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, 1999
( ) 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, 1999 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,
1999 1998
(i) Distribution allocable to principal on the $ 1,736 $ 1,756,288
mortgage loans (includes $0 and $168,067 of pre-
payments for the three months ended March 31, 1999
and 1998, respectively).
(ii) Distribution allocable to interest on the $ 12,517 $
68,286
mortgage loans
(iii) Deferred interest added to the aggregate $ 0 $
0
principal balance of the mortgage loans
(iv) Shortfalls to date $ 931,458 $
242,801
(v) Advances included in amounts actually $ 0 $
0
distributed
(vi)(a) Aggregate amount of the subordinated $ 0 $
0
distribution which was paid to the senior
certificate holders
(vi)(b) Aggregate amount of withdrawals from $ 0 $
0
the reserve fund
(vii) Aggregate principal balance of mortgage $ 873,909 $
2,094,255
loans at end of period
(viii) Aggregate amount in the shortfall account $ 0 $
0
(ix) Administrative fees retained or withdrawn $ 2,798
$
4,827
from the collection account
(x)(a) Aggregate principal balance of mortgage $ 0 $
0
loans delinquent
(x)(b) Aggregate number of loans delinquent 0
0
(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/ Class D 0
0
discount)
Total $ 0 $
0
(xii)(b) Subordinated amount, as a percentage 0
0
of the principal balance reported under (vii) above
(xiii) Amount remaining in the Debt Service $ 0
$
0
Reserve Fund
(xiv) Weighted average mortgage pass-through rate 10.28%
10.28%
as of the first day of the month immediately
preceding the reporting date.
(xv) All voluntary advances recovered during $ 0
$
0
the related 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
Central United Life Insurance Company ("CUL"), 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 dis-
closures 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, dis-
counted 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 1999 vs. First Quarter 1998
The Trust redeemed $0 and $814,532 of mortgage pass-through certificates during
the first quarter of 1999 and 1998, respectively. The distributions were
made from principal payments received on the mortgage loans.
The Trust received $23,275 and $133,308 of distributions allocable to interest
on the mortgage loans during the first quarter of 1999 and 1998, respectively.
The lower interest income for 1998 is attributed to the lower principal balances
of mortgages outstanding due to mortgage amortization and mortgage loan prin-
cipal prepayments. These prepayments result in lower net income because the
profit produced by the differences in the interest rate collected on the mort-
gage 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 out-
standing 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. Seventeen mortgage loans with outstanding balances totaling $17,387,137
had been prepaid as of March 31, 1999. 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 totaling
$1,081,075 at March 31, 1999. 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 $232,132, management presently believes that
the principal balance and accrued interest should be fully recoverable in the
event of default.
The church building and property securing the loan with a recorded balance of
$849,075 at March 31, 1999, which is included in the amount of closely
monitored loans as previously discussed, 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. 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 reported that it had originally obtained a loan from the
Small Business Administration for $607,700 at 4% interest to assist in recon-
struction 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 by year-end 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 construction of the sanctuary
will stabilize 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 it owes
$100,000 to the sub-contractor and it needs an additional $100,000 to
complete all items on the certificate. The church has applied for an
additional $200,000 from the SBA which has 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 24. 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.
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, 1998 is $286,178.
On February 17, 1998, the treasurer reported that the City Council has approved
the necessary GAP financing required and finalized the contracts with Magic
Johnson/McFarlance Urban Partner, Group. Negotiation for acquisition began in
March 1998. It is estimated that a payoff could occur by January 1999. Mean-
while, construction activities remain halted pending FEMA issues. On August 17,
1998, the treasurer reported that negotiations for acquisition are proceeding as
planned. On October 29, 1998 the treasurer reported that an initial offer was
refused by the Church and an apology for the offer was made. The Church was
assured that any future offers will be equitable.
With respect to the loan with a recorded balance of $232,132, 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. A site
visit in April 1998 by the servicer found the property in good repair and
recently painted.
Through March 31, 1999 the Trust has experienced total payment shortfalls of
$645,117. 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, 1999 is $395,412.
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 which is specifically related to the loans
which collateralize the mortgage pass-through certificates.
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 $242,801 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.
Year 2000 Compliance
By the end of 1999, the Company expects that its various administrative systems
will have the capability to process transactions dated beyond 1999. The
costs to complete the Company's efforts to modify or replace such systems
are not expected to be material.
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 $ 1,092,867 $ 391,411 $ 803,146
B 25,571 51,142
C 22,328 46,351
D 15,410 30,819
Total $ 1,092,867 $ 454,720 $ 931,458
Principal Unrealized Scheduled
Bond Indebtedness Shortfalls Losses Indebtedness
Class (Par Value) to Date to Date (Par Value)
A $ 1,092,867 $ 637,295 $2,889,709 $ 3,345,281
B 938,379 938,379
C 199 1,242 1,043
D 622,615 622,615
Total $ 1,092,867 $ 637,494 $4,451,945 $ 4,907,318
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 under-
signed thereunto duly authorized.
Date CML Church Mortgage Trust
1990 Rated Series A-1
May 19, 1999 By: /s/ Roger T. Stephenson
Roger T. Stephenson
Vice President
May 19, 1999 By: /s/ M. F. Hron
M. F. Hron
Vice President
