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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 June 30, 1997
( ) 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)
2727 Allen Parkway, Houston Texas 77019-2115
(Address of principal executive offices) (Zip Code)
(713) 529-0045
(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 June 30, 1997 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
June 30,
1997 1996
(i) Distribution allocable to principal on the mtg $1,348,688 $2,317,026
loans (includes $894,912 and $2,152,969 of prepayments for
the three months ended June 30, 1997 and 1996,
respectively).
(ii)Distribution alloc to interest on the mtg lns $ 144,473 $ 227,900
(iii)Deferred interest added to the aggr principal $ 0 $ 0
balance of the mortgage loans
(iv)Shortfalls to date $ (200,969) $ 147,563
(v)Advances included in amts actually distributed $ 0 $ 0
(vi)(a)Aggr amt of the subordinated distribution $ 0 $ 0
which was paid to the senior certificate holders
(vi)(b)Aggr amt of withdrawals from the reserve fund $ 0 $ 0
(vii)Aggr principal balance of mtg lns at end $4,149,059 $ 6,670,392
of period
(viii)Aggr amt in the shortfall account $ 0 $ 0
(ix)Admin fees retained or withdrawn from the $ 6,110 $ 12,037
collection account
(x)(a)Aggr principal balance of mortgage loans $ 236,468 $ 241,028
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 mtg pass-through Class C 0 0
certificates net of unamortized premium/
discount) Class D 0 0
Total $ 0 $ 0
(xii)(b)Subordinated amt, as a percent of the 0 0
principal balance reported under (vii) above
(xiii)Amt remaining in the Debt Service Reserve Fund $ 0 $ 0
(xiv)Wghted average mtg pass-through rate as of 10.28% 10.28%
the first day of the month immediately preceding the
reporting date.
(xv)All voluntary adv recovered during the related $ 0 $ 0
prepayment period.
See accompanying notes to the financial statement.
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statement
CML CHURCH MORTGAGE TRUST
1990 RATED SERIES A-1
Statement of Trust Activity (Unaudited)
For the Six Months Ended
June 30,
1997 1996
(i) Distribution allocable to principal on the mtg $1,706,903 $3,227,941
lns (includes $894,912 and $2,828,294 of prepayments for
the three months ended June 30, 1997 and 1996,
respectively).
(ii)Distribution alloc to interest on the mtge lns $ 346,599 $ 523,773
(iii)Def interest added to the aggregate principal $ 0 $ 0
balance of the mortgage loans
(iv)Shortfalls to date $ 997,008 $ 934,176
(v)Advances included in amts actually distributed $ 0 $ 0
(vi)(a)Aggr amt of the subordinated distribution $ 0 $ 0
which was paid to the senior certificate holders
(vi)(b)Aggr amt of withdrawals from the reserve fund $ 0 $ 0
(vii)Aggr principal balance of mortgage loans at end $4,149,059 $ 6,670,392
of period
(viii)Aggr amt in the shortfall account $ 0 $ 0
(ix)Admin fees retained or withdrawn from the $ 17,592 $ 28,196
collection account
(x)(a)Aggr principal balance of mortgage loans $ 236,468 $ 241,028
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 mtg pass-through Class C 0 0
certificates net of unamortized premium/
discount) Class D 0 0
Total $ 0 $ 0
(xii)(b)Subord amt, as a percent of the principal 0 0
balance reported under (vii) above
(xiii)Amt remaining in the Debt Service Reserve Fund $ 0 $ 0
(xiv)Weighted average mtg 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.
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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
Second Quarter 1997 vs. Second Quarter 1996
The Trust redeemed $1,463,018 and $2,314,442 of mortgage pass-through certifi-
cates during the second quarter of 1997 and 1996, respectively. The distri-
butions were made from principal payments received on the mortgage loans.
First Six Months 1997 vs. First Six Months 1996
The Trust redeemed $1,818,445 and $2,859,423 of mortgage pass-through certifi-
cates during the first six months of 1997 and 1996, respectively. The
distributions were made from principal payments received on the mortgage
loans.
The Trust received $352,027 and $523,773 of distributions allocable to interest
on the mortgage loans during the first six months of 1997 and 1996, respec-
tively. The lower interest income for 1997 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. Fourteen mortgage loans with outstanding balances
totaling $17,387,137 had been prepaid as of June 30, 1997. These proceeds
from prepayment were used to make principal payments on Class A mortgage
pass-through certificates. Although $17,387,137 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 certi-
ficates, 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.
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Management of Christian Mutual Life Insurance Company (CML), as servicer of the
loans, is closely monitoring two loans with recorded balances of $1,088,106
at June 30, 1997. Management is concerned with the ongoing ability of the
borrowers to meet debt service requirements. One of the loans with a
recorded balance of $851,638 has been recorded in accordance with Financial
Accounting Standard Board Statement No. 114 based on the value of the under-
lying loan collateral less costs of disposal. For the other loan with an
outstanding principal balance of $236,468, 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
had recorded a specific loan loss reserve of $1,000,000 in relation to one
of the loans 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 collectability of the outstanding
principal balance. The specific loan loss reserve of $1,000,000 and fore-
gone 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 collectability of the outstanding princi-
pal balance. This foregone interest income was recorded as a direct reduc-
tion 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 certifi-
cates.
In the third quarter 1996 10Q report filed in November 1996, management recorded
an additional $505,369 of specific loan losses 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 certifi-
cates.
With respect to this loan with a recorded balance of $1,170,000, CML had 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 mod-
ification 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 approxi-
mately $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. Escrow closed on March 27, 1997 in the amount of $1,300,000.
Through June 30, 1997 the Trust has experienced total payment shortfalls of
$997,008. 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 June 30, 1997 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 June 30, 1997, which is
specifically related to the loans which collateralize the mortgage pass-
through certificates.
The church buildings and properties securing the loan with a recorded balances
of $851,638 at June 30, 1997, which is included in the amount of closely
monitored loans previously disclosed is 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. Management established a loan
loss reserve of $652,422 and $258,698 in 1994 for foregone interest at
December 31, 1994.
With respect to this loan, the church's sanctuary had been damaged by the earth-
quake. 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 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 negotia-
tions are successful. Meanwhile the church has completed 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.
On March 7, 1997 the Treasurer proposed a new payment schedule for a twelve
month period. The schedule provides for a weekly draft of $4,500 for a
monthly payment of $19,500. Additional drafts of $10,000 on March 11,
$13,800 on April 11, $13,800 on May 11 and $10,000 on June, July, August and
September 11 will enable payments to be current at the $19,500 per month
level. The additional draft for April 11 was successfully completed on
April 24th. The additional draft for May 11 in the amount of $13,800 was
returned for insufficient funds. The additional drafts for $10,000 for
June, July and August have not been completed. There are six drafts
of $4,500 each that have not been honored through July 29, 1997.
With respect to the loan with a recorded balance of $236,468, the church has
not been able to make complete monthly payments since April 1, 1996 and is
presently in arrears. 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 pay-
ment, 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 $1,197,977 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 $ 4,324,536 $(275,278) $ (85,678)
B 25,571 194,189
C 33,328 631,668
D 15,410 256,829
Total $ 4,324,536 $ 200,969 $ 997,008
Principal Unrealized Scheduled
Bond Indebtedness Shortfalls Losses Indebtedness
Class (Par Value) to Date to Date (Par Value)
A $ 4,324,536 $(85,678) $1,049,234 $ 5,459,448
B 938,379 938,379
C 985 2,688 1,703
D 622,615 622,615
Total $ 4,324,536 $(84,693) $2,612,916 $ 7,022,145
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
None.
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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 under-
signed thereunto duly authorized.
Date CML Church Mortgage Trust
1990 Rated Series A-1
August 25, 1997 By:
Roger T. Stephenson
Executive Vice President and
Trust Officer
August 25, 1997 By:
M. A. Kandel
Vice President
