effective overall annual yield of 3.50% in 2008. We aim to
provide a reliable dividend to our investors.  In 2008, 51% of dividends paid to
shareholders was taxable ordinary dividends,  while 49% of the dividends paid to
shareholders   was  return  of  capital   and  is   reported   as   non-dividend
distributions.

     The total  amount  of  dividends  paid in 2008 was  $868,455  which  number
includes  $124,680 of  dividends  declared  but not paid in 2007 and $123,604 of
dividends  declared but not paid in 2008. In 2008, the total amount of dividends
declared and paid to  shareholders  was $867,379.  Of the $867,379  amount paid,
approximately  $438,763,  or 51%,  was a  distribution  of taxable  income,  and
$428,616,  or 49%,  was a return of  capital  because it was a  distribution  of
shareholder equity and not a distribution of taxable income. The Company decided
to pay cash from operating and financing activities to shareholders to provide a
reliable income source to shareholders.

     Interest  and other  income was  approximately  $3,690,000  for fiscal 2008
compared to $3,933,000 for fiscal 2007. The decline relates to reduced  interest
income on mortgage loans and bonds as well as a reduction in origination income.
Interest on mortgage  loans  receivable  declined as the  weighted  average rate
declined  from  8.80%  to 8.70% as the loan  balances  outstanding  declined  by
$772,000. Bond balances have increased approximately $615,000 from approximately
$11,264,000  at December 31, 2007 to  approximately  $11,879,000 at December 31,
2008.  The weighted  average  interest rate on the bonds  declined from 8.14% at
December 31, 2007 to 7.94% at December 31, 2008. Although the bond balances have
increased,  we have  not  received  interest  since  May  2007 on  approximately
$2,035,000  of bonds that we hold as the bond issuer is in default.  These bonds
had been paying interest at  approximately  6.72%.  The trustee of the bonds has
foreclosed on the property and is working to sell the property.

     The Company distributed virtually all of its cash from operating activities
and  investing  activities  for the fiscal year ending  December 31, 2008 in the
form of dividends to shareholders. Total cash for operating income and investing
activities  totaled  $1,016,000 and $93,000 for the fiscal year ending  December
31,  2008  respectively.  In  addition,  the Company  increased  its real estate
impairment  reserve and its bond portfolio  reserve by $461,000 and $300,000 for
the fiscal year ending  December 31, 2008  respectively.  This  increase in loan
loss  reserves was  recognized  in its  entirety for the period under  generally
accepted  accounting  principles  ("GAAP"),  but does not affect  taxable income
distributions  we are  required  to make to  maintain  our status as a REIT.  We
anticipate  distributing  all of our  taxable  income  (100%)  in  the  form  of
dividends to our  shareholders  in the  foreseeable  future to maintain our REIT
status and to provide a reliable income source to our shareholders.

     Origination  income is recognized  over the life of the loans. As loans are
repaid  prior  to  maturity,   the  remaining  deferred  origination  income  is
recognized. In 2007, the Company recognized higher amounts of origination income
due to the early  repayment of loans.  Excluded  from revenue for fiscal 2008 is
$73,000 of  origination  income,  or  "points,"  we received for loans issued in
2008.  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, 2008,  June 30, 2008,  September 30, 2008 and December
31, 2008 included  origination  income even though it was not  recognized in its
entirety as income for the period under GAAP.

                                       23

<PAGE>

     Interest expense increased from approximately  $1,989,000 in fiscal 2007 to
approximately  $2,066,000 in 2008. Interest expense consists of interest paid on
secured investor certificates and the line of credit as well as the amortization
of loan costs  related  to these debt  obligations.  The  increase  in the total
interest expense resulted from higher balances on the line of credit during 2008
compared to 2007 and the  write-off of loan costs of  approximately  $179,000 in
September  2008 when we replaced our line of credit with KeyBank with a new line
of credit with Beacon Bank. These increases were partially offset by a reduction
in  the  balances  outstanding  and  interest  rates  of  the  secured  investor
certificates and a lower interest rate on the line of credit.

     Net interest income  represents the difference  between  interest and other
income less interest  expense.  Net interest income declined from  approximately
$1,944,000 in fiscal 2007 to approximately  $1,624,000 in fiscal 2008 due to the
reduction  in interest  income  produced by mortgage  loans and bonds as well as
increases in interest  expense  resulting  from the write-off of loan costs when
the line of credit was replaced,  and higher balances outstanding on the line of
credit.

     Provision for losses on mortgage loans receivable and bonds increased as we
recorded additional  allowance against the mortgage loans as well as a provision
for losses on one bond that was in default.  We recorded a provision  for losses
on loans during 2008 of approximately  $53,000 compared to approximately $33,000
in 2007.  We  continually  assess our loan  portfolio  and reserve for potential
losses based on the payment  history and status of loans.  At December 31, 2008,
we reserved  approximately $107,000 for eleven mortgage loans, of which five are
three  or more  mortgage  payments  in  arrears.  One of  these  loans is in the
foreclosure process. At December 31, 2007, we reserved approximately $72,000 for
fourteen  mortgage loans, of which four were three or more mortgage  payments in
arrears.  Three of these loans were in the foreclosure process, of which one had
declared bankruptcy.

     The additional  provision for losses on our bond portfolio relates to bonds
that we hold of the  St.  Agnes  Missionary  Baptist  Church  ("St.  Agnes")  in
Houston,  Texas.  The St. Agnes bonds are secured by three  properties that were
listed for approximately $19,167,000.  St. Agnes stopped making full payments on
the bonds in May 2007,  but had been making  reduced  payments,  which are being
held in escrow.  We recorded a provision  for losses on the bonds of $100,000 in
2007. The trustee for the St. Agnes bonds foreclosed on the property that served
as collateral  for the bonds in 2008. St. Agnes has been searching for financing
to replace  the bonds in 2008,  but has not been  successful.  The  trustee  has
received  offers on one of the  properties in 2008,  but nothing  definitive has
been signed.  While these offers did not result in the sale of one or all of the
properties,  they did provide a further basis as to the potential  sale value of
the  properties.  St. Agnes stopped making reduced  payments to the trustee once
the properties were foreclosed on. We recorded a provision for additional losses
of $300,000 due to the delays in selling the properties and deterioration in the
credit and economic environment.

     Our  operating  expenses  for  fiscal  2008 were  approximately  $1,242,000
compared to  approximately  $973,000 for fiscal 2007. This increase in operating
expenses  was a  result  of  additional  losses  on real  estate  owned by us of
approximately  $244,000.  We recorded  additional losses on property that we own
based on the estimated  selling prices in 2008. We disposed of two properties in
2008. We expect to dispose of two  properties in 2009. We expect to foreclose on
two  additional  properties  in 2009 and may incur  costs to secure and  prepare
these  properties  for sale.  We exhaust all options  available  to us to before
proceeding  to  foreclosure.  We do  not  foresee  any  additional  increase  in
foreclosures other than these two churches.

     Net income for fiscal 2008 was  approximately  $50,000 on total revenues of
approximately  $3,690,000  compared to net income of  approximately  $853,000 on
total revenues of approximately $3,933,000 for fiscal 2007. This decrease in net
income was due to a reduction in interest  income from mortgage  loans and bonds
resulting from lower interest rates and lower mortgage balances,  a reduction in
net interest margin  resulting from the write off of loan costs when we replaced
our KeyBank line of credit with one from Beacon Bank,  additional  losses on the
St. Agnes bonds that were foreclosed upon, and real estate impairment losses.

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  agents  and
registrar.

                                       24
<PAGE>

     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 just under three years. Our borrowers are typically small independent
churches  with  little or no  borrowing  history.  Once a church  establishes  a
payment  history with us, they 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 have  demonstrated they
can meet their mortgage debt obligations.

     Currently, our bond portfolio comprises 25% 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 par  value of the  outstanding  bonds was
$12,278,000  as of December 31, 2008. We have recorded a provision for losses on
one bond as the bond  trustee has  foreclosed  on the property and is working to
sell the property.  Prior to 2007 we did not  experience any loss of income from
our bond portfolio.  We may sell bonds to match  maturities of secured  investor
certificates  to the extent that interest  income  combined  with  repayment and
normal maturities of our mortgage loans do not cover these amounts.

     We work to  match  maturities  of  mortgage  loans  and  bonds  to meet the
maturities of our secured  investor  certificates.  We have also used funds from
prepayment of mortgage loans and bonds that have been called for payments on our
maturing secured investor  certificates.  In addition, if needed, we are able to
sell bonds that we own to meet the maturities of secured investor  certificates.
In 2008  and  2007,  we used  funds  from  operating,  investing  and  financing
activities  to make  payments  on maturing  secured  investor  certificates  and
shareholder distributions. While we have generally paid amounts in excess of the
taxable dividend requirement, to maintain our REIT status, in the future, we may
have to reduce  these  excess  amounts  in order to  maintain  our debt  service
requirements on our maturing secured investor certificates.

     We had deficits in working  capital at December 31, 2008 and 2007. The main
reasons for this deficit were the repayment of mortgage  loans  receivable,  the
renewal of a portion of secured investor  certificates when they mature, and the
continuation  of our line of credit,  even though it is  classified as a current
liability. Historically,  mortgage loans receivable have been refinanced or paid
off  prior to the  stated  maturities.  There is no  assurance  that  this  will
continue. If maturities and prepayment of loans, along with other potential cash
flows from the sale of real estate  owned,  are not  sufficient  to meet current
maturities of secured  investor  certificates,  we may have to sell bonds in our
bond portfolio to meet these obligations.  While we have historically sold bonds
at par  value,  there is no  assurance  that we will  always be able to do so. A
portion of the secured  investor  certificates  have  renewed at maturity at the
current  rates and terms.  There is no  assurance  that the rate of renewal will
continue or that the terms of the renewal  will be as  favorable  as it has been
historically.

     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 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.  We  currently  have an
$4,500,000  secured  revolving  credit  facility  with Beacon  Bank,  Shorewood,
Minnesota.  Advances  on the line of  credit  are  available  up to  $4,500,000,
subject to  borrowing  base  limitations.  As of  December  31,  2008 we have an
outstanding  balance of $4,500,000 against our line of credit.  This credit line
is secured by a first priority  interest in  substantially  all of the Company's
assets other than the collateral  pledged to secure the Company's Series "A" and
Series "B"  secured  investor  certificates.  Interest  on our line of credit is
payable to Beacon Bank on a monthly basis.  We believe that the rate at which we
lend  funds  will  always be higher  than the cost at which we borrow  the funds
(currently  the rate at which we can borrow  funds  under this line of credit is
the prime rate with a minimum interest rate of 5.00%).  However, there can be no
assurance  that we can always  lend funds out at rates  higher  than the rate at
which we borrow the funds. When we do carry an outstanding  balance on this line
of credit we plan to "pay-down"  any future  borrowings on our line of credit by
applying  the proceeds  from  principal  payments on our current loan  portfolio
payments and any loan  re-payments.  Increases or decreases in the lending rates
charged by our bank  sources as well as the  increase or decrease in the rate of
interest  charged on our loans has and likely will  continue to impact  interest
income we will earn and, accordingly,  influence dividends declared by our Board
of Directors.

     In October  2008,  the  Company  filed a  registration  statement  with the
Securities  and  Exchange  Commission  to offer  Series  "C"  secured  investors
certificates  of  $20,000,000.  Upon being  declared  effective  by the SEC, the
certificates  will be offered in multiples of $1,000 with interest rates ranging
from 6.25% to 7.25%, subject to changing market rates, and maturities from 13 to
20 years.  The  certificates  will be  collateralized  by certain mortgage loans
receivable and church bonds of approximately  the same value. Our future capital
needs are expected to be met by (i) future public offerings of our shares and/or
our  certificates;  (ii) the repayment of existing loans and bonds and potential
sale of bonds; and (iii) borrowing under our existing line of credit.

                                       25


<PAGE>

Loan Loss Reserve Policy

     We follow a loan loss reserve policy on our portfolio of loans outstanding.
This critical policy requires  complex  judgments and the need to make estimates
of future  events,  which may or may not  materialize  as  planned.  This policy
reserves for principal  amounts  outstanding on a particular  loan if cumulative
interruptions  occur in the normal  payment  schedule of a loan. Our policy will
reserve for the outstanding  principal  amount of a loan in our portfolio if the
amount  is in doubt of being  collected.  At  December  31,  2008,  we  reserved
$107,308  against eleven  mortgage  loans.  As of December 31, 2008, we had five
first  mortgage  loans that are three or more  payments in  arrears.  One of the
loans is in the process of being foreclosed. The loan has an outstanding balance
of  approximately  $640,000.  The church missed one mortgage payment in 2007 and
twelve mortgage payments in 2008. We plan to take possession of this property in
2009 and list it for sale through a local realtor.

     The second loan has an outstanding balance of approximately  $248,000.  The
church missed one mortgage payment in 2007 and three mortgage  payments in 2008.
The church is working to bring its account current.

     The third loan has an outstanding  balance of approximately  $464,000.  The
church missed three payments in 2008. The church is making  payments  toward the
arrearage.

     The fourth loan has an outstanding balance of approximately  $187,000.  The
church  missed  four  mortgage  payments  in 2008.  The  church is getting a new
pastor,  and we are working with the denomination and the regional bishop to get
the church back to a monthly mortgage payment schedule.

     The fifth loan has an outstanding  balance of approximately  $650,000.  The
church  missed  three  payments in 2008.  The church has listed the property for
sale and expects to have the sale completed by March 31, 2009.

     As of December 31, 2007, we had four first mortgage loans that are three or
more  payments  in  arrears.  Three of the loans  were in the  process  of being
foreclosed. The first loan had an outstanding balance of approximately $385,000.
The church  missed one  mortgage  payment in 2006 and ten  mortgage  payments in
2007.  As of  December  31,  2008,  the Company had  obtained  ownership  of the
property,  which required the Company to reclassify the loan as real estate held
for sale.

     The second loan had an outstanding balance of approximately  $238,000.  The
church missed five mortgage  payments in 2007. We had obtained a deed in lieu of
foreclosure from the church and recorded the deed in the county where the church
resides.  As of December  31, 2008,  the Company had  obtained  ownership of the
property,  which required the Company to reclassify the loan as real estate held
for sale.

     The third loan had an outstanding  balance of approximately  $383,000.  The
church  missed six  mortgage  payments in 2007.  We  initiated  the  foreclosure
process,  but on the day on which  we were to take  possession  through  Sheriff
Sale, the church filed bankruptcy. As of December 31, 2008, the Company obtained
ownership of the property and it is classified as real estate held for sale.

     The fourth loan had an outstanding balance of approximately  $150,000.  The
church missed one payment in 2006 and two payments in 2007. The church submitted
a repayment  plan which was accepted.  As of December 31, 2008, the borrower had
continued the accepted payment plan and was not behind on payments.

     We  presently  expect our loan loss  reserves  to be  adequate to cover all
losses. Listed below is our current loan loss reserve policy:

<TABLE>
<CAPTION>

 ==============================================================================================================================
 Incident     Percentage of Loan Reserved          Status of Loan
 ==============================================================================================================================
<S><C>
 ------------------------------------------------------------------------------------------------------------------------------
 1.                                                None Loan is current, no
                                                   interruption in payments
                                                   during history of the loan,
                                                   ("interruption" means receipt
                                                   by us more than 30 days after
                                                   scheduled payment date).
 ------------------------------------------------------------------------------------------------------------------------------
 2.                                                None Loan current, previous
                                                   interruptions experienced,
                                                   but none in the last six
                                                   month period. Applies to
                                                   restructured loans or loans
                                                   given forbearance.
 ------------------------------------------------------------------------------------------------------------------------------
 3.           None                                 Loan current, previous interruptions experienced, but none in the last 90
                                                   day period.

                                       26

<PAGE>

 ==============================================================================================================================
 Incident     Percentage of Loan Reserved          Status of Loan
 ==============================================================================================================================

------------------------------------------------------------------------------------------------------------------------------
 4.           1.00%                                Loan serviced regularly, but 1 to 3 payments cumulative in arrears.
                                                   Delinquency notice sent.
 ------------------------------------------------------------------------------------------------------------------------------
 5.           5.00%                                Loan serviced regularly, but 4 or 5 payments cumulative in arrears.
                                                   Repayment plan requested
 ------------------------------------------------------------------------------------------------------------------------------
 6.           The greater of: (i) accumulated      Loan is declared in default.  Foreclosure proceeding underway or
              reserve during default period equal  imminent.  Reserve amount dependent on value of collateral.  All expenses
              to principal loan balance in excess  related to enforcing loan agreements are expensed.
              of 65% of original collateral
              value; or (ii) 1% of the remaining
              principal balance each quarter
              during which the default remains in
              effect.
 ==============================================================================================================================
</TABLE>

     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. Loan loss reserves are recorded on a
quarterly basis.

Bond Loss Policy

     Bond loss  reserves  are  estimated by  management  and are  determined  by
reviewing payment history,  our experience with defaulted bond issues as well as
historical trends.

     We  currently  own  $2,035,000  First  Mortgage  Bonds  issued by St. Agnes
Missionary Baptist Church. St. Agnes has defaulted on its payment obligations to
bondholders.  Currently, Herring Bank, trustee for the bondholders of St. Agnes,
has  foreclosed  on the  Church's  property  and has filed an unlawful  detainer
against St. Agnes because the Church has not agreed to pay rent to Herring while
a buyer for their  properties is sought.  St. Agnes received a continuance  from
the courts to not enforce the unlawful  detainer  while they  continue to either
find new financing or a buyer for the properties.

     On August 8, 2008 a local church executed a First Amendment to an Exclusive
Real Estate  Purchase  Contract to purchase one of the three  properties  of St.
Agnes known as the Gamma Center for $3,500,000. The potential buyer breached the
contract by failing to make the required  escrow payments and then later failing
to close on the  purchase  of the Gamma  Center.  A lawsuit is  intended  if the
potential  buyer does not honor its contract.  Herring Bank has learned that the
potential  buyer has moved in or is currently  using the Gamma Center and paying
rent to St. Agnes.  The  attorneys for Herring Bank advised the potential  buyer
that Herring Bank, not St. Agnes, is the owner of the property.  Therefore,  any
payments to St. Agnes should cease and the contract must be honored.

     We are monitoring these  proceedings and have reserved $400,000 against the
$2,035,000  St. Agnes bonds it owns.  It is  difficult to determine  the correct
reserve  amount  since  no  viable  offers  have  been  made for the  other  two
facilities St. Agnes owns. We do not know the condition of the three  facilities
at this time, as we are investors in the bonds issued by St. Agnes, not the loan
originator and St. Agnes' is still occupying the facilities. The increase in the
loan  reserve  from  $100,000  to  $400,000  is  appropriate  in our view as the
collateral  backing the bonds will incur deferred  maintenance  costs given that
churches  do not  continue  to  repair or  maintain  their  facilities  in these
scenarios until they either sell their properties or the default is cured.

     The Company, along with all other bondholders, has a superior lien over all
other creditors. We have not received interest payments from St. Agnes since May
2007.  We are not  accruing  any missed  interest  payments  from the bonds.  We
foresee that we will not receive any interest  payments  from St. Agnes  through
the first half of 2009.

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.

                                       27
<PAGE>

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

     Of our  significant  accounting  policies  described  in the  notes  to our
financial  statements included herewith,  we believe that the estimation of fair
value of our mortgage loans  receivable  involves a high degree of judgment.  We
estimate the fair value of our mortgage loans  receivable and related  allowance
for loan losses  based on the current  status of loans,  the history of payments
and the number of payments in arrears.  We do not consider the availability of a
market for a loan in  estimating  fair value at this time.  We estimate the fair
value of the bond  portfolio  based on similar  bonds in  inactive  markets  and
widely accepted valuation techniques.  We had one bond series default, which was
subsequently  foreclosed upon by the bond trustee.  We have estimated  losses on
this bond based on the underlying  collateral,  the anticipated selling price of
the properties, the current credit environment, and the condition of the economy
in general.  The recorded losses on the defaulted bonds effectively  reduced the
bonds to fair value, which is the amount management believes will be recovered.

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

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 at this time.

Item 8.  Financial Statements.

     Financial  Statements  required  by this  item can be  found  at pages  F-1
through F-17 of this Form10-K and are deemed incorporated herein by reference.

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

None.

Item 9A(T). Controls and Procedures.

Disclosure Controls and Procedures

     Under the supervision and with the participation of our senior  management,
consisting of Philip J. Myers,  our chief executive  officer and chief financial
officer,  we  conducted an  evaluation  of the  effectiveness  of the design and
operation  of our  disclosure  controls  and  procedures,  as  defined  in Rules
13a-15(e) and 15d-15(e)  under the Securities  Exchange Act of 1934, as amended,
as of the end of the period  covered by this  report  (the  "Evaluation  Date").
Based on this  evaluation,  our chief  executive  officer  and  chief  financial
officer concluded,  as of the Evaluation Date, that our disclosure  controls and
procedures  are not  effective  as a result  of  limited  resources  devoted  to
financial  reporting  and  limited  segregation  of duties  such that  financial
information  required to be disclosed in our Securities and Exchange  Commission
("SEC") reports (i) is recorded,  processed,  summarized and reported within the
time  periods  specified  in SEC rules and forms,  and (ii) is  accumulated  and
communicated to our management,  including our chief executive officer and chief
financial officer,  as appropriate to allow timely decisions  regarding required
disclosure. More specifically,  the Company has a limited number of personnel in
the finance and  accounting  functions.  Were there a larger staff,  it would be
possible to provide for enhanced  disclosure of financial  reporting matters and
greater segregation of duties which would permit checks and balances and reviews
that  would  improve  internal  control.  Management  recognizes  that these are
material  weaknesses.  A material  weakness is a deficiency,  or  combination of
deficiencies, in internal control over financial reporting, such that there is a
reasonable  possibility that a material  misstatement of the Company's annual or
interim  financial  statements  will not be  prevented  or  detected in a timely
basis.

                                       28

<PAGE>

Management's Annual Report on Internal Control Over Financial Reporting

     The  management of American  Church  Mortgage  Company is  responsible  for
establishing  and  maintaining  an  adequate  system of  internal  control  over
financial  reporting  (as defined in  Exchange  Act Rule  13a-15(f)).  Under the
supervision  and  with  the  participation  of our  senior  management,  we also
conducted an evaluation of our internal  control over financial  reporting as of
the Evaluation Date. Our 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 of
accounting  principles  generally accepted in the United States.  Because of its
inherent limitations,  internal control over financial reporting may not prevent
or  detect  misstatements.  Therefore,  even  those  systems  determined  to  be
effective  can provide only  reasonable  assurance of  achieving  their  control
objectives.  In  evaluating  the  effectiveness  of our  internal  control  over
financial reporting, our management used the criteria set forth by the Committee
of  Sponsoring  Organizations  of the  Treadway  Commission  (COSO) in  Internal
Control - Integrated  Framework.  Based on that evaluation,  our chief executive
officer and chief financial  officer  concluded that, as of the Evaluation Date,
we did not maintain  effective  internal  control over financial  reporting as a
result of the  material  weakness  described  above.  We  continue  to  evaluate
internal control  improvements,  particularly related to financial reporting for
ongoing changes to our operations and segregation of duties,  to provide greater
segregation  and  improve  overall  internal  control.  Some of the  remediation
actions we are undertaking  include,  but are not limited to, the following:  a)
having an  internal  control  review  done by an  Independent  Board  Member who
performs  periodic  testing of our internal  controls and procedures;  b) having
separate oversight of bank reconciliations and other cash management  procedures
by individuals who are not involved in the day to day operations of the Company;
and c)improve monitoring of changes to financial reporting requirements.

     This  annual  report  does  not  include  an  attestation   report  of  our
independent  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 temporary rules of the Securities
and Exchange  Commission that permit us to provide only  management's  report in
this annual report.

     Our independent registered public accountants have reported to our Board of
Directors certain matters of involving internal controls that they considered to
be material  weaknesses on the Evaluation Date,  under standards  established by
the American Institute of Certified Public Accountants.  The material weaknesses
relates to the limited resources related to financial reporting and available to
provide segregation of duties.

Changes in Internal Control over Financial Reporting

     There were no changes in our  internal  control over  financial  reporting,
except for the material  weakness  identified above related to limited resources
devoted to 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

     Not applicable.

                                    PART III

Item 10. Directors, Executive Officers, Promoters 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 12, 2009, 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 12, 2009, 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
<PAGE>

Item 12. Security Ownership of Certain Beneficial Owners and Management

     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 12, 2009, 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 12, 2009, 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 Accountants 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 12, 2009, 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.



















                                       30

<PAGE>



 Item 15. Exhibits


<TABLE>
<CAPTION>
     Exhibit
     No.                Title


<S>  <C>                                                                                                                         <C>
     3.1                Amended and Restated Articles of Incorporation                                                           1

     3.2                Third Amended and Restated Bylaws                                                                        2

     4.1                Specimen Common Stock Certificate                                                                        1

     4.2                Trust Indenture between the Company and The Herring National Bank dated April 26, 2002                   3

     4.3                Supplemental  Trust Indenture  between the Company and The Herring  National Bank dated September 28,    4
                        2004

     4.4                First Supplemental Indenture to 2002 Indenture dated July 2, 2007                                        2

     4.5                First Supplemental Indenture to 2004 Indenture dated July 2, 2007                                        2

     10.1               Amended and Restated REIT Advisory Agreement with Church Loan Advisors, Inc. dated January 22, 2004      5

     10.2               Security Agreement between the Company and The Herring National Bank, as Trustee dated April 26, 2002    3

     10.3               Supplemental  Security  Agreement between the Company and The Herring National Bank, as Trustee dated    4
                        September 28, 2004

     10.4               Form of Loan and Security Agreement by and between the Company and Beacon Bank                           6

     10.5               Form of Revolving Note                                                                                   6

     10.6               Form of Securities Account Control Agreement by and among the Company, Herring Bank and Beacon Bank      6

     31.1               Certification Pursuant to Section 302 of Sarbanes Oxley Act of 2002                                      7

     31.2               Certification  Pursuant to 19 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes    7
                        Oxley Act of 2002


(1)      Incorporated herein by reference to the Company's Registration Statement on Form 8-A, 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, filed April 26, 2002.
(4)      Incorporated herein by reference to the  Company's Registration Statement on Form S-11/A, filed September 29, 2004.
(5)      Incorporated herein by reference to the Company's Current Report on Form 8-K/A, filed August 1, 2007.
(6)      Incorporated herein by reference to the Company's Current Report on Form 8-K, filed September 17,2008.
(7)      Filed herewith.

</TABLE>





                                       31

<PAGE>



         SIGNATURES

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

                                AMERICAN CHURCH MORTGAGE COMPANY

Dated:   March 31, 2009         By:      /s/ Philip J. Myers
        ----------------        -------------------------------------
                                Philip J. Myers, President, Treasurer
                                Chief Executive Officer, President and Treasurer
                                Principal Executive Officer and Principal
                                Financial Officer

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

By:       /s/ Philip J. Myers                           Date:     03/31/2009
         ----------------------------------                  ------------------
         Philip J. Myers
         President, Treasurer and Director

By:       /s/ Dennis J. Doyle                           Date:     03/31/2009
         ----------------------------------                   -----------------
         Dennis J. Doyle, Director

By:      /s/ Michael G. Holmquist                       Date:     03/31/2009
         ----------------------------------                   -----------------
         Michael G. Holmquist, Director

By:      /s/ Kirbyjon H. Caldwell                       Date:     03/31/2009
         ----------------------------------                   -----------------
         Kirbyjon H. Caldwell, Director











                                       32

<PAGE>








                        AMERICAN CHURCH MORTGAGE COMPANY

                              Minnetonka, Minnesota

                              Financial Statements

                           December 31, 2008 and 2007












<PAGE>


                                [GRAPHIC OMITTED]


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


Board of Directors
American Church Mortgage Company
Minnetonka, Minnesota


We have audited the  accompanying  balance  sheets of American  Church  Mortgage
Company  as of  December  31,  2008  and  2007  and the  related  statements  of
operations,  stockholders'  equity,  and cash flows for each of the years in the
two-year  period ended  December  31, 2008.  American  Church  Mortgage  Company
management is responsible for these financial statements.  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 audit included  consideration of 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 also  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  financial   statements,   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, 2008 and 2007,  and the results of its operations and
its cash flows for each of the years in the two-year  period ended  December 31,
2008 in conformity with accounting  principles  generally accepted in the United
States of America.





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

Minneapolis, Minnesota
March 31, 2009





                                      F-1
<PAGE>

                   AMERICAN CHURCH MORTGAGE COMPANY

                            Balance Sheets
<TABLE>
<CAPTION>
                                                                                               December 31
---------------------------------------------------------------------------------------------------------------------------
                                ASSETS                                                  2008                        2007
---------------------------------------------------------------------------------------------------------------------------

Current Assets
<S>                                                                             <C>                         <C>
    Cash and equivalents                                                        $      271,373              $      285,118
    Accounts receivable                                                                133,638                     112,546
    Interest receivable                                                                154,466                     151,105
    Current maturities of mortgage loans receivable, net of
          allowance of $107,308 and $72,056 and deferred
          origination fees of $32,531 and $30,412 at
          December 31, 2008 and 2007, respectively                                     463,841                     877,400
 Current maturities of bond portfolio                                                  342,000                      41,000
    Prepaid expenses                                                                     9,724                       7,072
                                                                                --------------                   ---------
            Total current assets                                                     1,375,042                   1,474,241


Mortgage Loans Receivable, net of current maturities                                32,100,196                  32,464,951

Bond Portfolio, net of current maturities                                           11,536,937                  11,222,713

Real Estate Held for Sale                                                            1,261,832                   1,566,561

Deferred Secured Investor Certificates Offering Costs,
    net of accumulated amortization of $977,237 and $871,437
    at December 31, 2008 and 2007, respectively                                        654,810                     700,479

Deferred Line of Credit Costs, net of accumulated
    amortization of $5,835 and $36,652 at
 December 31, 2008 and 2007, respectively                                               32,383                     227,278
                                                                                --------------                  ----------
            Total Assets                                                          $ 46,961,200                $ 47,656,223
                                                                                ==============                  ==========

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



                                      F-2

<PAGE>

                  AMERICAN CHURCH MORTGAGE COMPANY
                           Balance Sheets
<TABLE>
<CAPTION>

                                                                                              December 31
---------------------------------------------------------------------------------------------------------------------------
                LIABILITIES AND STOCKHOLDERS' EQUITY                                  2008                         2007
---------------------------------------------------------------------------------------------------------------------------

Current Liabilities
<S>                                                                               <C>                          <C>
    Current maturities of secured investor certificates                           $ 3,969,000                  $ 2,197,000
    Line of credit                                                                  4,500,000                    3,350,000
    Accounts payable                                                                   23,317                       28,941
    Accrued expenses                                                                        -                       18,022
    Building funds payable                                                            352,595                       50,000
    Dividends payable                                                                 123,604                      124,680
                                                                                   ----------                    ---------
            Total current liabilities                                               8,968,516                    5,768,643

Secured Investor Certificates, Series A                                             3,151,000                    6,008,000
Secured Investor Certificates, Series B                                            14,518,000                   14,626,000

Stockholders' Equity
    Common stock, par value $.01 per share
        Authorized, 30,000,000 shares
        Issued and outstanding, 2,472,081 and 2,493,595
           at December 31, 2008 and 2007, respectively                                 24,721                       24,936
    Additional paid-in capital                                                     22,814,911                   22,927,644
    Accumulated deficit                                                            (2,515,948)                  (1,699,000)
                                                                                  -----------                   ----------
            Total stockholders' equity                                             20,323,684                   21,253,580
                                                                                  -----------                   ----------

            Total liabilities and equity                                         $ 46,961,200                 $ 47,656,223
                                                                                  ===========                   ==========

</TABLE>

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


                                      F-3

<PAGE>


                     AMERICAN CHURCH MORTGAGE COMPANY

                         Statements of Operations
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
                                                                                          Years Ended December 31
                                                                                         2008                      2007
---------------------------------------------------------------------------------------------------------------------------

<S>                                                                                  <C>                       <C>
Interest and Other Income                                                            $ 3,690,434               $ 3,932,815

Interest Expense                                                                       2,066,432                 1,988,594
                                                                                     -----------                ----------
Net Interest Income                                                                    1,624,002                 1,944,221

Provision for losses on mortgage loans receivable                                         52,670                    33,101
Provision for losses on bonds                                                            300,000                   100,000
                                                                                     -----------                ----------
Total provision for losses on mortgage loans and bonds                                   352,670                   133,101
                                                                                     -----------                ----------

Net Interest Income after provision for mortgage and bond losses                       1,271,332                 1,811,120

Operating Expenses
Other operating expenses                                                                 781,439                   755,443
Real estate impairment loss                                                              460,865                   217,362
                                                                                     -----------                ----------
Total operating expenses                                                               1,242,304                   972,805
                                                                                     -----------                ----------

Operating income                                                                          29,028                   838,315

Other income                                                                              21,403                    14,875
                                                                                     -----------                ----------

Net Income                                                                         $      50,431               $   853,190
                                                                                     ===========                ==========

Basic and Diluted Income Per Share                                                        $ 0.02                    $ 0.34
                                                                                     ===========                ==========

Weighted Average Common Shares Outstanding - Basic and Diluted                         2,480,392                 2,493,595
                                                                                     ===========                ==========

</TABLE>

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



                                      F-4

<PAGE>

                        AMERICAN CHURCH MORTGAGE COMPANY

                       Statements of Stockholders' Equity
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
                                                                                           Additional
                                                                  Common Stock               Paid-In         Accumulated
                                                             Shares          Amount          Capital           Deficit
--------------------------------------------------------------------------------------------------------------------------

<S>                                                  <C>     <C>            <C>           <C>                <C>
Balance, December 31, 2006                                   2,493,595      $ 24,936      $ 22,927,644       $ (1,897,618)

    Net income                                                                                                    853,190

    Dividends declared                                                                                           (654,572)
                                                      --------------------------------------------------------------------

Balance, December 31, 2007                                   2,493,595      $ 24,936      $ 22,927,644       $ (1,699,000)

    Repurchase of 21,514 shares of common stock                (21,514)         (215)         (112,733)

    Net income                                                                                                     50,431

                                                     ---------------------------------------------------------------------
    Dividends declared                                                                                           (867,379)

Balance, December 31, 2008                                 $ 2,472,081      $ 24,721      $ 22,814,911       $ (2,515,948)
                                                     =====================================================================
</TABLE>


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




                                      F-5

<PAGE>

                 AMERICAN CHURCH MORTGAGE COMPANY
                     Statements of Cash Flows
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
                                                                                          Years Ended December 31
                                                                                      2008                          2007
---------------------------------------------------------------------------------------------------------------------------

Cash Flows from Operating Activities
<S>                                                                             <C>                           <C>
    Net income                                                                  $     50,431                  $    853,190
    Adjustments to reconcile net income to net cash
        from operating activities:
        Impairment loss on real estate held for sale                                 460,865                       217,362
        Provision for losses on mortgage loans receivable                             52,670                        33,101
        Provision for losses on bond portfolio                                       300,000                       100,000
        Amortization of loan origination discounts                                  (102,152)                     (123,473)
        Amortization of deferred costs                                               159,972                       202,067
        Recognition of loan costs with line of credit refinancing                    178,941                             -
        Other                                                                              -                        60,000
        Change in assets and liabilities
            Accounts receivable                                                      (55,067)                       24,163
            Interest receivable                                                       (3,361)                       13,818
            Prepaid expenses                                                          (2,652)                        1,300
            Accounts payable                                                          (5,624)                        2,630
            Accrued expenses                                                         (18,022)                       18,022
                                                                                   ----------                   ----------
            Net cash from operating activities                                     1,016,001                     1,402,180

Cash Flows from Investing Activities
    Investment in mortgage loans                                                  (1,954,644)                   (6,807,144)
    Proceeds from origination fees                                                    73,022                        76,135
    Collections of mortgage loans                                                  2,709,320                     9,891,776
    Investments in bonds                                                          (1,372,355)                   (2,533,620)
    Proceeds from bonds                                                              457,131                       720,604
    Proceeds from sale of property                                                   180,532                       130,343
                                                                                 ------------                   -----------
            Net cash provided from investing activities                               93,006                     1,478,094

Cash Flows from Financing Activities
    Proceeds from line of credit, net                                              1,150,000                        61,185
    Payments on secured investor certificate maturities                           (1,193,000)                   (1,851,000)
    Payments for deferred costs                                                      (98,349)                     (110,289)
    Stock redemptions                                                               (112,948)                            -
    Dividends paid                                                                  (868,455)                     (927,310)
                                                                                 -----------                   ------------
            Net cash used for financing activities                                (1,122,752)                   (2,827,414)
                                                                                 ------------                  ------------
Net (Decrease) Increase in Cash and Equivalents                                      (13,745)                       52,860

Cash and Equivalents - Beginning of Year                                             285,118                       232,258
                                                                                 -----------                   -----------

Cash and Equivalents - End of Year                                                 $ 271,373                     $ 285,118
                                                                                 ===========                   ===========
</TABLE>

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




                                      F-6
<PAGE>


                 AMERICAN CHURCH MORTGAGE COMPANY

               Statements of Cash Flows - Continued

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
                                                                                         Years Ended December 31
                                                                                     2008                          2007
---------------------------------------------------------------------------------------------------------------------------

Supplemental Cash Flow Information

<S>                                                                             <C>                           <C>
     Dividends payable                                                          $    123,604                  $   124,680
                                                                                ============                  ===========

     Mortgages and accounts receivable
        to real estate held for sale                                            $    989,083                  $   789,076
                                                                                ============                  ===========

  Mortgage loans closed but not paid                                            $    352,595                  $    50,000
                                                                                ============                  ===========

  Line of credit borrowings use for deferred offering costs                     $        -                    $   166,815
                                                                                ============                  ===========

  Line of credit borrowings used for payment of secured
investor certificates                                                           $        -                    $ 1,956,000
                                                                                ============                  ===========

     Real estate held for sale to mortgage loans                                $    645,000                  $        -
                                                                                ============                  ===========

     Line of credit refinanced                                                  $  4,200,000                  $        -
                                                                                ============                  ===========

    Cash paid during the year for
        Interest                                                                $  2,084,454                  $  1,760,693
                                                                                ============                  ============
</TABLE>


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



                                      F-7


<PAGE>


                        AMERICAN CHURCH MORTGAGE COMPANY

                          Notes to Financial Statements

                           December 31, 2008 and 2007


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

Cash and Equivalents

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

The Company maintains accounts primarily at two financial institutions. At times
throughout  the year,  the Company's  cash and  equivalents  balances may exceed
amounts  insured by the Federal  Deposit  Insurance  Corporation.  Cash in money
market  funds is not  Federally  insured.  The Company has not  experienced  any
losses in such accounts.

Bond Portfolio

The Company accounts for the bond portfolio under Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity Securities." The
Company  classifies the bond portfolio as "available-for  sale" and measures the
portfolio at fair value.  While the bonds are generally  held until  contractual
maturity,  the Company classifies them as available for sale as the bonds may be
used to repay secured investor  certificates or provide additional  liquidity in
the short term. The Company has  classified  $342,000 in bonds as current assets
based on  management's  estimates for  liquidity  requirements  and  contractual
maturities of certain bonds maturing in 2009.

Allowance for Mortgage Loans and Accounts Receivable

The Company records mortgage loans receivable at estimated net realizable value,
which is the unpaid  principal  balances of the mortgage  loans  receivable  and
accounts receivable,  less the allowance for mortgage loan losses. The Company's
loan policy provides an allowance for estimated  uncollectible loans based on an
evaluation of the current status of the loan portfolio. This policy reserves for



                                      F-8

<PAGE>

                        AMERICAN CHURCH MORTGAGE COMPANY

                          Notes to Financial Statements

                           December 31, 2008 and 2007

principal amounts  outstanding on a particular loan if cumulative  interruptions
occur  in  the  normal  payment  schedule  of a  loan,  therefore,  the  Company
recognizes a provision for losses and an allowance for the outstanding principal
amount  of a loan in the  Company's  portfolio  if the  amount  is in  doubt  of
collection.  Additionally,  no interest  income is recognized on impaired  loans
that are in the foreclosure  process. At December 31, 2008, the Company reserved
$107,308 for eleven  mortgage  loans,  of which five are three or more  mortgage
payments in arrears. One of the loans is in the foreclosure process. At December
31, 2007, the Company  reserved  $72,056 for fourteen  mortgage  loans, of which
four were three or more mortgage payments in arrears. Three of the loans were in
the foreclosure process, of which one had declared bankruptcy.

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

                                            2008                     2007
                                    -----------------------------------------
Balance at beginning of year          $     72,056            $     97,262
Provision for additional losses             52,670                  33,101
Charge-offs                                (17,418)                (58,307)
                                    -----------------------------------------
Balance at end of year               $     107,308            $    72,056
                                    =========================================

Charge-offs  include  amounts related to transfers to real estate held for sale.
The total impaired loans, which are loans that are in the foreclosure process or
are no longer performing, were approximately $640,000 and $1,156,000 at December
31,  2008 and 2007,  respectively,  which the  Company  believes  is  adequately
secured by the underlying collateral.

Loans totaling approximately $901,000 and $150,000 exceeded 90 days past due but
continued to accrue interest as of December 31, 2008 and 2007, respectively. The
Company believes that continued  interest  accruals are appropriate  because the
loans are well secured, not deemed impaired and the Company is actively pursuing
collection of past due payments.

Real Estate Held for Sale

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

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.

Foreclosure was also completed on a church located in Tyler,  Texas in 2005. The
church  congregation  is now  meeting  in a  different  location  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.


                                      F-9

<PAGE>
                        AMERICAN CHURCH MORTGAGE COMPANY

                          Notes to Financial Statements

                           December 31, 2008 and 2007

Foreclosure  was  completed  in 2006 on a church  located in Dayton,  Ohio.  The
church  congregation  is now  meeting  in a  different  location  and the church
property is currently  unoccupied.  The Company owns and took  possession of the
church and listed the property for sale through a local realtor.

Foreclosure was completed in 2008 on a church located in Anderson,  Indiana. The
Company owns and took  possession  of the property in May 2008 and listed it for
sale.

Foreclosure was completed in 2008 on a church located in Lancaster,  Texas.  The
Company  owns and took  possession  of the  property in July 2008 and listed the
property for sale. In order to obtain a certificate of occupancy,  a new parking
lot must be  completed,  as the previous  owner began to replace the parking lot
without  city  approval.  The  Company  has  factored  the costs of parking  lot
replacement into its fair value calculation of the property.

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 it
attempts to obtain  financing  from another  lender.  If  alternative  financing
cannot be  obtained,  the  Company  will list the  church  for sale with a local
realtor.

A deed in lieu of foreclosure was received from a church located in Cleveland,
Ohio. The Company took possession of the church and listed the property for sale
through a local realtor. The sale of the property was completed on January 18,
2008. The property sold for approximately $215,000 and the Company received
approximately $181,000 from the sale of the property after closing costs and
realtor fees.

Foreclosure was also completed on a church located in Dallas, Texas. The Company
took possession of the property. The Company received an earnest money deposit
from a buyer, the certificate of occupancy was obtained, and the sale of the
property was completed on September 30, 2008, for approximately $650,000.

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  and
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

                                      F-10

<PAGE>
                        AMERICAN CHURCH MORTGAGE COMPANY

                          Notes to Financial Statements

                           December 31, 2008 and 2007

including,  but not limited  to,  discounted  cash flow  models,  quoted  market
values, and third party independent appraisals.

Revenue Recognition

Interest  income  on  mortgage  loans  receivable  and  the  bond  portfolio  is
recognized  as earned.  Other income  included  with  interest  represents  cash
received for loan  origination  fees,  which are recognized over the life of the
loan using the straight-line  method,  which approximates the effective interest
method, 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 Per Common Share

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

Income Taxes

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

In June 2006, the FASB issued Interpretation No. 48, `Accounting for Uncertainty
in Income Taxes - an  interpretation of FASB Statement No. 109 (FIN 48)". FIN 48
clarifies the requirements of SFAS 109, "Accounting for Income Taxes",  relating
to the recognition of income tax benefits.  FIN 48 provides 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 adoption
of FIN 48 on January 1, 2008, had no material effect on the Company's  financial
condition or results of operations.

Repurchase of Common Stock

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


                                      F-11


<PAGE>
                        AMERICAN CHURCH MORTGAGE COMPANY

                          Notes to Financial Statements

                           December 31, 2008 and 2007

Reclassifications

The Company made certain reclassifications to the balance sheet and statement of
operations for the year ended  December 31, 2007, to conform to  classifications
for the year ended  December 31, 2008.  Deferred  income  related to origination
fees of  approximately  $627,000 is reclassified to mortgage loans receivable in
the balance  sheet at December  31, 2007.  Amortization  of loan costs and other
costs of  approximately  $210,000 are  reclassified  to interest  expense in the
statement of operations  for the year ended  December 31, 2007.  Other income of
approximately  $15,000 was reclassified  from interest and other income to other
income in the  statement  of  operations  for the year ended  December 31, 2007.
Total  stockholders'  equity,  net income,  and cash flows are  unchanged due to
these reclassifications.

2.  FAIR VALUE MEASUREMENT

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

Under SFAS 157,  fair value is  defined as the price that would be  received  to
sell an asset or paid to transfer a liability in an orderly  transaction between
market   participants  at  the  measurement   date  in  the  principal  or  most
advantageous  market.  SFAS 157  establishes a hierarchy in determining the fair
value of an asset or  liability.  The fair value  hierarchy  has three levels of
inputs,  both observable and unobservable.  SFAS 157 requires the utilization of
the lowest  possible  level of input to  determine  fair  value.  Level 1 inputs
include  quoted  market  prices  in an active  market  for  identical  assets or
liabilities.  Level 2 inputs  are  market  data,  other  than  Level 1, that are
observable  either directly or indirectly.  Level 2 inputs include quoted market
prices for similar  assets or  liabilities,  quoted market prices in an inactive
market,  and other  observable  information  that can be  corroborated by market
data.  Level 3 inputs are  unobservable  and corroborated by little or no market
data.

Except for the bond  portfolio,  which is required by  authoritative  accounting
guidance to be recorded at fair value in our Balance Sheets, the Company elected
not to record  any other  financial  assets or  liabilities  at fair  value,  as
permitted  by SFAS 159.  No events  occurred  during  the  twelve  months  ended
December 31, 2008 that would require  adjustment to the  recognized  balances of
assets or liabilities, which are recorded at fair value on a nonrecurring basis.

                                      F-12

<PAGE>

                        AMERICAN CHURCH MORTGAGE COMPANY

                          Notes to Financial Statements

                           December 31, 2008 and 2007

The following table  summarizes the Company's  financial  instruments  that were
measured at fair value on a recurring basis at December 31, 2008.

                                                              Fair Value
                                                             Measurement
                                     Fair Value                Level 3

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

We determine  the fair value of the bond  portfolio  shown in the table above by
comparing with similar  instruments in inactive  markets as well as using widely
accepted  valuation  techniques  including  discounted cash flow analysis on the
expected cash flows of the bonds. The analysis reflects the contractual terms of
the bonds, which are callable by the issuer at any time, including the period to
maturity and the  anticipated  cash flows of the bonds and uses  observable  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 beginning of the year         $     11,263,713
           Purchases                                       1,372,355
           Proceeds                                         (457,131)
           Provision for losses                             (300,000)
                                                          ----------
           Balance at end of the year               $     11,878,937
                                                          ==========

3.  MORTGAGE LOANS RECEIVABLE AND BOND PORTFOLIO

At December 31, 2008, the Company had first mortgage loans  receivable  totaling
$33,268,791.  The loans  bear  interest  ranging  from  5.00% to  12.00%  with a
weighted  average of  approximately  8.70% at December 31, 2008. The Company had
first mortgage loans receivable totaling  $34,040,983 that bore interest ranging
from 7.50% to 12.00% with a weighted average of approximately  8.80% at December
31, 2007.

The Company has a portfolio  of secured  church  bonds at December  31, 2008 and
2007,  which are  carried at fair  value.  The bonds pay either  semi-annual  or
quarterly  interest ranging from 4.50% to 12.00%.  The weighted average interest
rate on the bonds was  approximately  7.94% and 8.14% at  December  31, 2008 and
2007,  respectively.  Eight bond issues  comprised  81% and 85% of the Company's
bond  portfolio at December 31, 2008 and 2007,  respectively.  The Company has a
provision  for losses of $400,000  and  $100,000 at December  31, 2008 and 2007,
respectively,  for one

                                      F-13


<PAGE>

                        AMERICAN CHURCH MORTGAGE COMPANY

                          Notes to Financial Statements

                           December 31, 2008 and 2007

bond  series that is in default.  This bond series is  approximately  17% of the
bond  portfolio  at December  31, 2008 and 2007,  respectively.  The Company had
maturities and  redemptions of bonds of  approximately  $457,000 and $721,000 in
2008 and 2007, respectively.  The Company purchased approximately $1,372,000 and
$2,534,000 of bonds in 2008 and 2007, respectively.

The  contractual  maturity  schedule for mortgage loans  receivable and the bond
portfolio as of December 31, 2008, is as follows:

                                           Mortgage Loans        Bond Portfolio

   2009                                     $   603,680          $       65,000
   2010                                       1,094,057                 175,000
   2011                                         736,532                 525,000
   2012                                         813,334                 351,000
   2013                                       1,492,256                 659,000
   Thereafter                                28,528,932              10,503,937
                                             ----------              ----------
                                             33,268,791              12,278,937
   Less loan loss and bond loss provisions     (107,308)               (400,000)
   Less deferred origination income            (597,446)                    -
                                           ------------              ----------
                       Totals               $32,564,037             $11,878,937
                                             ==========             ===========

The Company  currently owns $2,035,000  First Mortgage Bonds issued by St. Agnes
Missionary Baptist Church located in Houston,  Texas. St. Agnes defaulted on its
payment obligations to bondholders.  The church subsequently commenced a Chapter
11 bankruptcy  reorganization  proceeding  regarding the three  properties  that
secure the church bonds in November 2007, which was dismissed in September 2008,
and the church was  subsequently  foreclosed  upon. The Company,  along with all
other bondholders,  has a superior lien over all other creditors. No accrual for
interest receivable from the bonds is recorded by the Company. The Company has a
provision for losses of $400,000 and $100,000 for the bonds at December 31, 2008
and 2007,  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. Interest expense related to these certificates for the years ended
December  31,  2008 and 2007,  respectively,  is  approximately  $1,518,000  and
$1,657,000. The weighted average interest rate on the certificates was 6.86% and
7.34%  for  2008  and  2007,  respectively.  Holders  of  the  secured  investor
certificates may renew certificates at the current rates and terms upon maturity
at the  Company's  discretion.  Renewals upon  maturity are  considered  neither
proceeds  from nor issuance of secured  investor  certificates.  Renewals  total
approximately  $1,004,000  and  $1,318,000 in 2008 and 2007,  respectively.  The
secured  investor   certificates   have  certain   financial  and  non-financial
covenants.

                                      F-14

<PAGE>

                        AMERICAN CHURCH MORTGAGE COMPANY

                          Notes to Financial Statements

                           December 31, 2008 and 2007

The estimated maturity schedule for the secured investor certificates at
December 31, 2008 is as follows:

                                         Secured Investor
                                            Certificates
                                        --------------------

           2009                          $    3,969,000
           2010                               1,151,000
           2011                                 850,000
           2012                               1,167,000
           2013                               1,135,000
           Thereafter                        13,366,000
                                            -----------

                      Totals                $21,638,000
                                             ==========

In October 2008, the Company filed a registration  statement with the Securities
and Exchange  Commission to offer Series "C" secured  investors  certificates of
$20,000,000.  Upon being declared effective by the SEC, the certificates will be
offered in multiples of $1,000 with interest  rates ranging from 6.25% to 7.25%,
subject to  changing  market  rates,  and  maturities  from 13 to 20 years.  The
certificates  will be  collateralized  by certain  mortgage loans receivable and
church bonds of approximately the same value.

5.  LINE OF CREDIT

The Company obtained an $8,000,000 line of credit with Beacon Bank replacing the
$15,000,000   revolving  credit  facility  with  KeyBank  National   Association
(KeyBank) until September 2010. Advances on the new line of credit are available
up to  $4,500,000,  subject to  borrowing  base  limitations,  until Beacon Bank
participates  out the remaining  portion of the line of credit up to $8,000,000.
Interest  on the new line of credit is  charged  monthly  at the prime rate with
minimum  interest of 5.00%.  If the prime rate becomes  greater than 6.00%,  the
interest  rate will be the prime rate less .50%,  subject to a minimum  interest
rate of 6.00%.  The line of  credit  is  secured  by a first  priority  security
interest in  substantially  all of the  Company's  assets other than  collateral
pledged to secure the  Company's  Series  "A" and  Series "B"  secured  investor
certificates.  The  line of  credit  has  various  financial  and  non-financial
covenants.  At December 31, 2008, the interest rate on the facility is 5.00% and
we have an outstanding balance of $4,500,000. Additional expense was incurred of
approximately  $179,000 when unamortized fees related to our terminated Key Bank
line of credit were recognized during 2008.

At December 31, 2007, the Company had a $15,000,000 line of credit with KeyBank.
This  line of  credit  had  carried  interest  at the  LIBOR  plus  1.875%  with
reductions  in the premium above LIBOR based on a financial  ratio.  At December
31, 2007,  the  outstanding  balance on the line of credit was  $3,350,000  with
interest charged at LIBOR plus 1.50%, which totaled 6.56%.

                                      F-15

<PAGE>

                        AMERICAN CHURCH MORTGAGE COMPANY

                          Notes to Financial Statements

                           December 31, 2008 and 2007

6.  TRANSACTIONS WITH AFFILIATES

The  Company  has an  Advisory  Agreement  with  the  Advisor.  The  Advisor  is
responsible  for the  day-to-day  operations of the Company and provides  office
space,  administrative  services and personnel.  The Advisor and the Company are
related  through common  ownership and common  management.  The Company paid the
Advisor  management and origination fees of approximately  $452,000 and $487,000
during 2008 and 2007, respectively. The Company repurchased approximately 22,000
common stock shares from American Investors Group, Inc. for approximately  $5.25
per share in the twelve  months  ended  December 31,  2008.  American  Investors
Group,  Inc.  is related to the  Company  through  common  ownership  and common
management.

7. 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  2008,  the  Company  had  pretax  income  of  $50,431  and
distributions  to shareholders  in the form of dividends  during the tax year of
$867,379. The expected tax expense to the Company, pre-dividends would have been
$17,147. In 2007, the Company had pretax income of $853,190 and distributions to
shareholders  in the form of  dividends  during  the tax year of  $654,572.  The
expected tax expense to the Company, pre-dividends,  would have been $290,085 in
2007. The Company paid out 100% of taxable income in dividends in 2008 and 2007.

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

<TABLE>
<CAPTION>
                                                                 2008             2007
                                                                 ----             ----

<S>                                                        <C>                  <C>
   Expected tax expense                                    $    17,147          $290,085
   Realized tax loss                                          (134,666)         (284,427)
   Benefit of REIT distributions                              (149,179)         (129,118)
   Valuation allowance                                         266,698            63,460
                                                              --------          --------

       Total provision included in operating expenses      $       -           ($ 60,000)
                                                              ========          ========

The components of deferred income taxes are as follows:
                                                                2008              2007
                                                                ----              ----
         Loan origination fees                               $203,132          $213,036
         Loan loss allowance                                  176,527            58,499
         Real-estate impairment                               238,206           215,997
         Valuation allowance                                 (617,865)         (487,532)
                                                             --------           ------

                Total deferred income tax                  $     -              $   -
                                                             ========           ======
</TABLE>


                                      F-16

<PAGE>

                        AMERICAN CHURCH MORTGAGE COMPANY

                          Notes to Financial Statements

                           December 31, 2008 and 2007

The total deferred tax assets are as follows:
<TABLE>
<CAPTION>
                                                              2008               2007
                                                              ----               ----

<S>                                                        <C>                 <C>
         Deferred tax assets                               $617,865            $487,532
         Deferred tax asset valuation allowance            (617,865)           (487,532)
                                                            -------             -------

                     Net deferred tax asset                $     -             $     -
                                                            =======             ======
</TABLE>

The change in the valuation allowance was approximately $203,000 and $63,000 for
2008 and 2007, respectively.

8.  FAIR VALUE OF FINANCIAL INSTRUMENTS

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

<TABLE>
<CAPTION>
                                                        December 31, 2008                    December 31, 2007
                                                    -----------------------------     --------------------------------
                                                     Carrying             Fair            Carrying             Fair
                                                      Amount             Value             Amount              Value
                                                    ----------         ----------        ----------       ------------

<S>                                              <C>                <C>                  <C>                <C>
      Cash and equivalents                       $     271,373      $     271,373        $  285,118         $  285,118
      Accounts receivable                              141,821            141,821           112,546            112,546
      Interest receivable                              154,466            154,466           151,105            151,105
      Mortgage loans receivable                     32,564,037         33,469,004        33,342,351         33,342,351
      Bond portfolio                                11,878,937         11,878,937        11,263,713         11,263,713
      Secured investor certificates                 21,638,000         23,341,297        22,831,000         22,831,000
</TABLE>

The fair value of the mortgage  loans  receivable is currently  greater than the
carrying value as the portfolio is currently yielding a higher rate than similar
mortgages  with similar terms for borrowers  with similar  credit  quality.  The
changes in the credit markets in which we transact has experienced a decrease in
interest  rates  resulting in the fair value of the mortgage loans rising during
the twelve  months  ended  December 31,  2008.  The  carrying  value of the bond
portfolio  is currently  at fair value.  The bonds were valued by comparing  our
portfolio to similar instruments with like terms since our bonds are callable at
any time by the issuer at par and the bond  portfolio  yield is currently  lower
than the interest  rates on similar  instruments.  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-17