UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________
FORM 10-Q
(Mark one)
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE PERIOD ENDED September 30, 1996
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 33-34144
CML CHURCH MORTGAGE TRUST
1990 RATED SERIES A-1
(Exact name of registrant as specified in its charter)
Wisconsin 39-1676037
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
6 Loudon Road, Concord, New Hampshire 03302-1858
(Address of principal executive offices) (Zip Code)
(603) 224-2373
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the registrant (1) had 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 number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date.
At September 30, 1996 there were no shares of Common Stock outstanding.
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statement
CML CHURCH MORTGAGE TRUST
1990 RATED SERIES A-1
Statement of Trust Activity (Unaudited)
For the
Three Months Ended
September 30,
1996
1995
(i) Distribution allocable to principal on the
mortgage $ 165,846 $ 742,455
loans (includes $0 and $539,536 of prepayments for
the three months ended September 30, 1996 and 1995,
respectively).
(ii) Distribution allocable to interest on the
mortgage $ 160,088 $ 345,764
loans
(iii) Deferred interest added to the aggregate
principal $ 0 $ 0
balance of the mortgage loans
(iv) Shortfalls to date $
255,401 $ (46,637)
(v) Advances included in amounts actually
distributed $ 0 $ 0
(vi)(a) Aggregate amount of the subordinated
distribution $ 0 $ 0
which was paid to the senior certificate holders
(vi)(b) Aggregate amount of withdrawals from the
reserve fund $ 0 $ 0
(vii) Aggregate principal balance of mortgage
loans at end $ 5,999,177 $ 10,161,129
of period
(viii) Aggregate amount in the shortfall
account $ 0 $ 0
(ix) Administrative fees retained or withdrawn
from the $ 12,730 $ 17,003
collection account
(x)(a) Aggregate principal balance of mortgage
loans $ 236,692 $ 1,626,722
delinquent
(x)(b) Aggregate number of loans delinquent 1 1
(xi) Book value of real estate acquired
through $ 0 $ 0
foreclosure or grant of deed in lieu of foreclosure
(xii)(a) Subordinated Amount Class B $ 0 $ 0
(Class B, C, and D mortgage pass-through Class C 0 0
certificates net of unamortized premium/
discount) Class D 0 0
Total $ 0 $ 0
(xii)(b) Subordinated amount, as a percentage of
the principal 0 0
balance reported under (vii) above
(xiii) Amount remaining in the Debt Service
Reserve Fund $ 0 $ 0
(xiv) Weighted average mortgage pass-through
rate as of 10.28% 10.28%
the first day of the month immediately preceding the
reporting date.
(xv) All voluntary advances recovered during
the related $ 0 $ 0
prepayment period.
See accompanying notes to the financial statement.
CML CHURCH MORTGAGE TRUST
1990 RATED SERIES A-1
Statement of Trust Activity (Unaudited)
For the Nine Months Ended
September 30,
1996
1995
(i) Distribution allocable to principal on the
mortgage $ 3,393,787 $ 1,089,551
loans (includes $2,828,294 and $539,536 of prepayments
for the six months ended September 30, 1996 and 1995,
respectively).
(ii) Distribution allocable to interest on the mortgage
$ 683,861 $ 1,117,672
loans
(iii) Deferred interest added to the aggregate
principal $ 0 $ 0
balance of the mortgage loans
(iv) Shortfalls to date $
1,189,577 $ 706,127
(v) Advances included in amounts actually
distributed $ 0 $ 0
(vi)(a) Aggregate amount of the subordinated
distribution $ 0 $ 0
which was paid to the senior certificate holders
(vi)(b) Aggregate amount of withdrawals from the
reserve fund $ 0 $ 0
(vii) Aggregate principal balance of mortgage
loans at end $ 5,999,177 $ 10,161,129
of period
(viii) Aggregate amount in the shortfall
account $ 0 $ 0
(ix) Administrative fees retained or withdrawn
from the $ 40,926 $ 52,191
collection account
(x)(a) Aggregate principal balance of mortgage
loans $ 236,692 $ 1,626,722
delinquent
(x)(b) Aggregate number of loans delinquent 1 1
(xi) Book value of real estate acquired
through $ 0 $ 0
foreclosure or grant of deed in lieu of foreclosure
(xii)(a) Subordinated Amount Class B $ 0 $ 0
(Class B,C, and D mortgage pass-through Class C 0 0
certificates net of unamortized premium/
discount) Class D 0 0
Total $ 0 $ 0
(xii)(b) Subordinated amount, as a percentage of
the principal 0 0
balance reported under (vii) above
(xiii) Amount remaining in the Debt Service
Reserve Fund $ 0 $ 0
(xiv) Weighted average mortgage pass-through
rate as of 10.28% 10.28%
the first day of the month immediately preceding the
reporting date.
(xv) All voluntary advances recovered during
the related $ 0 $ 0
prepayment period.
See accompanying notes to the financial statement.
CML CHURCH MORTGAGE TRUST
1990 RATED SERIES A-1
Notes to Financial Statement (Unaudited)
(1) Basis of Presentation
The financial statement included herein has been prepared without
audit by Christian Mutual Life Insurance Company ("CML"), the
servicer of the mortgage loans, on behalf of the M&I First
National Bank, Trustee of the CML Church Mortgage Trust 1990
Rated Series A-1 ("Trustee").
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted
pursuant to rules and regulations of the Securities and
Exchange Commission, although CML believes that the
disclosures are adequate to make the information presented not
misleading. It is suggested that these condensed financial
statements be read in conjunction with the financial
statements and the notes thereto included in the Trust's
latest annual report on Form 10K.
On January 1, 1995 the Trust adopted Financial Accounting Standards
Board Statement No. 114, Accounting by Creditors for
Impairment of a Loan, which requires that creditors value all
loans for which it is probable that the creditor will be
unable to collect certain amounts due according to the terms
of the loan agreement at the present value of expected future
cash flows, discounted at the loan's effective interest rate,
or observable market price of the impaired loan or the fair
value of the collateral if the loan is collateral dependent.
Management believes that loan carrying values and loan loss
reserves provided in this 10-Q Filing comply with the
requirements of this Statement.
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Results of Operations
Third Quarter 1996 vs. Third Quarter 1995
The Trust redeemed $114,241 and $459,566 of mortgage pass-through
certificates during the third quarter of 1996 and 1995,
respectively. The distributions were made from principal
payments received on the mortgage loans.
First Nine Months 1996 vs. First Nine Months 1995
The Trust redeemed $2,973,664 and $908,321 of mortgage pass-through
certificates during the first nine months of 1996 and 1995,
respectively. The distributions were made from principal
payments received on the mortgage loans.
The Trust received $683,861 and $1,117,672 of distributions
allocable to interest on the mortgage loans during the first
nine months of 1996 and 1995, respectively. The lower
interest income for 1996 is attributed to the lower principal
balances of mortgages outstanding due to mortgage amortization
and mortgage loan principal prepayments. These prepayments
result in lower net income because the profit produced by the
differences in the interest rate collected on the mortgage
loans and the rate paid to bondholders decreases as mortgage
loans are prepaid. Prepayments also increase the charge in
the period of prepayment for amortization of deferred issuance
costs, which occurs over the life of the outstanding bonds.
As of May 1, 1994 the lockout period for mortgage loan prepayment
had expired for all mortgage loans in the 1990 Rated Series A-
1 pool. Because the interest rate on the mortgage loans in
the pool is higher than the prevailing rates for similar
loans, prepayments on principal on the mortgage loans are
likely to occur. Eleven mortgage loans with outstanding
balances totaling $16,067,183 had been prepaid as of September
30, 1996. These proceeds from prepayment were used to make
principal payments on Class A mortgage pass-through
certificates. Although $16,067,183 of prepayments have been
received to date, no assurance can be given as to the rate of
prepayments on the mortgage loans pledged as security for the
mortgage pass-through certificates, and therefore no assurance
can be given as to the amount and timing of redemptions of
mortgage pass-through certificates or the time that any
particular mortgage pass-through certificate will remain
outstanding prior to its stated maturity.
Management of Christian Mutual Life Insurance Company (CML), as
servicer of the loans,is closely monitoring three loans with
recorded balances of $2,299,106 at September 30, 1996.
Management is concerned with the ongoing ability of the
borrowers to meet debt service requirements. Two of the loans
with recorded balances totaling $2,062,413 have been recorded
in accordance with Financial Accounting Standard Board
Statement No. 114 based on the value of the underlying loan
collateral less costs of disposal. For the other loan with an
outstanding principal balance of $236,693, management
presently believes that the principal balance and accrued
interest should be fully recoverable in the event of default.
As a result of an appraisal received by the Trust in November 1993,
management recorded a specific loan loss reserve of $1,000,000
in relation to one of the three loans discussed previously
with a book value of $3,084,079 due to management's concerns
about the borrower's ongoing ability to service the debt
coupled with management's concerns about collateral value as
a result of the November 1993 appraisal. The Trust received
$99,000 of interest payments after the original mortgage loan
became over 90 days past due. These payments were recorded
as further reductions of the carrying value of the mortgage
loan due to uncertainties regarding the collectibility of the
outstanding principal balance. The specific loan loss reserve
of $1,000,000 and foregone interest income of $99,000 were
recorded as direct reductions of the subordinated mortgage
pass-through certificates ($509,526) and amortization of the
remaining premium on the Class C subordinated mortgage pass-
through certificates ($589,474). The $509,526 of reductions
of the subordinated mortgage pass-through certificates were
allocated to bond classes as follows: $416,349 to Class D,
$2,796 to Class C, and $90,381 to Class B.
In 1994 the Trust received another $20,000 of interest payments
which were recorded as further reductions of the carrying
value of the mortgage loan due to uncertainties regarding the
collectibility of the outstanding principal balance. This
foregone interest income was recorded as a direct reduction of
the Senior (Class A) mortgage pass-through certificates.
In the fourth quarter of 1994, management recorded an additional
$756,500 of specific loan loss reserves as a result of
appraisals received during that quarter. These reserve
adjustments were recorded as a direct reduction of the Senior
(Class A) mortgage pass-through certificates.
In the fourth quarter 1995 10K report filed in March 1996,
management recorded an additional $244,441 of specific loan
loss reserves as a result of an appraisal received in March
1996. This reserve adjustment was recorded as a direct
reduction of the Senior (Class A) mortgage pass-through
certificates.
In the third quarter 1996 10K report filed in November 1996,
management recorded an additional $505,369 of specific loan
loss reserves as a result of a cash buyout transaction
accepted by one of the churches described previously according
to a letter dated October 29, 1996. This reserve adjustment
was recorded as a direct reduction of the Senior (Class A)
mortgage pass-through certificates.
Through September 30, 1996 the Trust has experienced total payment
shortfalls of $1,189,577. This shortfall represents principal
and interest payments due to bondholders, but not yet
disbursed because mortgage payments received by the Trust are
not adequate to cover these debt service payments. The total
amount of interest accrued but not recorded at September 30,
1996 is $472,462. The foregone interest income has eliminated
the $25,098 residual interest reported at December 31, 1992;
the remaining foregone interest income was treated as a write-
down of the senior and subordinated mortgage pass-through
certificates.
In assessing the recoverability of loan balances, management
evaluates factors relevant to the borrower's financial
condition and obtains updates of original appraisals when
considered necessary. The Trust has recorded a general loan
loss reserve of $200,000 at September 30, 1996, which is
specifically related to the loans which collateralize the
mortgage pass-through certificates.
The church buildings and properties securing two loans with
recorded balances of $2,062,413 at September 30, 1996, which
are included in the amount of closely monitored loans
previously disclosed are located near the south central
section of Los Angeles, California, the scene of civil unrest
on April 29, 1992 and an earthquake on January 17, 1994.
These churches are the properties for which management
recorded specific loan loss reserves as discussed previously.
One of the churches had reported a loan loss reserve of
$1,000,000 through September 30, 1994 and $119,000 in 1994 for
foregone interest; the reserve was increased by $104,078 in
the fourth quarter of 1994, by another $244,441 in the fourth
quarter of 1995 and by another $505,369 in the third quarter
of 1996. The other church established a loan loss reserve of
$652,422 and $258,698 in 1994 for foregone interest at
December 31, 1994.
With respect to one of the loans with a recorded balance of
$1,170,000, CML has been drafting $17,800.00 per month from
the church since January 1, 1995, in accordance with a
modification agreement to the loan agreement, which
modification agreement is dated December 1994 and effective
June 1, 1994. The monthly draft of $17,800 is comprised of
principal and interest payments totaling $15,550 and $2,250
towards replenishing the church s Loan Payment Account. The
monthly drafts were successfully completed until January 1996.
The church notified CML in January 1996 of its inability to
meet the February 1 draft of $17,800. Additionally the church
was unable to meet the $10,000 payment toward the interest
arrearage of $56,800 resulting from the modification agreement
dated December 1994. Since February 1, the church has been
able to complete each monthly payment of principal and
interest due of $15,550, but only with the company drawing
funds down from the church s Loan Payment Account to
supplement payment shortfalls. The church completed the July
1, 1996 payment of $15,550 by sending a check for $10,000 on
June 27, an additional check for $2,000 on July 11, and CML
drawing the balance of $3,550 from the Loan Payment Account.
On or about January 31, 1996, the church s Loan Payment
Account had a balance of $36,606. On or about July 16, 1996,
the remaining balance of the Loan Payment Account was
approximately $650. The church has informed CML that it
understands that it must have a plan going forward to meet its
debt service obligations. In August, the treasurer on behalf
of the church submitted a proposal for a cash buyout of the
loan for $1,200,000. After conferring with the Trustee, a
counter proposal of $1,300,000 was made on October 7, 1996.
This counter offer has been accepted by the church according
to a letter dated October 29, 1996.
With respect to the other loan with a recorded balance of $892,413,
the church's sanctuary had been damaged by the earthquake.
The church has reported that it had originally obtained a loan
from the Small Business Administration for $607,700 at 4%
interest to assist in reconstruction of the sanctuary. The
church also reports the permitting process is completed. Four
contractors have submitted bids each in excess of $1,100,000.
The church has informed the company that the SBA has approved
its request to borrow additional funds, for a total SBA loan
amount of $1,278,200. The estimated construction period is
nine months to one year. To assist in meeting its debt
service obligations, the church agreed to weekly drafts from
the church's account. Weekly drafts of $6,812 have been made
through the summer with some drafts not being honored. Loan
payments are current through September, and additional weekly
drafts if honored have been made to complete the October
payment. The treasurer reports that a possible sale of the
property to Magic Johnson Construction Company is being
negotiated. This could lead to a pay off of the mortgage
within the next nine to twelve months if negotiations are
successful. Meanwhile the church is continuing the rehab of
the sanctuary. The treasurer has assured management that
weekly drafts will be honored. The church reports that the
summertime is difficult for collections; however, the
treasurer has communicated his and the church s hope that the
momentum created by the reconstruction of the sanctuary will
stabilize the giving.
With respect to the loan with a recorded balance of $236,692, the
church has not been able to make complete monthly payments
since April 1, 1996 and is presently in arrears in the amount
of $13,805. The company is presently communicating with the
church in efforts to bring the payments current. Management,
although concerned with the ongoing ability of the church to
meet the monthly payment, continues to believe all principal
and interest are recoverable in the event of default.
Liquidity and Capital Resources
The Trust has no fixed assets nor any commitments outstanding to
purchase or lease any fixed assets.
Each class of certificates was structured in a manner that such
funds received from the related mortgage loans would be
sufficient to fund all interest and principal payments on the
certificates, and all other expenses of the Trust. Shortfalls
discussed in note 2 were not anticipated in cash flow
projections at the time the pool was formed. Because of these
matters, the Trust has not made $1,189,577 of scheduled
principal and interest payments to date on the senior and
subordinated mortgage pass-through certificates.
Additionally, no assurances can be given as to the amount of
shortfalls of principal and interest on loans in default which
may occur in the future. The certificates represent an
interest in the Pool created pursuant to the Pooling Agreement
and do not represent an interest in or obligation of, and are
not guaranteed by the Company, CML, the Underwriter or any
other affiliate of the Company, or any other person or entity
other than the Pool created pursuant to the Pooling Agreement.
Distributions of interest on the certificates and amounts in
reduction of outstanding amount of the Class A, Class B, Class
C and Class D Certificates will be made from the assets held
by the Trustee under the Pooling Agreement (primarily the
mortgage loans and principal and interest payments thereon)
and there will be no other source of funds for such
distributions.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
Defaults are discussed in detail under Management's Discussion and
Analysis of Financial Condition and Results of Operations. Shortfalls
against scheduled payments and reconciliations of actual indebtedness
to scheduled indebtedness, by class, are shown below:
Quarterly Total
Principal Principal
& Interest & Interest
Bond Indebtedness Shortfalls Arrearage
Class (Par Value) (Recoveries) to Date
A $ 6,134,375 $ 177,015 $ 248,355
B 25,571 151,571
C 37,405 563,642
D 15,410 226,009
Total $ 6,134,375 $ 255,401 $1,189,577
Principal Unrealized Scheduled
Bond Indebtedness Shortfalls Losses Indebtedness
Class (Par Value) to Date to Date (Par Value)
A $ 6,134,375 $248,355 $1,431,403 $ 7,317,423
B 938,379 938,379
C 822 2,797 1,975
D 622,615 622,615
Total $ 6,134,375 $249,177 $2,995,194 $ 8,880,392
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
The transaction described in the Other Information section of the previous
10-Q Filing occurred on September 10, 1996. The servicer CML has entered
into an agreement with a life insurance company domesticated in Texas
which produces (1) a change in control of CML to the Texas life insurance
company, and (2) a change in CML's management. The Texas life insurance
company now owns all outstanding shares of CML Church Mortgage, Inc.
Item 6. Exhibits and Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date CML Church Mortgage Trust
1990 Rated Series A-1
November 11, 1996 By: Roger T. Stephenson
Roger T. Stephenson
Executive Vice President and
Trust Officer
November 11, 1996 By: M.A. Kandel
M. A. Kandel
Vice President
