UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

_________________________________________

FORM 10-K
(Mark one)

(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997

(  ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT 1934

Commission File Number 33-27664


CML CHURCH MORTGAGE, INC.
(Exact name of registrant as specified in its charter)

Wisconsin     02-0430692
(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 by 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 December 31, 1997 there were 52 shares of Common Stock, $1.00 par value,
outstanding.

Item 1-Business
CML Church Mortgage, Inc. (the Company) was incorporated in the State of
Wisconsin on March 10, 1989, and is a wholly-owned subsidiary of Christian
Mutual Life Insurance Company.  The Company was organized to facilitate the
financing of mortgage loans and is not permitted and does not intend to engage
in any business activities other than (i) to issue bonds secured by promissory
notes secured by first liens on real estate, (ii) to purchase or otherwise
acquire, own, hold, transfer, convey, assign, pledge, mortgage, finance,
refinance and otherwise deal with such mortgage collateral, (iii) to invest and
reinvest the payments received with respect to the mortgage collateral, and
(iv) to engage in any activities incidental and necessary for such purposes. 
The Company does not have, nor is it expected in the future to have, any
significant assets other than the assets pledged as security for specific series
of securities issued by it.

    There are no paid employees of the Company.

Item 2 - Properties
The Company owns no property and leases no office space.

Item 3 - Legal Proceedings
The Company is not a party to any material pending legal proceedings.

Item 4 - Submission of Matters to a Vote of Security Holders
No matters were submitted during the fourth quarter of the fiscal year 1997 to
a vote of  security holders.

PART II

Item 5 - Market for Registrant's Common Equity and Related Stockholder Matters
No effort has been made to make a market for the common stock of the Company. 
Christian Mutual Life Insurance Company owns 100% of the issued and outstanding
shares of the Company.

Item 6 - Selected Financial Data  
                          1997          1996       1995       1994          1993

Total revenue         $  248,963    492,266   798,889     1,358,701       2,436,
084
Net income (loss)           (396)       327       875               661        
  653
Earnings (loss) per share
    of common stock            (7.62)       .89       .88           .66        
 .65
Cash dividends per           
    share declared             -          -         -             -            -
Total Assets            1,775,783  3,045,276 4,032,817     6,752,597  13,807,572
Mortgage-backed bonds  1,736,838  2,993,724 3,915,260     6,411,771  13,062,952
Stockholder's equity          1,391      1,787    32,460        31,585     
30,924


Item 7 - Management's Discussion and Analysis of Financial Condition and Results
    of Operations

Years ended December 31, 1997 compared to December 31, 1996
Revenues for 1997 include interest income of  $128,768 and $119,972 from mort-
gages backing the Series 1 and Series 2 bonds, respectively.  The corresponding
interest income for 1996 includes $147,842 and $141,992 from mortgages backing
the Series 1 and Series 2 bonds, 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 prepay-
ments result in lower net income because the profit produced by the differences
in the interest rate collected on the mortgage loans and the rate to bondholders
decreases as mortgage loans are prepaid.

Prepayments also increase the charge in the period of prepayment for amortiza-
tion of deferred issuance costs, which occurs over the life of the outstanding
bonds.

Bond redemptions totaled $1,256,886 and $752,870 during 1997 and 1996,
respectively.

Years ended December 31, 1996 compared to December 31, 1995
Revenues for 1996 include interest income of $147,842 and $141,992 from
mortgages backing the Series 1 and Series 2 bonds, respectively.  The corre-
sponding interest income for 1995 includes $236,002 and $193,650 from mortgages
backing the Series 1 and Series 2 bonds, respectively.  The lower interest
income for 1996 is attributed to the lower principal balances of mortgages
outstanding due to mortgage amortization and mortgage loan principal prepay-
ments.  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 to the bondholders decreases as mortgage loans are prepaid.  

Prepayments also increase the charge in the period of prepayment for amortiza-
tion of deferred issuance costs, which occurs over the life of the outstanding
bonds.

Bond redemptions totaled $752,870 and $2,274,227 during 1996 and 1995,
respectively.

Other Real Estate Owned
On December 28, 1993, the Company accepted a deed-in-lieu of foreclosure on a
church property securing a loan with an outstanding principal balance of
$1,749,203.  The property is located near the south central section of Los
Angeles, California. 

As a result of an appraisal received by the Company in November 1993, management
recorded a write-down of $534,203 in order to value the property at fair market
less estimated cost to sell. This write-down was treated as a direct reduction
of the Series 1 Subordinated Bonds in the amount of $128,873, the residual
interest in the amount of $294,462 and the Series 1 Senior Bonds in the amount
of $110,868.  In 1994, management recorded a second write-down of $124,921. 
This write-down was treated as a direct reduction of the Series 1 Senior Bonds.
In February 1996, the Company received an offer to purchase the property for
$720,000 (net of estimated costs to sell).  As such, an additional write-down of
$360,000 was made in the 1995 financial statements to record the value of the
property at the current value.  This offer was never finalized.

In October 1996, the Company received an offer for the sale of the property
"as is" for $520,000.  Additionally, two settlements totaling $207,190 were re-
ceived covering three incidents of substantial vandalism and theft of property
of the church property since the third week of February 1996.   As a result of
these transactions, an additional $45,000 write-down was recorded in the third
quarter of 1996.  The new carrying value of $675,000 reflects (1) the "as is"
offer price of $520,000 less estimated cost to sell of approximately $52,000 and
(2) the $207,190 settlement amounts for repairs which will not be required if
the property is sold "as is."  An environmental inspection revealed asbestos
that was exposed by the vandalism incidents.  The cost of the asbestos removal
was estimated at $150,000 further reducing the offer price to approximately
$370,000.  As a result, an additional $123,666 write-down was recorded at
December 31, 1996. 

The property was sold "as is" on December 30, 1996, for approximately $370,000
and the funds were received in early January 1997.  Additional funds amounting
to $37,353 were received in January 1997 due to an over estimation of selling
expenses at December 31, 1996.
 
Potential Problem Loan
The Company is closely monitoring one loan with a balance of $1,060,769 at
December 31, 1997.  Payments are current due to draws from the loan payment
account.  This account requires six (6) months of payments at all times.  Weekly
drafts in the amount of $6,787 to replenish the loan payment account have not
been completed for twelve (12) of the drafts since September 1997.  The borrower
will attempt to make up this short-fall in the loan payment account beginning in
April 1998.

Liquidity and Capital Resources
The Company has no fixed assets nor any commitments outstanding to purchase or
lease any fixed assets.

Each series of mortgage-backed bonds was structured in a manner such that
principal and interest payments received from the related mortgage loans would
be sufficient to fund all interest and principal payments on the bonds in
addition to all other expenses of the Company.  As discussed in Item 7 -
Management's Discussion and Analysis of Financial Condition and Results of
Operations 1997 vs. 1996 and 1996 vs. 1995, interest income from mortgages
backing the Series 1 bonds declined in both 1997 and 1996 due to foregone
interest income of a nonaccrual mortgage loan transferred to real estate
owned coupled with yield losses due to mortgage loan prepayments.  Because of
these matters, the Company did not make $67,651 of principal payments scheduled
for February 10, 1994 and $71,524 of principal payments scheduled for August 10,
1994 to holders of 9.10% unrated Series 1 senior bonds, $84,951 of principal
payments scheduled for February 10, 1995 and $89,857 of principal payments
scheduled for August 10, 1995 to holders of 9.10% unrated Series 1 senior bonds,
$104,833 of principal payments scheduled for February 10, 1996 and $111,030 of
principal payments scheduled for August 10, 1996 to holders of 9.10% unrated
Series 1 senior bonds.  On February 10, 1997, an additional $127,298 of
principal payments was not paid as scheduled to the holders of 9.10% unrated
Series 1 senior bonds.  No assurances can be given as to the rate of prepayment
of the mortgage loans or the amount of foregone interest income from loans in
default which may occur in the future.  The bonds are non-recourse bonds, and
the holders of the bonds may not look to the Company or the Servicer, but may
only look to the pool of mortgage loans and other assets securing the
bonds for payment of principal and interest thereon.  No mortgage loans securing
any other series or bonds will be available to satisfy claims of holders of the
bonds.

Item 8 - Financial Statements and Supplementary Data
The financial statements of the Company as of December 31, 1997 and 1996, and
for the years ended December 31, 1997, 1996, and 1995 along with the independent
auditors' reports are included herein.

Item 9 - Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure

On March 26, 1997 CML Church Mortgage, Inc. filed Form 8-K to report the
appointment of  KPMG Peat Marwick LLP as principal accountant for the Company
on March 26, 1997.

The audit report on the financial statements of CML Church Mortgage, Inc. by
Ernst & Young LLP for the year ended December 31, 1995, did not contain any
adverse opinion or disclaimer of opinion, nor was it qualified or modified as to
uncertainty, audit scope, or accounting principles.

PART III

Item 10 - Directors and Executive Officers of the Company
The directors and executive officers of the Issuer are as follows:

         Name Age  Positions and Offices Held
    Daniel J. George     31  President
    Mary Lou Rainey      41  Secretary

Mr. George joined Christian Mutual Life Insurance Company in 1996, on the
acquisition of  the Company's parent by Central United Life Insurance Company. 

Ms. Rainey joined Christian Mutual Life Insurance Company in 1996, on the
acquisition of the Company's parent by Central United Life Insurance Company. 

Item 11 - Executive Compensation
The Company has no salaried employees.

The directors and executive officers of the Company are required to devote only
so much of their time to the Company's affairs as is necessary or required for
the effective conduct and operation of the Company's business.  The mortgage
loan Servicing Agreement provides that Christian Mutual Life Insurance Company,
as Servicer, will assume principal responsibility for administering the day-to-
day operations of the Company and performing or supervising the performance of
such other administrative functions necessary in managing the Company as may be
agreed upon by the Christian Mutual Life Insurance Company and the Board of
Directors of the Company.  The officers named above, in their capacities as
such, will devote only a small portion of their time to the affairs of the
Company.  However, since the above officers are employees of the Servicer, 
they will devote such portion of their time to the affairs of Christian Mutual
Life Insurance Company in their capacities as employees of Christian Mutual Life
Insurance Company, as is required for the performance of the duties of Christian
Mutual Life Insurance Company under the Servicing Agreement.

Item 12 - Security Ownership of Certain Beneficial Owners and Management

As of December 31, 1997, Christian Mutual Life Insurance Company owns 100% of
the outstanding shares of Common Stock of the Company (52 shares) and has the
sole voting and dispositive powers.

Item 13 - Certain Relationships and Related Transactions

The mortgage loans held by Trustee were originated by CML and were acquired by
the Company for $17,317,000 (the outstanding principal balance at date of
acquisition).  The mortgage loans serve as collateral for $9,153,000 of Series 1
mortgage-backed bonds and $8,164,000 of Series 2 mortgage-backed bonds.  CML
will continue to service the mortgage loans for the Company for annual fees
equal to 0.40% and 0.45%, respectively, of the outstanding mortgage loan
principal balances backing the Series 1 and Series 2 mortgage-backed bonds.

CML purchased from the Company subordinated bonds in the amount of $274,590
and $204,100 pertaining to the Series 1 and Series 2 pools, respectively.

Losses of principal on mortgage loans will be charged directly to the
Subordinated Bonds as an automatic reduction of the outstanding principal
balances.  Similarly, past due or defaulted interest amounts on mortgage loans
will reduce interest otherwise payable on the Subordinated Bonds.  This reduc-
tion will continue to the extent and as long as the interest paid on the mort-
gage loans is not current.

PART IV

Item 14 - Exhibits, Financial Statement Schedules, and Reports on Form 8-K

INDEX TO FINANCIAL STATEMENTS

Financial Statements and Schedule Page No.

Independent Auditors' Report (KPMG Peat Marwick LLP)                         
F-1

Report of Independent Auditors - Ernst & Young LLP                           F-2

Balance Sheets as of December 31, 1997 and 1996                              
F-3

Statements of Operations for the years ended December 31, 1997,
    1996 and 1995                                                              
                    F-4

Statements of Change in Stockholder's Equity for the years ended
    December 31, 1997, 1996 and 1995                                           
    F-5

Statements of Cash Flows for the years ended December 31, 1997,
    1996 and 1995                                                              
               
        F-6

Notes to Financial Statements                                                  
                 F-7

The following schedule is filed as part of this Annual Report on Form 10-K:

    Schedule IV - Mortgage Loans on Real Estate                                
 S-1


All other schedules for which provision is made in the applicable accounting
regulations of  the Securities and Exchange Commission are not required under
the related instructions or are inapplicable, and therefore have been omitted.

Exhibits

The Exhibits filed as a part of this Annual Report are listed in the attached
Exhibit Index. 


Reports on Form 8-K

The Company filed no report on Form 8-K during the last quarter of the fiscal
year ended December 31, 1997. 

SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) 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, on this 27th day of March,
1998.

CML CHURCH MORTGAGE, INC.



_______________________________________
Daniel J. George, President

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.


    Signature   Title                       Date

              
  Daniel J. George    President     March 27, 1998


      
  Mary Lou Rainey      Secretary    March 27, 1998






Independent Auditors' Report

The Board of Directors
CML Church Mortgage, Inc.:


We have audited the balance sheets of CML Church Mortgage, Inc. (the Company) as
of December 31, 1997 and 1996, and the related statements of operations, changes
in stockholder's equity, and cash flows for the years then ended.  Our audit
also included the financial statement schedule listed in the accompanying index.
These financial statements and schedule are the responsibility of the Company's
management.  Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of CML Church Mortgage, Inc. at
December 31, 1997 and 1996 and the results of its operations and its cash flows
for the years then ended, in conformity with generally accepted accounting
principles.  Also, in our opinion, the related financial statement schedule,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.


    KPMG PEAT MARWICK LLP



Houston, Texas
March 27, 1998



                        F-1

Report of Independent Auditors


Board of Directors
CML Church Mortgage, Inc.

We have audited the balance sheet of CML Church Mortgage, Inc. (the Company) as
of  December 31, 1995, and the related statements of operations, changes in
stockholder's equity and cash flows for the year then ended.  Our audit also
included the financial statement schedule  listed in the Index at Item 14(a).
These financial statements and schedule are the responsibility of the Company's
management.  Our responsibility is to express an opinion on these financial
statements and the schedule based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstate-
ment. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of CML Church Mortgage, Inc. at
December 31, 1995, and the results of its operations and its cash flows for the
year then ended, in conformity with generally accepted accounting principles. 
Also, in our opinion, the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, present fairly
in all material respects the information set forth therein.



ERNST & YOUNG LLP

March 15, 1996




                        F-2




















CML CHURCH MORTGAGE, INC.
Notes to Financial Statements
December 31, 1997 and 1996


(1) Organization and Summary of Significant Accounting Policies Organization

CML Church Mortgage, Inc. (the Company) was incorporated in the State of
Wisconsin on March 10, 1989, and is a wholly-owned subsidiary of Christian
Mutual Life Insurance Company (CML).  The Company was organized to facilitate
the financing of mortgage loans and is not permitted and does not intend to en-
gage in any business activities other than (1) to issue bonds secured by pro-
missory notes secured by first liens on real estate, (2) to purchase or other-
wise acquire, own, hold, transfer, convey, assign, pledge, mortgage, finance,
refinance and otherwise deal with such mortgage collateral, (3) to invest and
reinvest the payments received with respect to the mortgage collateral fund from
any disposition or liquidation of the mortgage collateral and (4) to engage in
any activities incidental and necessary for such purposes.

         Basis of Presentation
The financial statements have been prepared in accordance with generally
accepted accounting principles.

The preparation of the financial statements requires management to make
estimates and assumptions that affect amounts reported in the financial
statements and accompanying notes.  Such estimates and assumptions could change
in the future as more information becomes known which could impact the amounts
reported and disclosed herein.

Significant accounting policies are as follows:

         Mortgage-Backed Bonds
On August 29, 1989, the Company sold $9,153,000 of senior bonds and $274,590 of
subordinated bonds (Series 1), and on April 11, 1990, the Company sold
$8,164,000 of senior bonds and $204,100 of subordinated bonds (Series 2).  The
bonds are nonrecourse bonds and the holders of the bonds may not look to the
Company, but may only look to the pool of mortgage loans securing the bonds
for payment of  principal and interest thereon.  No mortgage loans securing
any other series or bonds will be available to satisfy claims or holders of the
bonds.

Mortgage-backed bonds are stated at their outstanding unpaid principal balances.



F-7


Notes to Financial Statements

         Description of Assets Collateralizing
Mortgage-Backed Bonds
Loans are stated at their outstanding unpaid principal balances.

Each series of mortgage-backed bonds is secured by a pool of assets (the Pool)
consisting of: (a) mortgage loans, which consist of fixed interest rate real
estate loans evidenced by promissory notes secured by mortgages or similar
security interests which create a first lien on church buildings and related
properties, (b) a principal payment account (used to deposit receipts of
mortgage loan principal), (c) an interest payment account and (d) reinvestment
earnings on the principal and interest payment account balances.  A separate
Pool is maintained for each series of mortgage-backed bonds.

Accrual of interest income on mortgage loans is discontinued when management has
determined that the borrower will be unable to meet contractual obligations and/
or when loans are 90 days or more in arrears, except in certain instances where
management believes that collateral held by the Company is clearly sufficient
and full satisfaction of both principal and interest is highly probable.  When a
loan is placed on nonaccrual, all interest previously accrued but not collected
is reversed against current period income.  Nonaccrual loans may be returned to
an accrual status when principal and interest payments are not delinquent and
the risk characteristics of the loan have improved to the extent that there no
longer exists a material concern as to the collectibility of principal.

         Deferred Issuance Costs
Deferred issuance costs consist of underwriting discounts and other expenses of
issuance and distribution of the mortgage-backed senior bonds.  Such costs are
amortized over the life of the outstanding bonds using a method which
approximates the effective interest method, adjusted for prepayment.

         Residual Interest
Upon issuance of the senior bonds, the Company sold, without recourse, separate
residual interests in the respective Pools underlying the Series 1 and Series 2
bonds. Provided there has been no default or deficiency in the payment of prin-
cipal or interest on the respective senior or subordinated bonds, as defined,
the holders of the residual interest are entitled to receive all amounts on
deposit in the interest payment accounts which have been transmitted by the
Trustee to the Company as well as all other remaining assets in the Pools.

F-8

CML CHURCH MORTGAGE, INC.
Notes to Financial Statements


The residual interests are accounted for in a manner similar to a minority
interest in a consolidated subsidiary.  That is, income deemed attributable
to the residual interests is reflected as a charge to income through a
corresponding increase in the residual interest liability.  Payments to the
holders of the residual interest, when made, serve to reduce the liability
account balance.  If there are payment deficiencies on the senior bonds, the
amounts accumulated on behalf of the residual interest must first be used to
satisfy any remaining obligations to the senior bond holders, thereby reducing
the liability account balance.

         Allowance for Loan Losses
The allowance for loan losses established on mortgage loans collateralizing each
series of mortgage-backed bonds are first charged directly to the subordinated
bonds as an automatic reduction of the outstanding principal balance.  Any
losses which exceed the balance of the subordinated bonds and the amounts
accumulated on behalf of the residual interests will be absorbed by the
senior bond holders.  It is the Company's policy to record a separate allowance
for loan losses if in management's judgment the carrying value of the mortgage
loans would exceed the carrying value of the subordinated bonds.

Beginning in 1995, the Company adopted Financial Accounting Standards Board
Statement No. 114, Accounting by Creditors for Impairment of a Loan.  Under the
new standard, the allowance for loan losses related to loans that are identified
for evaluation in accordance with Statement 114 is based on discounted cash
flows using the loan's initial effective interest rate or the fair value of the
collateral for certain collateral dependent loans.  Prior to 1995, the allowance
for credit losses related to these loans was based on undiscounted cash flows or
the fair value of the collateral for collateral dependent loans.

While management uses the best information available in establishing the allow-
ance for loan losses, future adjustments may be necessary if economic conditions
differ substantially from the assumptions used in making the evaluation.

         Other Real Estate Owned
Other real estate owned includes real estate acquired by foreclosure and real
estate substantively repossessed.  Real estate acquired by foreclosure is com-
prised of properties acquired through foreclosure proceedings or acceptance of
a deed in lieu of foreclosure.  The Company holds no real estate which has been
substantively repossessed.



F-9


CML CHURCH MORTGAGE, INC.
Notes to Financial Statements

After foreclosure, properties held for sale are carried at the lower of fair
value less estimated costs to sell or cost.  If the fair value of the asset
less estimated costs to sell becomes less than the cost of the asset, the amount
is charged directly against the asset.

Operating expenses are charged to other expenses.  Gains and losses upon dis-
position are reflected in the statements of operations as realized.

         Federal Income Taxes
An election has been made to treat the Pools as real estate mortgage investment
conduits (REMIC).  A REMIC is not subject to federal taxation; rather, the
income of the REMIC is taxable to the holders of interest thereon. 
Qualification as a REMIC requires ongoing compliance with certain conditions. 
Accordingly, no provision for federal income taxes has been made.

         Cash Equivalents
The Company considers all highly liquid investments with original maturities of
less than 90 days to be cash equivalents.

         New Accounting Standard
In March 1995, the Financial Accounting Standards Board issued Statement No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of, which requires impairment losses to be recorded on
long-lived assets used in operations when indications of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount.  Statement No. 121 also addresses the
accounting for long-lived assets that are expected to be disposed of.  The
Company adopted Statement No. 121 in the first quarter of 1996. 
The adoption of this standard did not have a material effect on the Company's
financial statements.

In February 1997, the FASB issued SFAS No. 128, Earnings Per Share.  SFAS No.
128, which must be adopted for fiscal years ending after December 15, 1997,
established standards for computing and presenting earnings per share ("EPS")
and applies to entities with publicly held common stock or potential common
stock.  It replaces the presentation of primary EPS with a presentation of
basic EPS.  It also requires dual presentation of basic and diluted EPS on
the face of the income statement for all entities with complex capital struc-
tures and requires a reconciliation of the numerator and denominator of the
basic EPS computation to the numerator and denominator of the diluted EPS
computation, with all prior period EPS data presented restated.



F-10



CML CHURCH MORTGAGE, INC.
Notes to Financial Statements
    

(2)      Cash and Cash Equivalents, Held By Trustee
Principal and interest payments received on the mortgage loans are controlled by
a Trustee.  These amounts are utilized to meet the semiannual interest payments
on the mortgage-backed senior and subordinated bonds, to reduce the outstanding
principal balance on the bonds and to make payments to the holders of residual
interests.

(3)      Mortgage Loans, Held By Trustee
The mortgage loans, which serve as collateral for the mortgage-backed senior and
subordinated bonds, consist of fixed interest rate real estate loans evidenced
by promissory notes secured by mortgages or similar security interests which
create a first lien on church buildings and related properties.  The church
buildings and properties securing the loans were located in 3 different states
across the United States.  All of the mortgage loans contain provisions
prohibiting prepayment during periods ranging from approximately 36 months to
48 months from the date acquired by the Company.  The mortgage loans, when
originated, generally had loan-to-value ratios ranging between 43% and 65%. 
The ability and willingness of these borrowers to honor their repayment
commitments is generally dependent upon the financial condition of the church
obligated as mortgagor which, in turn, depends on the contributions received
from members of the congregation.  Approximately 69% of the remaining balance
receivable is due from one congregation.

An analysis of the allowance for loan losses is as follows for the years ended
December 31:

                                                                1997   1996    
   
1995
    Balance at beginning of year           $   -       -         100,000
    Provision for losses                            -       -     (100,000)
    Balance at end of year                     $      -       -               -
    

(4) Other Real Estate Owned
On December 28, 1993, the Company accepted a deed-in-lieu of foreclosure on a
church property securing a loan with an outstanding principal balance of
$1,749,203.  The property is located near the south central section of Los
Angeles, California.  As a result of an appraisal received by the Company in
November 1993, management recorded a write-down of $534,203 in order to value
the property at fair market value less estimated cost to sell.  This write-down
was treated as a direct reduction of the Series 1 subordinated 

F-11

CML CHURCH MORTGAGE, INC.
Notes to Financial Statements

Bonds in the amount of $128,873, the residual interest in the amount of $294,462
and the Series 1 Senior Bonds in the amount of $110,868. In 1994, management
recorded a second write-down of $124,921.  This write-down was treated as a
direct reduction of the Series 1 Senior Bonds.  In February 1996, the Company
received an offer to purchase the property for $720,000 (net of estimated costs
to sell).  As such, an additional write-down of $360,000 was made in the 1995
financial statements to record the value of the property at the current value.

In October 1996, the Company received an offer for the sale of the property "as
is" for $520,000.  Additionally, two settlements totaling $207,190 were made
covering three incidents of substantial vandalism and theft of property at the
church property since February 1996.  As a result of these transactions, an
additional $45,000 write-down was recorded in the third quarter of 1996.  The
adjusted carrying value of $675,000 reflects (1) the "as is" offer price of
$520,000 less estimated cost to sell of approximately $52,000 and (2) the
$207,190 settlement amounts for repairs which will not be required if the
property is sold "as is".  A subsequent environmental inspection revealed
asbestos that was exposed by the vandalism incidents.  The cost of the asbestos
removal was estimated at $150,000 further reducing the offer price to
approximately $370,000.  As a result, an additional $123,666 write-down was
recorded at December 31, 1996. 

The property was sold "as is" on December 30, 1996, for approximately $370,000
and the funds were received in early January 1997.  The write-down recorded at
December 31, 1996 was adjusted to $90,000 due to an over estimation of selling
expenses, which is included in the increase of mortgage-backed senior bonds on
the Statement of Operations.

(5) Mortgage-Backed Senior Bonds
Mortgage backed senior bonds held by the Company are comprised of two bonds
backed by two separate pools of mortgages.  The following details the
compilation of the mortgage backed senior bonds as of December 31, 1997 and
1996:

                                                                      1997     
    
    1996
    
    Mortgage-backed senior bonds-Series 1        $ 2,007,841     2,566,079
    Net reductions in Series 1 bonds                   (727,103)     (764,455)
    Mortgage-backed senior bonds-Series 2            252,000       988,000
                                                                $ 1,532,738    
2,789,624




F-12

CML CHURCH MORTGAGE, INC.
Notes to Financial Statements


The following is a summary of the Series 1 Senior Bonds.  The interest rate,
stated maturity and original principal amounts of these bonds, all dated August
1, 1989, and the outstanding principal amounts as of December 31, 1997:

                                     Original      Outstanding
    Interest   Stated           principal      principal
    rate      maturity           amounts       amounts
    9.00 %      2/10/1994    $    262,000     67,651
    9.10     8/10/1994       277,000     71,524
    9.10     2/10/1995       329,000     84,951
    9.10     8/10/1995      348,000        89,857
    9.25     2/10/1996      406,000       104,833
    9.25     8/10/1996       430,000      111,030
    9.25     2/10/1997       493,000    127,298
    9.75     8/10/2001     5,506,000    1,350,697
                                $ 8,051,000  2,007,841

The above maturity schedule does not reflect the cumulative write-downs of
Series 1 Senior Bonds of $727,103, $764,455 and $595,789 at December 31, 1997,
1996 and 1995, respectively (see notes 3 and 4).  Management of the Company
believes that if these write-downs are realized as a result of losses on the
sale of other real estate owned or foregone interest income on nonperforming
mortgage loans, the bondholders would incur losses on a pro-rata share of their
investment in relation to the total outstanding senior bonds.

The following is a summary of the Series 2 Senior Bonds.  The interest rate,
stated maturity and original principal amounts of these bonds, all dated August
1, 1990, and the outstanding principal amounts as of December 31, 1997:

                               Original           Outstanding
    Interest  Stated         principal    principal
    rate      maturity       amounts        amounts
    9.75%        4/10/1997   $  308,00          --
    9.85    10/10/1997     362,00          --
    9.85     4/10/1998     382,000         37,000
    10.50        4/10/2003  5,359,000    215,000
                   $ 6,411,000       252,000


F-13


CML CHURCH MORTGAGE, INC.
Notes to Financial Statements

Interest on senior bonds is payable semiannually.  The amount to be paid to bond
holders on each payment date is limited, however, to the funds available in the
interest payment account (see note 1).

The stated maturities are the dates on which the senior bonds will be fully
paid,assuming no prepayments are received on the mortgage loans and principal
and interest payments are received in accordance with the terms of the mortgage
loans.  The actual maturities of the senior bonds will be shortened by prepay-
ments on the mortgage loans and by any senior bond calls.

As originally documented, the Series 1 Senior Bonds were to be redeemed, to the
extent of funds available, as follows:

Annually, the spread between mortgage interest received plus reinvestment
earnings and interest on Series 1 Senior and Subordinated Bonds will be used to
redeem a maximum of $68,750 of the Series 1 Senior Bonds maturing August 10,
2001.  Such annual redemptions will occur until an aggregate of $275,000 of such
Series 1 Senior Bonds has been redeemed.  Redemptions commenced February 10,
1990 and will continue thereafter on August 10 and February 10 of each year.

All payments, but not prepayments, of mortgage loan principal received through
February 1, 1991, were used to effect redemptions of Series 1 Senior Bonds
maturing February 10, 1991.  Such redemptions commenced February 10, 1990.

Prepayments of mortgage loans collateralizing the Series 1 Senior Bonds shall be
used to effect redemptions of Series 1 Senior Bonds with maturity dates
occurring prior to or on the maturity date of the mortgage loan prior to
prepayment.

Commencing August 1997, the Company will redeem Series 1 Senior Bonds maturing
August 10, 2001, presented for redemption by appropriate representatives of
deceased holders, but only to the extent that funds are available in the
principal account maintained by the Trustee.

F-14

CML CHURCH MORTGAGE, INC.
Notes to Financial Statements

In addition to the redemptions described above, the Company may, at its option,
redeem all, but not less than all, of the outstanding Series 1 Senior Bonds at
any time the aggregate principal amount outstanding is less than 20% of the
aggregate principal amount originally issued.

However, as a result of defaults on the mortgage loans collateralizing the
Series 1 Senior Bonds, the bonds are no longer subject to scheduled or mandatory
redemption.  Mandatory redemptions may not be reinstated until either (a) such
default is cured or (b) the aggregate amount of the principal account plus the
aggregate outstanding principal amount of mortgage loans securing the bonds as
to which no default in payment of principal or interest has occurred and which
has not been cured exceeds the outstanding principal amount of the bonds, and
the amount on deposit in the interest payment account plus interest payable on
the outstanding principal amount of such non-defaulting mortgage loans
(assuming no repayments of principal) is at least equal to the interest payable
on the outstanding principal amount of the bonds as may be reduced from time to
time by redemption.  As a result of the bonds no longer being subject to
scheduled or mandatory redemption, the residual interest relating to the Series
1 Senior Bonds was eliminated. 

The Series 2 Senior Bonds will be redeemed to the extent of funds available, as
follows:

Annually, the spread between mortgage interest received plus reinvestment
earnings and interest on Series 2 Senior and Subordinated Bonds will be used
to redeem the Series 2 Senior Bonds maturing April 10, 2003.  Such annual
redemptions will occur until an aggregate of $204,100 of such Series 2 Senior
Bonds have been redeemed.  Redemptions commenced October 10, 1990 and will
continue thereafter on April 10 and October 10 of each year.

All payments, but not prepayments, of mortgage loan principal received through
October 1, 1991, were used to effect redemptions of Series 2 Senior Bonds
maturing October 10, 1991.  Such redemptions commenced October 10, 1990.

Prepayments of mortgage loans collateralizing the Series 2 Senior Bonds shall be
used to effect redemptions of Series 2 Senior Bonds with maturity dates
occurring prior to or on the maturity date of the mortgage loan prior to prepay-
ment.


F-15

CML CHURCH MORTGAGE, INC.
Notes to Financial Statements

Commencing October 1998, the Company will redeem Series 2 Senior Bonds maturing
April 10, 2003, presented for redemption by appropriate representatives of
deceased holders, but only to the extent that funds are available in the
principal account maintained by the Trustee.

In addition to the redemptions described above, the Company may, at its option,
redeem all, but not less than all, of the outstanding Series 2 Senior Bonds at
any time the aggregate principal amount outstanding is less than 20% of the
aggregate principal amount originally issued.  Additional redemptions scheduled
are as follows:

        Date
          of                           Principal
    redemption                         amount
    October 10, 1998              $      85,000
    April 10, 1999                     90,000
    October 10, 1999                     103,000
    April 10, 2000                    100,000
    October 10, 2000                     111,000
    April 10, 2001                118,000
    October 10, 2001                     122,000
    April 10, 2002                    122,000
    October 10, 2002                     112,000
    April 10, 2003                   29,000
    Total Series 2 Senior Bonds $ 992,000

Mandatory redemptions shall be effected on a semiannual payment date and Series
2 Senior Bonds shall be selected for redemption by the Trustee by lot as pro-
vided in the Indenture.

(6) Mortgage-Backed Subordinated Bonds
On the date of issue of the Series 2 Senior Bonds, CML purchased a subordinated
bond due on April 10, 2003 (the final maturity of the Series 2 Senior Bonds) in
the principal amount of $204,100.  The Series 2 Subordinated Bond bears interest
at the rate of 11% per annum, payable semiannually, commencing October 10, 1990.

Payments of principal and interest on the Series 2 Subordinated Bond are
subordinated to the prior payment, when due, of interest at stated rates and
principal on the Series 2 Senior Bonds.

F-16

CML CHURCH MORTGAGE, INC.
Notes to Financial Statements

    
(7)      Mortgage Loan Servicing
The mortgage loans held by the Trustee were originated by CML and were acquired
by the Company from CML.  The Company acquired 9 mortgage loans for $9,153,000
in 1989 and 10 mortgage loans for $8,164,000 in 1990.  The amounts paid to
acquire the loans represented the outstanding principal balance at date of
acquisition.  CML is under contract with the Company to service the mortgage
loans for an annual fee equal to 0.40% of the outstanding principal balance of
mortgage loans collateralizing the Series 1 Senior Bonds and 0.45% of the out-
standing principal balance of mortgage loans collateralizing the Series 2 Senior
Bonds.

(8) Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, Disclosures About Fair
Value of Financial Instruments, as amended during 1994 by Statement of Financial
Accounting Standards No. 119, Disclosures About Derivative Financial Instruments
and Fair Value of Financial Instruments, requires disclosures about all finan-
cial instruments held or owed by a company except for certain excluded
instruments and instruments for which it is not practicable to estimate fair
value.

Management believes that the carrying amount approximates the fair value for all
of the Company's financial instruments. Since the mortgage-backed bonds are not
readily marketable, the fair value of the bonds is determined by the fair value
of the underlying assets and, as such, the carrying amount is a reasonable
approximation of the fair value. 


F-17


EXHIBIT INDEX


Exhibit 3.    Articles of Incorporation and By-Laws

3.1-     Articles of Incorporation of Issuer (Incorporated herein by Reference
to
Exhibit 3.1 of Registration Statement on Form S-11 No. 33-27664)     

3.2-     By-Laws of Issuer (Incorporated herein by Reference to Exhibit 3.2 of
Registration Statement on Form S-11 No. 33-27664)

Exhibit 4.    Instruments defining the rights of security holders, including
indentures

4.1-     Indenture dated August 1, 1989 between Company and M&I First National
Bank, Trustee, incorporated herein by Reference to Exhibit 4.1 to Form 10K for
the year ended December 31,  1989.

4.2-     First Supplemental Indenture date as of August 1, 1989 between Company
and
M&I First National Bank, Trustee, incorporated herein by Reference to Exhibit
4.2 to Form 10K for the year ended December 31, 1989.

4.3-     Form of Senior Bond (included in Exhibit 4.2), incorporated herein by
Reference to Exhibit 4.3 to Form 10K for the year ended December 31, 1989.

4.4-     Form of Subordinated Bond (included in Exhibit 10.3), incorporated
herein
by Reference to Exhibit 4.4 to Form 10K for the year ended December 31, 1989.

4.5-     Form of Certificate of Residual Interest (included in Exhibit 10.3)
incorporated herein by Reference to Exhibit 4.5 to Form 10K for the year ended
December 31, 1989.

4.6  -   Second Supplemental indenture dated as of April 1, 1990 between
Company
and M&I First National Bank, Trustee, incorporated herein by Reference to
Exhibit 4.1 to Form 10K for the year ended December 31, 1990.

4.7  -   Form of Senior Bond (included in Exhibit 4.1), incorporated herein by 
Reference to Exhibit 4.2 to Form 10K for the year ended December 31, 1990.

4.8  -   Form of Subordinated Bond (included in Exhibit 10.3), incorporated
herein
by Reference to Exhibit 4.3 to Form 10K for the year ended December 31, 1990.

4.9  -   Form of Certificate of Residual Interest (included in Exhibit 10.3),
incorporated herein by Reference to Exhibit 4.4 to Form 10K for the year ended
December 31, 1990.


E-1


Exhibit 10.   Material Contracts

10.1-    Purchase Agreement dated August 28, 1989 among the Company, Christian
Mutual Life Insurance Company and M&I First National Bank, incorporated herein
by Reference to Exhibit 10.1  to Form 10K for the year ended December 31, 1989.

10.2-    Servicing Agreement dated August 28, 1989 among the Company, M&I First
National Bank and Christian Mutual Life Insurance Company, incorporated herein
by Reference to Exhibit 10.2 to Form 10K for the year ended December 31, 1989.

10.3-    Subordinated Indebtedness and Residual Certificate Agreement dated as
of
August 1, 1989 among the Company, Christian Mutual Life Insurance Company and
B.C. Ziegler and Company, incorporated herein by Reference to Exhibit 10.3 to
Form 10K for the year ended December 31, 1989.

10.4-    Purchase Agreement dated April 11, 1990 among the Company, Christian
Mutual Life Insurance Company, and M&I First National Bank, incorporated herein
by Reference to Exhibit 10.1 to Form 10K for the year ended December 31, 1990.

10.5-    Servicing Agreement dated April 11, 1990 among the Company, M&I First
National Bank, and
Christian Mutual Life Insurance Company,    incorporated herein by Reference to
Exhibit 10.2 to Form 10K for the year ended December 31, 1990.

10.6-    Subordinated Indebtedness and Residual Certificate Agreement dated as
of
April 1, 1990 among the Company, Christian Mutual Life Insurance Company, and
B.C. Ziegler and Company, incorporated herein by Reference to Exhibit 10.3 to
Form 10K for the year ended December 31, 1990.

Exhibit 16.   Letter re Change in Certifying Accountant

16.1-    Letter from registrant's former independent accountant dated March 27,
1997.








E-2