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 March 31, 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 March 31, 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
March 31,
1997 1996
(i)Distribution allocable to principal on the mortgage $ 358,215 $ 910,915
loans (includes $0 and $675,325 of prepayments for
the three months ended March 31, 1997 and 1996,
respectively).
(ii)Distribution allocable to int on the mortgage loans$ 202,126 $ 295,873
(iii)Deferred int added to the aggregate principal $ 0 $ 0
balance of the mortgage loans
(iv)Shortfalls to date $ 1,197,977 $ 786,613
(v)Advances included in amts actually distributed $ 0 $ 0
(vi)(a)Aggregate amt of the subordinated distribution $ 0 $ 0
which was paid to the senior certificate holders
(vi)(b)Aggregate amt of withdrawals from the res fund $ 0 $ 0
(vii)Aggregate prin balance of mortgage lns at end $4,190,660 $ 8,987,418
of period
(viii)Aggregate amount in the shortfall account $ 0 $ 0
(ix)Administrative fees retained or w/d from the $ 11,482 $ 16,159
collection account
(x)(a)Aggregate prin balance of mortgage loans $ 236,468 $ 235,338
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
cert net of unamortized premium/discount)Class D 0 0
Total $ 0 $ 0
(xii)(b)Subordinated amt, as percentage of the prin 0 0
balance reported under (vii) above
(xiii)Amt remaining in the Debt Service Res Fund $ 0 $ 0
(xiv)Weighted aver mortgage pass-through rate as of 10.28% 10.28%
the first day of the month immediately preceding the
reporting date.
(xv)All voluntary advs 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
First Quarter 1997 vs. First Quarter 1996
The Trust redeemed $0 and $544,981 of mortgage pass-through certificates during
the first quarter of 1997 and 1996, respectively. The distributions were made
from principal payments received on the mortgage loans.
The Trust received $202,126 and $295,873 of distributions allocable to interest
on the mortgage loans during the first quarter of 1997 and 1996,
respectively. 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. Twelve mortgage loans with outstanding balances totaling
$16,139,317 had been prepaid as of March 31, 1997. 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 $2,272,218
at March 31, 1997. Management is concerned with the ongoing ability of the
borrowers to meet debt service requirements. Two of the loans with recorded
balances totaling $2,035,750 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 $236,468, 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
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 collectability 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 collectability 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 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
certificates.
Through March 31, 1997 the Trust has experienced total payment shortfalls of
$1,197,977. 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 March 31, 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 recover ability 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 March 31, 1997, 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
$2,035,750 at March 31, 1997, which are included in the amount of closely
monitored loans previously disclosed are located near the south central
section of Los Angeles, California. 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.
Escrow closed on March 27, 1997 in the amount of $1,300,000.
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.
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 has been
returned for insufficient funds. This draft has been resubmitted as of June
4th along with two drafts for $4,500 to make up for May 2ndand May 15th
drafts not honored.
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 in the amount of $12,470. 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 $ 5,660,323 $ (58,755) $ 189,600
B 17,047 168,618
C 34,698 598,340
D 15,410 241,419
Total $ 5,660,323 $ 8,400 $1,197,977
Principal Unrealized Scheduled
Bond Indebtedness Shortfalls Losses Indebtedness
Class (Par Value) to Date to Date (Par Value)
A $ 5,660,323 $189,600 $1,238,418 $ 6,709,141
B 938,379 938,379
C 902 2,711 1,809
D 622,615 622,615
Total $ 5,660,323 $190,502 $2,802,123 $ 8,271,944
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.
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
May 30, 1997 By: Roger T. Stephenson
Roger T. Stephenson
Executive Vice President and
Trust Officer
May 30, 1997 By: M.A. Kandel
M. A. Kandel
Vice President
