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Hillside United Methodist Church, Inc.Notes to the Financial StatementsDecember 31, 2018Revenue recognitionContributions, which include unconditional promises to give (pledges), are recognized as revenuesin the period received or promised. Conditional contributions are recorded when the conditions havebeen substantially met. Contributions are considered to be without donor restrictions unlessspecifically restricted by the donor.The Organization reports contributions in the with donor restrictions net asset class if they arereceived with donor stipulations as to their use. When a donor restriction expires, that is, when astipulated time restriction ends or purpose restriction is accomplished, restricted net assets arereleased and reclassified to without donor restriction net assets in the consolidated statement ofactivities.Use of estimatesThe process of preparing financial statements in conformity with U.S. generally acceptedaccounting principles requires the use of estimates and assumptions regarding certain types ofassets, liabilities, revenues, and expenses. Such estimates primarily relate to unsettled transactionsand events as of the date of the financial statements. Accordingly, upon settlement, actual resultsmay differ from estimated amounts.Income taxThe Organization is a not-for-profit entity under section 501(c)(3) of the Internal Revenue Code andis not subject to federal or state income taxes.Employee benefit plansPension planThe Organization offers a pension plan to the ordained ministers through the North GeorgiaConference of the United Methodist Church. As of December 31, 2018, pension expenses totaling 52,719 were recorded in the statements of activities as benefits.401K PlanThe Organization sponsors a 401(k) profit sharing plan which covers substantially all employees, asdefined in the plan document. The Organization's contribution is discretionary and is determined byits Board of Directors on an annual basis. The Organization made contributions of 7,462 for theyear ended December 31, 2018.Financial instrumentsIn accordance with the requirements of ASC No. 820, "Fair Value Measurements and Disclosures",the Organization has determined the estimated value of its financial instruments using availablemarket information and valuation methodologies. The Organization's financial instruments consist ofinterest swap and interest floor/cap derivatives. Considerable judgment is required to develop theestimates of fair value; thus, the estimates are not necessarily indicative of the amounts that couldbe realized in a current market exchange. The Organization believes the carrying values of theseasset and liabilities is a reasonable estimate of their fair market values.The fair values of the Organization’s financial instruments are recorded as assets or liabilities on thestatement of financial position. The gains or losses are recorded in the statement of activities underthe other revenue/ expenses section.Page 7 of 13

Hillside United Methodist Church, Inc.Notes to the Financial StatementsDecember 31, 2018Fair valueFASB ASC 820-10, “Fair Value Measurement and Disclosures”, defines fair value, establishes aframework for measuring fair value, and expands disclosures about fair value measurements. Fairvalue is the price that would be received to sell an asset or paid to transfer a liability in an orderlytransaction between market participants at the measurement date. A fair value measurementassumes that the transaction to sell the asset or transfer the liability occurs in the principal marketfor the asset or liability or, in the absence of a principal market, the most advantageous market.Valuation techniques that are consistent with the market, income or cost approach, as specified byASC 820-10, are used to measure fair value.The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value intothree broad levels as follows:Level 1 –inputs are quoted prices (unadjusted) in active markets for identical assets orliabilities.Level 2 –inputs are inputs (other than quoted prices included within level 1) that areobservable for the asset or liability, either directly or indirectly.Level 3 –are unobservable inputs for the asset or liability and rely on management’sown assumptions about the assumptions that market participants would use inpricing the asset or liability.Fair value is a market-based measure, based on assumptions of prices and inputs considered from theperspective of a market participant that are current as of the measurement date, rather than an entityspecific measure. Therefore, even when observable inputs are not readily available the Organization’sown assumptions are set to reflect those that market participants would use in pricing the asset orliability at the measurement date. The availability of valuation techniques and observable inputs canvary from investment to investment and are affected by a wide variety of factors, including the type ofinvestment, whether the investment is new and not yet established in the marketplace, the liquidity ofmarkets, and other characteristics particular to the transaction. To the extent that valuation is based onmodels or inputs that are less observable or unobservable in the market, the determination of fair valuerequires more judgment. Because of the inherent uncertainty of valuation, those estimated values maybe materially higher or lower than the values that would have been used had a ready market for theinvestments existed. Accordingly, the degree of judgment exercised by the Organization in determiningfair value is greatest for investments categorized in Level 3. In some cases, the inputs used to measurefair value might be categorized within different levels of the fair value hierarchy. In such cases, the fairvalue measurement is generally categorized in its entirety in the fair value hierarchy based on thelowest level input that is significant to the fair value measurement. The Organizations policy fordetermining when transfers between levels of fair value hierarchy occur is the date of the event or thechange in circumstances that caused the transfer.Page 8 of 13

Hillside United Methodist Church, Inc.Notes to the Financial StatementsDecember 31, 2018As of December 31, 2018, the Organization’s financial statements presented these assets andliabilities in accordance with the level of fair value described above are as follows:DescriptionFinancial instrumentInterest rate capTotal fair value liabilityLevel 1 Level 2- - - -Level 3 -(92,821) (92,821) -Total - (92,821)(92,821)-- - -InvestmentsInvestments in marketable securities with readily determinable fair values are reported at their fairvalues in the statement of financial position. All of the Organization's investments are level 1 input.Level 1 input are quoted prices in active markets for identical assets or liabilities that theOrganization has the ability to access at the measurement date.Unrealized gains and losses are included in change in net asset. Investment income and gainsrestricted by a donor are reported as increases in unrealized net assets if the restrictions are met inthe reporting period in which the income and gains are recorded. Investment activity for the yearended consisted of the following:Beginningbalance InvestmentsTotalAdditions- 2,501 225,000 2,501 225,000-UnrealizedReductionsgain (loss) - (153) 227,348 (153) 227,348- --Endingbalance-As of December 31, 2018, the Organization’s investment consisted of the following:Certificate of depositCertificate of depositCertificate of depositCertificate of depositTotal Amount75,00050,00050,00050,000-Maturity dateMay 30, 2019November 29, 2019May 28, 2020November 30, 2020225,000--Page 9 of 13-Interest rate2.40%2.70%2.85%3.05%

Hillside United Methodist Church, Inc.Notes to the Financial StatementsDecember 31, 20182. Property and equipmentProperty and equipment activity for the year ended consists of the following:LandBuilding and improvementsProperty, plant and equipmentTotal costsAccumulated depreciationProperty, plant and equipmentBeginningAdditionsReductionsEnding 2,912,800 - - 55)- 4,708,553 (16,890) - - 4,691,663-Estimateduseful lives15 - 39 years5 yearsFor the year ended December 31, 2018, depreciation expense in the amount of 121,079 wasrecorded in the statement of activities.3. Mortgage obligationMortgage payable activity for the year consisted of the dditions- 1,110,226 1,110,226- Endingbalance-Reductions--- (159,427) (159,427) -950,799950,799-The terms of the mortgage obligation are as follows:Loan is Securedby -OriginalBalance-Church Building 4,102,660OriginalMaturity DateInterest Rate10/7/2020see belowPaymentFrequencyMonthlyPrincipal PrepaymentAmortizationAbilityYesYesThe Organization is required to meet certain compliance requirements in accordance with itsmortgage obligation agreements throughout the term of the mortgage obligation. The Organization’sswap agreement effectively fixes the interest rate (Libor 1.4%) of the mortgage obligation at6.55%. During the year, the Organization incurred interest expense in the amount of 100,946.The required annual principal payments on the mortgage obligation outstanding at December 31,2018 are as follows:Page 10 of 13

Hillside United Methodist Church, Inc.Notes to the Financial StatementsDecember 31, 2018Year endedDecember 31,20192020157,869792,930-Total 950,799--4. Concentration of riskThe Organization depends heavily on contributions from members for its revenue sources. Theability of the Organization’s contributors to continue giving amounts may be dependent upon currentand future overall economic conditions. While management believes the Organization has theresources to continue its programs, its ability to do so and the extent to which it continues, may bedependent on the above factors and other factors beyond its control.5. Risk managementThe Organization is exposed to various risks of loss related to torts; theft of, damage to, anddestruction of assets; errors or omissions; job related illness or injuries to employees; and acts ofGod. The Organization has obtained commercial insurance for risk of loss associated with torts,assets, errors or omissions, job related illness or injuries to employees and acts of God.6. Mortgage related financial instrumentsThe Organization is exposed to interest rate cash flow risk to the extent that its mortgageobligations are at a floating rate of interest. As such, the Organization entered into an interest rateswap agreement on October 3, 2005 with a notional amount of 3.7 million to manage the interestrate risk on the mortgage obligation. The swap agreement termination date is October 7, 2020. Theswap effectively fixes the underlying LIBOR rate of the mortgage obligation at 6.55%. As ofDecember 31, 2018, mortgage related financial instruments consisted of the following:Description Financial instrumentLIBOR HedgeLevel- 1 Level -2- -Total fair value liability - - -BeginningbalanceLIBOR HedgeTotal Level- 3(92,821) Total-- (92,821) 81,581(92,821) - - (92,821) 174,402) (174,402) --Unrealized(loss) gain-- - - -Page 11 of 13-- - - -81,581 81,581 -Endingbalance(92,821)(92,821)-

Hillside United Methodist Church, Inc.Notes to the Financial StatementsDecember 31, 2018DescriptionLIBOR HedgeFair Value atDecember 31, Valuation2018 Techniques (92,821)Significantunobservableinputs/ -Range(weightedaverage)-1 mo. USDLIBOR 1.40Indexvs. USD Fixed6.55Notional Amount 2,016,333DiscountedCash Flow7. Real estate notes receivableThe Organization entered into a 15-year promissory note relating to the sale of the donated land.The present value of the promissory note is recorded in the statement of financial position. Balanceof the promissory note as of December 31, 2018 is as follows:BeginningReal estate note receivable AdditionsReductions-64,907 -- - -Ending-(7,291) 57,616-The amortization expense for discount on notes receivable was recorded in the interest and feeincome on notes receivable in the statement of activities.The terms of the promissory note are as follows:Real estate noteis Secured byLandOriginalBalance 85,000CurrentBalance OriginalInterest PaymentMaturity DateRate - Frequency-57,61611/26/20263.75%Monthly8. Financial assets and liquidity managementThe Organization’s financial assets available within one year of the balance sheet date for generalexpenditure are as follows:Cash and equivalents Total 716,700716,700--The Organization has the policy to structure its financial assets to be available as its generalexpenditures, liabilities and other obligations come due.Page 12 of 13

Hillside United Methodist Church, Inc.Notes to the Financial StatementsDecember 31, 20189. Inherent limitation in evaluating the entity’s ability to continue as a going concernThe potential effects of inherent limitations on the ability to detect material misstatements aregreater for future events or conditions, considered in the aggregate, that raise substantial doubtabout the entity’s ability to continue as a going concern for a reasonable period of time. Predictionscannot be made about such future conditions or events. Accordingly, the absence of any referenceto substantial doubts about the entity’s ability to continue as a going concern for a reasonableperiod of time in the accompanying financial statements cannot be viewed as a guarantee of theentity’s ability to continue as a going concern for a reasonable period of time.10. Subsequent eventsThe Organization evaluated subsequent events through the date the financial statements wereavailable to be issued. The Organization is not aware of any subsequent events, which wouldrequire recognition or disclosure in the accompanying financial statements.–End of Report–Page 13 of 13

Hillside United Methodist Church, Inc. (the Organization) was incorporated on September 5, 1997 in the state of Georgia. The Organization is a local United Methodist Church formed to promote the Christian religion through the preaching of the Word of God. Basis of accounting and financial statements presentation