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, 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 September 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
September 30,
1997 1996
(i)Distribution allocable to prin on the mtg $ 149,314 $ 165,846
loans (includes $0 and $0 of prepayments for
the three months ended September 30, 1997 and 1996,
respectively).
(ii)Distr allocable to int on the mtg loans $ 163,525 $ 160,088
(iii)Deferred int added to the aggr principal $ 0 $ 0
balance of the mortgage loans
(iv)Shortfalls to date $ (963,886) $ 255,401
(v)Advances incl in amounts actually distr $ 0 $ 0
(vi)(a)Aggr amt of the subordinated distr $ 0 $ 0
which was paid to the sr certificate holders
(vi)(b)Aggr amt of withdrawals from the res fund $ 0 $ 0
(vii)Aggr principal bal of mtg loans at end $ 3,999,745 $ 5,999,177
of period
(viii)Aggregate amount in the shortfall account $ 0 $ 0
(ix)Admin fees retained or withdrawn from the $ 6,927 $ 12,730
collection account
(x)(a)Aggr principal balance of mtg loans $ 1,994,895 $ 236,692
delinquent
(x)(b)Aggregate number of loans delinquent 2 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,& 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 percentage of the prin 0 0
balance reported under (vii) above
(xiii)Amt remaining in the Debt Serv Reserve Fnd $ 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 vol 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 Nine Months Ended
September 30,
1997 1996
(i)Distribution allocable to principal on the mtg $ 1,856,217 $ 3,393,787
loans (incl $894,912 and $2,828,294 of prepayments
for the nine months ended September 30, 1997
and 1996, respectively).
(ii)Distribution allocable to int on the mtg loans $ 510,124 $ 683,861
(iii)Deferred int added to the aggregate principal $ 0 $ 0
balance of the mortgage loans
(iv)Shortfalls to date $ 33,122 $ 1,189,577
(v)Advances incl in amounts 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 res fund $ 0 $ 0
(vii)Aggr principal bal of mortgage loans at end $ 3,999,745 $ 5,999,177
of period
(viii)Aggr amount in the shortfall account $ 0 $ 0
(ix)Admin fees retained or withdrawn from the $ 24,519 $ 40,926
collection account
(x)(a)Aggr principal balance of mortgage loans $ 1,994,895 $ 236,692
delinquent
(x)(b)Aggregate number of loans delinquent 2 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,& D mtge 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 percentage of the principal 0 0
balance reported under (vii) above
(xiii)Amt remaining in the Debt Serv Reserve Fund $ 0 $ 0
(xiv)Weighted avg mtg pass-through rate as of 10.28% 10.28%
the first day of the month immediately preceding the
reporting date.
(xv)All vol adv 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 Disc & Anal of Financial Condition & Results of Oper.
Results of Operations
Third Quarter 1997 vs. Third Quarter 1996
The Trust redeemed $119,980 and $114,241 of mortgage pass-through certificates
during the third quarter of 1997 and 1996, respectively. The distributions were
made from principal payments received on the mortgage loans.
First Nine Months 1997 vs. First Nine Months 1996
The Trust redeemed $1,938,425 and $2,973,664 of mortgage pass-through
certificates during the first nine months of 1997 and 1996, respectively. The
distributions were made from principal payments received on the mortgage loans.
The Trust received $493,122 and $683,861 of distributions allocable to interest
on the mortgage loans during the first nine months 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. Fourteen mortgage loans with outstanding balances totaling $17,387,137
had been prepaid as of September 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 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 two loans with recorded balances of $1,083,775 at
September 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 $849,075 has 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 $234,700, 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 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.
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
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.
Through September 30, 1997 the Trust has experienced total payment shortfalls
of $33,122. 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, 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 September 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 $849,075 at September 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
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 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 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.
Although it was reported that the sanctuary rehab was completed, there are
additional items that must be finished before a certificate of occupancy is
issued. Meetings have been conducted in the sanctuary pending the issuance of
the certificate, however the church reports that is owes $100,000 to the
sub-contractor and it needs an additional $100,000 to complete all items for
the certificate. The church has applied for an additional $200,000 from the
SBA and been rejected. They are appealing that decision. Meanwhile work has
been halted on completion of the remaining items.
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.
Weekly drafts of $4,500 continue to be returned for insufficient funds. The
Treasurer reports that although the number of people has increased from 450 to
1,000, the offerings have remained the same. The church is planning on a major
giving campaign as well as two concerts to aggressively address their giving
shortfall. Advising the people of financial needs is a departure from their
usual practice. The Treasurer is confident the people will respond to the
plea. The cumulative past due interest as of November 1 is $109,395.
With respect to the loan with a recorded balance of $234,700, 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 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 $33,122 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 $ 4,204,555 $ 166,233 $ (114,045)
B 25,571 51,142
C 31,877 65,205
D 15,410 30,819
Total $ 4,204,555 $ 234,091 $ 33,121
Principal Unrealized Scheduled
Bond Indebtedness Shortfalls Losses Indebtedness
Class (Par Value) to Date to Date (Par Value)
A $ 4,204,555 $(113,981) $ 858,684 $ 5,177,220
B 938,379 938,379
C 171 1,785 1,615
D 622,615 622,615
Total $ 4,204,555 $(113,810) $2,421,463 $ 6,739,829
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
November 21, 1997 By: Roger T. Stephenson
Roger T. Stephenson
Executive Vice President and
Trust Officer
November 21, 1997 By: M.A. Kandel
M. A. Kandel
Vice President
