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, 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 September 30, 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
September 30,
1999 1998
(i) Distribution allocable to principal on the mortgage $ 5,511
$1,218,610
loans (includes $0 and $911,189 of prepayments
for the three months ended September 30, 1999
and 1998, respectively).
(ii) Distribution allocable to interest on the mortgage $ 4,805 $
38,063
loans
(iii) Deferred interest added to the aggregate principal $
0 $ 0
balance of the mortgage loans
(iv) Shortfalls to date $ 18,813 $
12,286
(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 $ 0 $
0
fund
(vii) Aggregate principal balance of mortgage loans at end $ (5,511) $
875,645
of period
(viii) Aggregate amount in the shortfall account $ 0
$
0
(ix) Administrative fees retained or withdrawn from the $
2,776 $ 4,354
collection account
(x)(a) Aggregate principal balance of mortgage loans $ 0
$
0
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)Subordinate amount, as a percentage of the $ 0 $
0
principal 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,
1999 1998
(i) Distribution allocable to principal on the $ 12,374 $
2,974,898
mortgage loans (includes $0 and $1,879,752 of
prepayments for the nine months ended September
30, 1999 and 1998, respectively).
(ii) Distribution allocable to interest on the mortgage $ 6,986 $
106,349
loans
(iii) Deferred interest added to the aggregate principal $ 0 $
0
balance of the mortgage loans
(iv) Shortfalls to date $935,188 $
255,087
(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 $ 0 $
0
fund
(vii) Aggregate principal balance of mortgage loans $ 863,271 $
875,645
at end of period
(viii) Aggregate amount in the shortfall account $ 0
$
0
(ix) Administrative fees retained or withdrawn from $ 8,364 $
9,181
the collection account
(x)(a) Aggregate principal balance of mortgage loans $ 0 $
0
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 of the $ 0
$
0
principal balance reported under (vii) above
(xiii) Amount remaining in the Debt Service Reserve $ 0 $
0
Fund
(xiv) Weighted average mortgage pass-through rate as 10.28% 10.28%
of the first day of the month immediately preceding
the reporting date.
(xv) All voluntary advances recovered during the $ 0
$
0
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 National Trust Company, as successor to 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 CUL 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 1999 vs. Third Quarter 1998
The Trust redeemed $0 and $1,135,909 of mortgage pass-through certificates
during the third quarter of 1999 and 1998, respectively. The distributions
were made from principal payments received on the mortgage loans.
First Nine Months 1999 vs. First Nine Months 1998
The Trust redeemed $0 and $1,938,425 of mortgage pass-through certificates
during the first nine months of 1999 and 1998, respectively.
The distributions were made from principal payments received on the
mortgage loans.
The Trust received $51,962 and $275,494 of distributions allocable to interest
on the mortgage loans during the third quarter of 1999 and 1998,
respectively. The lower interest income for 1999 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
bondholder 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. The proceeds from prepayment were
used to make principal payments on Class A mortgage pass-through
certificates. Although prepayments have been received, no assurance can
be given as to the, 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 Central United Life Insurance Company (CUL), as servicer of the
loans, is closely monitoring two loans remaining in the series, with
recorded balances totaling $1,065,368 at September 30, 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
ently 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 September 30, 1999, which is included in the amount of closely
monitored loans as previously discussed, 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 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 a
ction 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.
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 was estimated that a payoff could occur by January 1999.
Meanwhile, 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.
On August 25, 1999 the Treasurer reported that negotiations between the Santa
Barbara Plaza ( location of the church) and three (3) anchor tenants have
terminated. With no major leases signed, the developer (Johnson/Macfarlance
Group) cannot obtain the necessary financing for the purchase of the
property. The Community Redevelopment Agency (CRA) expects to wait 7-10
days for an alternate proposal. If there is no alternate proposal, all
negotiations may be terminated with the present developer and the
redevelopment opportunity will be open to other developers. On October 20,
1999 the Treasurer reported on the outcome of their October 12 board
meeting. The church plans to take some aggressive action to raise funds
outside of the ministry. They are presently setting up a nonprofit
corporation to receive grants. There is also a real estate broker in the
church that does rehab projects netting $30-$40,000 per project. The
church is hopeful of completing some of these projects to raise funds for
the mortgage payment. On November 12, 1999 the servicer informed the
Treasurer that an appraisal would be completed in the near future to
determine the highest and best use of the property and current market
value.
With respect to the loan with a recorded balance of $216,693 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. On February 1, 1999 the
loan payment account was fully funded with three (3) months of monthly
mortgage payments. All past due interest was paid as of February 1, 1999.
Regular monthly payments have continued through November 1, 1999. There
is currently one monthly payment in the loan payment account escrow. The
Church has a payment schedule in place to restore the loan payment account
to its full level of three payments.
Through September 30, 1999 the Trust has experienced total payment shortfalls of
$935,188 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, 1999 is
$497,554.
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 neither 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
fom 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 $935,188 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 mpt giaramteed by the Company, CUL, 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
The Company utilizes an external trustee to process the majority of its mission
critical transactions and has gathered information about their year 2000
compliance status. The Company continues to monitor their compliance.
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 $ 417,562 $ 413,739 $ 813,798
B 25,571 51,142
C (100) 18,813 39,428
D 15,410 30,819
Total $ 417,462 $ 473,533 $ 935,187
Principal Unrealized Scheduled
Bond Indebtedness Shortfalls Losses Indebtedness
Class (Par Value) to Date to Date (Par Value)
A $ 417,562 $ 679,255 $2,918,306 $ 2,656,613
B 938,379 938,379
C (100) 212 1,141 829
D 622,615 622,615
Total $ 417,462 $ 679,467 $4,480,441 $ 4,218,436
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 28, 1999 By: /s/ Roger T.
Stephenson
Roger T. Stephenson
Vice President
November 28, 1999 By: /s/ M. F. Hron
M. F. Hron
Vice President
