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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, 2001
or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to _______
Commission File Number 333-74817
MAIN PLACE FUNDING, LLC
-----------------------
(Exact name of registrant as specified in its charter)
Delaware 57-0236115
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
100 North Tryon Street, Charlotte, NC 28255
-------------------------------------------
(Address of principal executive offices) (Zip Code)
(704) 388-7436
--------------
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has 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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
On April 1, 2002, there were no shares of common stock outstanding. As of April
1, 2002 members' interests consisted of ownership percentages of 99 percent and
1 percent for Bank of America, N.A. and Main Place Trust, respectively.
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION I(1)(a) and
(b) OF FORM 10-K AND IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE
FORMAT.
Documents incorporated by reference: NONE
PART I
Item 1. BUSINESS
Main Place Funding, LLC ("Main Place"), a Delaware limited liability company, is
a subsidiary of Bank of America, N.A., which is a wholly owned indirect
subsidiary of Bank of America Corporation (the "Corporation"). On April 28,
1999, BankAmerica Corporation changed its name to Bank of America Corporation.
On July 5, 1999, NationsBank, N.A. changed its name to Bank of America, N.A. On
July 23, 1999, Bank of America, N.A. merged into Bank of America NT&SA, and the
surviving entity of that merger changed its name to Bank of America, N.A. (the
"Parent").
Main Place is the successor by merger of Main Place Real Estate Investment Trust
("MPREIT") with and into Main Place. MPREIT was established on October 29, 1996
as a Maryland real estate investment trust to consolidate the acquisition,
holding and management of certain closed-end residential mortgage loans owned by
certain affiliates of the Corporation. MPREIT was the successor by merger of
Main Place Funding Corporation ("MPFC") with and into MPREIT on November 1,
1996. On October 15, 1998, Main Place Holdings Corporation, the former parent of
MPREIT, merged with and into Main Place, and on December 23, 1998, MPREIT merged
with and into Main Place, its parent company.
As a result of the December 23, 1998 merger, Bank of America, N.A. holds a 99
percent membership interest in Main Place. The other 1 percent membership
interest is held by Main Place Trust, a Delaware business trust. In connection
with the merger of MPREIT with and into Main Place, all outstanding MPREIT Class
A Trust Shares were cancelled. All outstanding MPREIT Class B Trust Shares were
converted into rights to receive cash. As a result of the December 23, 1998
merger, Main Place's ownership interests are presented in the accompanying
financial statements to reflect the equity structure of a single-member limited
liability company ("LLC"). Main Place issues and sells mortgage-backed bonds and
acquires, owns, holds and pledges the related mortgage notes and other assets
serving as collateral in connection therewith. In connection with the merger
with MPREIT, Main Place assumed MPREIT's obligations under the Series 1995-2 and
Series 1997-1 mortgage-backed bonds.
Item 2. PROPERTIES
Main Place does not own or lease any physical property.
Item 3. LEGAL PROCEEDINGS
Main Place has no legal actions or proceedings pending against it.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Omitted in accordance with General Instruction I to Form 10-K.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
There is no common stock outstanding for Main Place. During 2001, Main Place
paid distributions of $2.5 million. Main Place made no distributions during
2000.
Item 6. SELECTED FINANCIAL DATA
Omitted in accordance with General Instruction I to Form 10-K.
2
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Total net income before cumulative effect of accounting changes was $505.5
million and $569.5 million for the years ended December 31, 2001 and 2000,
respectively. The decrease primarily resulted from decreases in interest income,
partially offset by decreases in interest expense on long term debt, reduced
funding costs associated with repurchase agreements, gains on sales of
securities, and a release of a portion of the allowance for credit losses. After
October 14, 1998, Main Place is classified as a single-member limited liability
company ("LLC") and, as such, is disregarded as an entity separate from its
owners for income tax purposes. Main Place has become aware that the predominant
practice for single-member LLCs is to provide for income taxes in their separate
financial statements, and has concluded that is a more informative presentation
than proforma disclosures. Income tax expense was $303.3 million for the year
ended December 31, 2001. Income tax expense for the year ended December 31, 2000
was $341.7 million.
Total income for the year ended December 31, 2001 was $953.0 million,
representing a decrease of $330.4 million compared to 2000. The decrease
includes a decline in interest and fees on loans from $798.0 million at December
31, 2000 to $542.3 million at December 31, 2001, due to decrease of 17 basis
points in average yield to 7.02 and a consistent reduction in the loan
portfolio. Interest income from the securities portfolio also declined $47.6
million, resulting from a reduction of $691.6 million in the average balance of
the securities portfolio. The decrease in total income also includes declines in
interest on time deposits placed of $43.1 million, resulting from a reduction of
284 basis points in average yield to 3.56 percent. The net change in total
income for the year ended December 31, 2001 also includes $13.4 million in gains
on sales of available-for-sale securities and $2.6 million increase in gains on
sales of
loans.
Total expenses (excluding income taxes) for the year ended December 31, 2001
were $144.1 million, representing a decrease of $228.1 million compared to 2000.
The decrease includes a decline in interest expense on securities sold under
agreements to repurchase of $72.2 million, resulting from a reduction of $616.4
million in average borrowings, and a 202 basis point decrease in interest rates
to 4.25 percent. Interest expense on long-term debt also declined $129.1 million
for the year ended December 31, 2001. This decrease results from a 204 basis
point decrease in average rates to 4.65 percent, along with the Series 1997-1
debt retirement of $1.0 billion on March 25, 2000 and the Series 1995-2 debt
retirement of $1.5 billion on October 25, 2000. The net change in total expense
for the year ended December 31, 2001 also includes a release of allowance for
credit losses of $21.8 million.
During 2001, Main Place made an adjustment of $21.8 million to release a portion
of the allowance for credit losses due to the decline in the average balance of
the loan portfolio throughout 2001. During 2000, Main Place recorded a $2.9
million provision for allowance for credit losses. Main Place made no provision
for credit losses. Nonperforming loans decreased $39.8 million to $23.5 million
at December 31, 2001, compared to December 31, 2000. Future economic conditions
and changes in the loan portfolio may increase nonperforming loans and,
accordingly, the level of the allowance for credit losses. The nature of the
process by which Main Place determines the appropriate allowance for credit
losses requires the exercise of considerable judgment. After review of all
relevant matters affecting loan collectibility, management believes that the
allowance for credit losses at December 31, 2001 is appropriate given its
analysis of estimated incurred credit losses at December 31, 2001.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and financial statement schedule required by this Item
are listed in the Index to Financial Statements.
3
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no changes in or disagreements with accountants on accounting and
financial disclosures.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Omitted in accordance with General Instruction I to Form 10-K.
Item 11. EXECUTIVE COMPENSATION
Omitted in accordance with General Instruction I to Form 10-K.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Omitted in accordance with General Instruction I to Form 10-K.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Omitted in accordance with General Instruction I to Form 10-K.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
a. The financial statements and financial statement schedule listed in
the Index to Financial Statements are filed as part of this report.
b. No reports on Form 8-K were filed during the quarter ended December
31, 2001.
c. The exhibits filed as part of this report are listed in the Index to
Exhibits.
4
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.
Main Place Funding, LLC
-----------------------
Date: April 1, 2002
________________________
Susan R. Faulkner
Treasurer and Senior Vice President/
Principal Financial and Accounting
Officer (Principal Financial and
Duly Authorized Officer)
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
_____________________ Treasurer and Senior Vice April 1, 2002
Susan R. Faulkner President / Principal Financial
and Accounting Officer
(Principal Financial and
Duly Authorized Officer)
Bank of America, N.A.
By:__________________ Managing Member April 1, 2002
Susan C. Carr
Main Place Trust
By:__________________ Special Managing April 1, 2002
Susan C. Carr Member
Business Trustee
5
MAIN PLACE FUNDING, LLC
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Accountants 7
Financial Statements:
Statement of Income for the Years Ended December 31, 2001, 2000 and 1999 8
Balance Sheet at December 31, 2001 and 2000 9
Statement of Cash Flows for the Years Ended December 31, 2001, 2000 and 1999 10
Statement of Changes in Members' Equity for the Years Ended December 31, 11
2001, 2000, and 1999
Notes to Financial Statements 12
Financial Statement Schedules:
Report of Independent Accountants on Financial Statement Schedule 22
Schedule IV - Mortgage Loans on Real Estate 23
6
Report of Independent Accountants
To the Members of Main Place Funding, LLC
In our opinion, the accompanying balance sheet and the related statements of
income, of changes in members' equity and of cash flows present fairly, in all
material respects, the financial position of Main Place Funding, LLC (the
"Company") at December 31, 2001 and 2000, and the results of its operations and
its cash flows for each of the three years in the period ended December 31, 2001
in conformity with accounting principles generally accepted in the United States
of America. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States of
America, which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
As disclosed in Note 2 to the financial statements, the Company changed its
method of accounting for income taxes in 2000.
/s/ PricewaterhouseCoopers LLP
Charlotte, North Carolina
March 27, 2002
7
Main Place Funding, LLC
Statement of Income
(Dollars in Thousands)
Year Ended December 31,
-----------------------------------------------------
2001 2000 1999
- -----------------------------------------------------------------------------------------------------------------------------------
Income
Interest and fees on loans $542,268 $797,965 $917,468
Interest on securities 132,304 179,942 431,486
Interest on time deposits placed 259,399 302,487 371,059
Gains on sales of securities 13,417 - 44,064
Gains on sales of loans 5,571 2,994 -
-------------- ------------- -------------
Total income 952,959 1,283,388 1,764,077
-------------- ------------- -------------
Expenses
Interest on securities sold under agreements to repurchase 70,928 143,125 289,842
Interest on long-term debt 69,738 198,853 191,274
Provision for (release of) allowance for credit losses (21,838) 2,994 -
Other operating expenses 25,276 27,191 25,820
-------------- ------------- -------------
Total expenses 144,104 372,163 506,936
-------------- ------------- -------------
Income before income taxes and cumulative effect of accounting change 808,855 911,225 1,257,141
Income tax expense 303,316 341,732 -
-------------- ------------- -------------
Net income before cumulative effect of accounting change 505,539 569,493 1,257,141
Cumulative effect of change in accounting for income taxes-benefit - 6,926 -
-------------- ------------- -------------
Net income $505,539 $576,419 $1,257,141
============== ============= =============
See accompanying notes to financial statements.
8
Main Place Funding, LLC
Balance Sheet
(Dollars in Thousands)
December 31,
2001 2000
- -------------------------------------------------------------------------------------------------------------------------
Assets
Cash and cash equivalents $ 350,405 $ 2,367,206
Time deposits placed with affiliates 11,240,849 3,820,000
Securities:
Available-for-sale (includes $885,535 and $2,075,695 pledged as collateral) 1,033,064 2,473,106
Held-to-maturity, at cost (market value $5,131 and $10,141) 5,118 10,107
---------------------------------
Total securities 1,038,182 2,483,213
---------------------------------
Loans, net of unearned income 5,152,713 9,741,301
Allowance for credit losses (7,729) (35,345)
---------------------------------
Loans, net of unearned income and allowance for credit losses 5,144,984 9,705,956
Interest receivable 36,407 77,491
Accounts receivable from affiliates 2,881 265,838
Other assets 125,704 15,778
---------------------------------
Total assets $ 17,939,412 $ 18,735,482
=================================
Liabilities
Accrued expenses due to affiliates $ 339,239 $ 458,484
Securities sold under agreements to repurchase from affiliates 885,535 2,075,695
Long-term debt 1,500,000 1,499,988
---------------------------------
Total liabilities 2,724,774 4,034,167
---------------------------------
Members' Equity
Contributed equity 13,395,436 13,395,436
Undistributed income 1,801,675 1,298,636
Accumulated other comprehensive income 17,527 7,243
---------------------------------
Total members' equity 15,214,638 14,701,315
---------------------------------
Total liabilities and members' equity $ 17,939,412 $ 18,735,482
=================================
See accompanying notes to financial statements.
9
Main Place Funding, LLC
Statement of Cash Flows
(Dollars in Thousands)
Year Ended December 31,
----------------------------------------------------
2001 2000 1999
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Activities
Net income before cumulative effect of accounting change $ 505,539 $ 569,493 $ 1,257,141
Reconciliation of income before cumulative effect to net cash
provided by operating activities
Gains on sales of securities (13,417) - (44,064)
Gains on sales of loans (5,571) (2,994)
Provision for (release of) allowance for credit losses (21,838) 2,994 -
Deferred income tax expense 9,908 2,454 -
Net decrease in interest receivable 41,084 2,592 47,453
Net decrease (increase) in accounts receivable from affiliates 262,957 (246,589) 441,485
Net (decrease) increase in accrued expenses - (3,818) 2,885
Net (decrease) in accrued expenses due to affiliates (119,245) (119,765) (12,374)
Other operating activities, net (116,095) 179 82,201
------------ ------------ -------------
Net cash provided by operating activities 543,322 204,546 1,774,727
------------ ------------ -------------
Investing Activities
Proceeds from maturities of securities held-to-maturity 4,991 35,256 156,226
Proceeds from sales and maturities of securities available-for-sale 1,456,365 555,373 5,779,228
Purchases of securities available-for-sale - (112,378) (50,892)
Net (increase) decrease in time deposits placed with affiliates (7,420,849) 1,180,000 7,000,000
Purchases of loans - - (2,923,376)
Collections on loans outstanding 3,044,615 1,753,302 3,546,540
Proceeds from sales of loans to affiliates 1,547,415 831,789 -
------------ ------------ -------------
Net cash (used in) provided by investing activities (1,367,463) 4,243,342 13,507,726
------------ ------------ -------------
Financing Activities
Net decrease in securities sold under agreements
to repurchase (1,190,160) (481,827) (6,101,296)
Proceeds from issuance of long-term debt - - 1,500,000
Retirement of long-term debt - (2,500,000) -
Distribution to members (2,500) - (12,000,000)
------------ ------------ -------------
Net cash used in financing activities (1,192,660) (2,981,827) (16,601,296)
------------ ------------ -------------
Net (decrease) increase in cash and cash equivalents (2,016,802) 1,466,061 (1,318,843)
Cash and cash equivalents at beginning of period 2,367,206 901,145 2,219,988
------------ ------------ -------------
Cash and cash equivalents at end of period $ 350,405 $ 2,367,206 $ 901,145
============ ============ =============
Supplemental cash flow disclosure
Cash paid for interest $ 142,355 $ 346,182 $ 488,304
Cash paid for income taxes 316,872 571,890 -
Loans transferred to foreclosed properties amounted to $11.4 million, $11.1
million and $18.2 million in 2001, 2000 and 1999 respectively. There were no
material noncash assets acquired or liabilities assumed in acquistions in 2001,
2000 and 1999. There were no distribution of loans to members in 2001 and 2000.
In 1999 distribution of loans to members were $120.1 million.
See accompanying notes to financial statements.
10
Main Place Funding, LLC
Statement of Changes in Members' Equity
(Dollars in Thousands)
Accumulated
Other Compre-
Contributed Undistributed Comprehensive Total Members' hensive
Equity Income Income (Loss)(1) Equity Income (Loss)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance on December 31, 1998 $ 24,980,572 $ - $ 220,081 $ 25,200,653
Net income - 1,257,141 - 1,257,141 1,257,141
Other comprehensive income - - (266,407) (266,407) (266,407)
-----------
Comprehensive income - - - - $ 990,734
===========
Distributions (11,585,136) (534,924) - (12,120,060)
-----------------------------------------------------------------
Balance on December 31, 1999 13,395,436 722,217 (46,326) 14,071,327
=================================================================
Net income before cumulative effect of
accounting change - 569,493 - 569,493 569,493
Cumulative effect of change in accounting
for income taxes - 6,926 - 6,926 6,926
Other comprehensive income - - 53,569 53,569 53,569
-----------
Comprehensive income - - - - $ 629,988
----------------------------------------------------------------- ===========
Balance on December 31, 2000 $ 13,395,436 $ 1,298,636 $ 7,243 $ 14,701,315
=================================================================
Net income before cumulative effect
of accounting change - 505,539 - 505,539 505,539
Other comprehensive income - - 10,284 10,284 10,284
-----------
Comprehensive income - - - - $ 515,823
===========
Distributions - (2,500) - (2,500)
-----------------------------------------------------------------
Balance on December 31, 2001 $ 13,395,436 $ 1,801,675 $ 17,527 $ 15,214,638
=================================================================
(1) Changes in Accumulated Other Comprehensive Income (loss) includes after-tax
net unrealized gains (losses) on securities available for sale.
See accompanying notes to financial statements.
11
Notes to Financial Statements
Note 1 - Description of Business
Main Place Funding, LLC ("Main Place"), a Delaware limited liability company, is
a subsidiary of Bank of America, N.A. (the "Parent"), which is a wholly owned
indirect subsidiary of Bank of America Corporation (the "Corporation").
Main Place was established originally as a Maryland real estate investment trust
to consolidate the acquisition, holding and management of certain closed-end
residential mortgage loans owned by certain affiliates of the Corporation.
Bank of America, N.A. holds a 99 percent membership interest in Main Place. The
other 1 percent membership interest is held by Main Place Trust, a Delaware
business trust, also a wholly owned subsidiary of Bank of America, N.A. Main
Place's ownership interests are presented in the accompanying financial
statements to reflect the equity structure of a single-member limited liability
company ("LLC"). Main Place is also considered a single-member LLC under current
tax law. Main Place issues and sells mortgage-backed bonds and acquires, owns,
holds and pledges the related mortgage notes and other assets serving as
collateral in connection therewith.
Note 2 - Summary of Significant Accounting Policies
Basis of Presentation
The accompanying financial statements have been prepared in accordance with
accounting principles generally accepted in the United States. Certain prior
period amounts have been reclassified to conform to current year
classifications. The preparation of the financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect reported amounts and
disclosures. Actual results could differ from these estimates. Significant
estimates made by management are discussed in these footnotes as applicable.
Cash and Cash Equivalents
Cash and cash equivalents includes cash on hand, cash items in the process of
collection and amounts due from affiliated banks.
Securities
Securities are classified based on management's intention on the date of
purchase. Debt securities which management has the intent and ability to hold to
maturity are classified as held-to-maturity and reported at amortized cost. All
other securities are classified as available-for-sale and carried at fair value
with net unrealized gains and losses included in accumulated other comprehensive
income on an after tax basis.
Interest and dividends on securities, including amortization of premiums and
accretion of discounts, are included in interest income. Realized gains and
losses from the sales of securities are determined using the specific
identification method.
Loans
Loans are reported at their outstanding principal balances net of any unearned
income, charge-offs, unamortized deferred fees and costs on originated loans and
premiums or discounts on purchased loans. Unearned income, discounts and
premiums are amortized to income using methods that approximate the interest
method.
12
Nonperforming Loans
Real estate secured consumer loans are classified as nonperforming at 90 days
past due. The amount deemed to be uncollectible on real estate secured consumer
loans is charged off at 180 days past due. Interest accrued but not collected is
generally written off along with the principal.
Commercial real estate loans that are past due 90 days or more as to principal
and interest, or where reasonable doubt exists as to timely collection,
including loans that are individually identified as being impaired, are
generally classified as nonperforming loans unless well secured and in the
process of collection. Interest accrued but not collected is reversed when a
commercial real estate loan is classified as nonperforming. Interest collections
on nonperforming commercial real estate loans for which the ultimate
collectibility of principal is uncertain are applied as principal reductions.
Otherwise, such collections are credited to income when received.
Allowance for Credit Losses
The allowance for credit losses is management's estimate of probable incurred
credit losses in the loan portfolio. Additions to the allowance for credit
losses are made by charges to the provision for credit losses. Credit exposures
deemed to be uncollectible are charged against the allowance for credit losses.
Recoveries of previously charged off amounts are credited to the allowance for
credit losses.
Main Place performs periodic and systematic detailed reviews of its loan
portfolios to identify inherent risks in and to assess the overall
collectibility of the portfolio. The allowance on certain homogeneous portions
of the loan portfolio, which generally consist of consumer loans, is based on
aggregated portfolio segment evaluations generally by loan type. Loss forecast
models are utilized for these segments which consider a variety of factors
including, but not limited to, historical loss experience, anticipated defaults
or foreclosures based on portfolio trends, delinquencies and credit scores, and
expected loss factors by loan type. Main Place has procedures in place to
monitor differences between estimated and actual incurred credit losses, which
include detailed periodic assessments by senior management of both individual
loans and credit portfolios and the models used to estimate incurred credit
losses in those portfolios.
Foreclosed Properties
Assets are classified as foreclosed properties and included in other assets upon
actual foreclosure or when physical possession of the collateral is taken
regardless of whether foreclosure proceedings have taken place.
Foreclosed properties are carried at the lower of the recorded amount of the
loan for which the foreclosed property previously served as collateral or the
fair value of the property less estimated costs to sell. Prior to foreclosure,
any write downs, if necessary, are charged to the allowance for credit losses.
Subsequent to foreclosure, gains or losses on the sale of and losses on the
periodic revaluation of foreclosed properties are credited or charged to
expense. Net costs of maintaining and operating foreclosed properties are
expensed as incurred.
Securities Sold Under Agreements To Repurchase
Securities sold under agreements to repurchase are with affiliates and are
treated as collateralized financing transactions and are recorded at the amounts
at which the securities were sold. (see Note 5 - Affiliate Transactions)
Income Taxes
Main Place is classified as a single-member LLC and, as such, is disregarded as
an entity separate from its owners for income tax purposes. Main Place has
become aware that the predominant practice for single-member LLCs is to provide
for income taxes in their separate financial statements, and has concluded that
is a more informative presentation than pro-forma disclosures. Accordingly,
effective January 1, 2000, Main Place recognized through a
13
cumulative effect adjustment, deferred tax assets and liabilities determined in
accordance with Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes", and the accompanying financial statements include an income
tax provision for the years ended December 31, 2001 and 2000. (see Note 7)
There are two components of income tax expense: current and deferred. Current
income tax expense approximates taxes to be paid or refunded for the applicable
period. Balance sheet amounts of deferred taxes are recognized on the temporary
differences between the basis of assets and liabilities as measured by tax laws
and their basis as reported in the financial statements. Deferred tax expense or
benefit is then recognized for the change in deferred tax liabilities or assets
between periods.
Recognition of deferred tax assets is based on management's belief that it is
more likely than not that the tax benefit associated with certain temporary
differences will be recognized. A valuation allowance is recorded for those
deferred tax items for which it is more likely than not that realization will
not occur.
Recently Issued Accounting Pronouncement
In 2001, the Financial Accounting Standard Board (FASB) issued Statement of
Financial Accounting Standards No. 141, "Business Combinations, Statement of
Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets",
Statement of Financial Accounting Standards No. 143, "Accounting for Assets
Retirement Obligations" and Financial Accounting Standards No. 144, "Accounting
for the Impairment or Disposal of Long Lived Assets". Main Place does not expect
the adoption of these pronouncements to have a material impact on its results of
operations or financial condition.
Note 3 - Securities
The amortized cost and market values of available-for-sale securities at
December 31 were (dollars in thousands):
2001
-------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
-------------- ------------- --------------- -------------
Mortgage-backed
securities $ 1,005,244 $ 28,350 $ (530) $ 1,033,064
============== ============= =============== =============
2000
-------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
-------------- ------------- --------------- -------------
Mortgage-backed
securities $ 2,461,610 $ 16,283 $ (4,787) $ 2,473,106
============== ============= =============== =============
14
The amortized cost and market values of held-to-maturity securities at December
31 were (dollars in thousands):
2001
-------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
-------------- ------------- --------------- -------------
Mortgage-backed
securities $ 5,118 $ 17 $ (4) $ 5,131
============== ============= =============== =============
2000
-------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
-------------- ------------- --------------- -------------
Mortgage-backed
securities $ 10,107 $ 34 $ - $ 10,141
============== ============= =============== =============
Gains of approximately $13.4 million and $44.1 million were realized on sales of
available-for-sale securities during 2001 and 1999, respectively. No gains or
losses on sales of securities were recognized during 2000.
The expected maturities of held-to-maturity and available-for-sale securities at
December 31, 2001, are summarized in the following tables (dollars in
thousands). Actual maturities may differ from contractual maturities or
maturities shown below since borrowers may have the right to prepay obligations
with or without prepayment penalties.
Available-for-Sale Securities
-----------------------------
Net
Amortized Market Unrealized
Cost Value Gains
--------------- --------------- ---------------
Due in one year or less $ 80,263 $ 83,185 $ 2,922
Due after one year through five years 353 362 9
Due after five years through ten years 161,551 166,907 5,356
Due after ten years 763,077 782,610 19,533
--------------- --------------- ---------------
$ 1,005,244 $ 1,033,064 $ 27,820
=============== =============== ===============
15
Held-to-Maturity Securities
---------------------------
Net
Amortized Market Unrealized
Cost Value Gains
------------ ----------- ------------
Due in one year or less $ - $ - $ -
Due after one year through five years 392 392 -
Due after five years through ten years 3,824 3,840 16
Due after ten years 902 899 (3)
--------- ---------- --------
$ 5,118 $ 5,131 $ 13
========= ========== ========
Note 4 - Loans
The following table presents the composition of loans at December 31 (dollars in
thousands):
2001 2000
- -------------------------------------------------------------------------------
Residential mortgage ......................... $ 5,149,783 $ 9,737,355
Commercial real estate ....................... 2,930 3,946
----------- -----------
Total loans, net of unearned income ...... $ 5,152,713 $ 9,741,301
=========== ===========
Mortgage loans collateralizing mortgage-backed bonds (as described in Note 6)
were comprised of the following at December 31 (dollars in thousands):
2001 2000
- --------------------------------------------------------------------------------
Adjustable-rate .............................. $ 1,892,016 $ 1,760,555
Fixed-rate ................................... 482,821 457,479
----------- ------------
Total mortgage loans ...................... $ 2,374,837 $ 2,218,034
=========== ============
Transactions in the allowance for credit losses for the years ended December 31
were as follows (dollars in thousands):
2001 2000 1999
- ----------------------------------------------------------------------------------------------------------
Balance, January 1 .................................................. $ 35,345 $ 35,988 $ 37,599
Net loans charged off ............................................... (207) (643) (1,611)
Allowance for loans sold ............................................ (5,571) (2,994)
Provision for (release of) allowance for credit losses .............. (21,838) 2,994 -
--------- -------- ---------
Balance, December 31 ................................................ $ 7,729 $ 35,345 $ 35,988
========= ======== =========
16
Main Place had $23.5 million of nonperforming loans at December 31, 2001 and
$63.3 million at December 31, 2000. Foreclosed properties at December 31, 2001,
were $5.3 million compared to $6.6 million at December 31, 2000.
Note 5 - Affiliate Transactions
Main Place maintains its cash and cash equivalent accounts with the Parent. Main
Place had $11.2 billion and $3.8 billion of time deposits placed with the Parent
for the years ended December 31, 2001 and 2000, respectively. Interest income on
time deposits placed with the Parent for the years ended December 31, 2001, 2000
and 1999 was $259.4 million, $302.5 million and $371.1 million, respectively.
At December 31, 2001 and 2000, Main Place had $2.9 million and $265.8 million,
respectively, of accounts receivable from affiliates. These receivables are
related to sales of loans to the Parent, mortgage payments and securities
principal and interest payments in process of collection, which generally clear
within 30 days.
At December 31, 2001 and 2000, Main Place had $885.5 million and $2.1 billion,
respectively, of U.S. government securities sold under agreements to repurchase
from the Parent and Banc of America Securities LLC, a wholly-owned subsidiary of
the Corporation, which mature on demand. Interest expense on these securities
for the years ended December 31, 2001, 2000 and 1999 was $70.9 million, $143.1
million and $289.8 million, respectively. At December 31, 2001, both the
carrying amount and the market value of the underlying securities sold under
these repurchase agreements were $885.5 million. At December 31, 2001, the
interest rate on the $885.5 million repurchase liability was 4.25 percent.
Main Place has entered into agreements with the Parent for the servicing and
administration of its mortgage loan portfolio. Servicing fees paid to the Parent
approximated $24.4 million, $25.4 million and $23.3 million for the years ended
December 31, 2001, 2000 and 1999, respectively, and are included in "Other
operating expenses" on the accompanying statement of income. Servicing fees are
based on actual collections on loans.
From time to time, Main Place purchases certain mortgage loans originated by the
Parent. Main Place purchased no loans from the Parent during 2001 or 2000. Main
Place purchased $2.9 billion of loans from the Parent for the year ended
December 31, 1999. Purchases or sales of loans between Main Place and the Parent
are at book value, excluding any related allowance for loan loss.
Accrued expenses due to affiliates as of December 31, 2001 and 2000 were $339.2
million and $458.5 million, respectively, composed primarily of income tax
payable to the Parent of $325.4 million and $338.9 million, respectively.
During the years ended December 31, 2001and 2000, Main Place sold $1.5 billion
and $831.8 million of mortgage loans to the Parent, respectively. During the
year ended December 31, 1999, Main Place distributed $120.1 million of loans to
members. Gains on sales of loans sold to the Parent for the years ended December
31, 2001 and 2000 were $5.6 million and $2.9 million, respectively. No gains or
losses were recorded on these transactions during 1999.
There were no securities purchased from the Parent during the years ended
December 31, 2001 and 1999. During the year ended December 31, 2000, Main Place
purchased $112.4 million of securities from the Parent.
17
Note 6 - Long-Term Debt
In April 1999, the Securities and Exchange Commission declared effective Main
Place's shelf registration statement ("Registration Statement") providing an
additional $5 billion of capacity for issuance of mortgage-backed bonds
("Bonds"). Bonds have been issued under this as well as previously effective
registration statements. The Bonds, which were issued in series pursuant to
separate indentures, are generally subject to the following terms. The Bonds,
collateralized primarily by mortgage loans on 1-to-4 family dwellings, are
obligations solely of Main Place. The Bonds are not prepayable at the option of
Main Place, but are subject to redemption in whole or in part under certain
circumstances. Under the terms of an indenture relating to each series of Bonds,
Main Place must maintain a minimum amount of eligible collateral, which is
determined on a discounted basis and may consist of mortgage loans, certain U.S.
agency mortgage pass-through certificates, U.S. government securities and cash
held by a trustee (the "Trustee"). The types, characteristics and permitted
amounts of eligible collateral are subject to change from time to time without
the consent of the bondholders if such changes would not adversely affect the
ratings assigned to the Bonds. In the event such collateral requirements are not
met with respect to any series, Main Place must provide additional or substitute
mortgage loans or other acceptable collateral with respect to such series to
meet the required amounts of eligible collateral and/or repurchase Bonds in an
amount sufficient to meet collateral requirements. If sufficient eligible
collateral is not supplied and/or sufficient Bonds are not repurchased, Main
Place must redeem a portion of the outstanding Bonds of such series such that
the existing amount of the eligible collateral meets the collateral requirements
of the indenture relating to the Bonds of such series that remain outstanding
after the redemption. In the event Main Place should fail to comply and two
thirds of bondholders not waive the default event, the Trustee is provided
certain remedies on behalf of the bondholders which may include liquidation of
the pledged collateral. As of December 31, 2001, Main Place had the authority to
issue approximately $3.5 billion of securities under its existing shelf
registration statement.
The following table displays the primary terms of Main Place's 1999-1
mortgage-backed bonds at December 31, 2001 (dollars in thousands):
Series
1999-1
(Issued
May 1999)
- ------------------------------------------------------------------------------------
Amount issued ........................................................ $1,500,000
Reference rate ....................................................... 3-mo. LIBOR
+12 bps
Period-end interest rate ............................................. 2.250%
Maturity ............................................................. 2002
Mortgage loans and cash collateralizing mortgage-backed bonds:
Collateral - book value ......................................... $2,534,864
Collateral - discounted value ................................... $2,070,423
Collateral - approximate amount exceeding
minimum indenture requirements ............................. $487,923
On March 25, 2000, Main Place repaid its obligations of $1.0 billion on the
Series 1997-1 mortgage-backed bonds. On October 25, 2000, Main Place repaid its
obligations of $1.5 billion on the Series 1995-2 mortgage-backed bonds.
18
Note 7 - Income Taxes
Due to Main Place's status as discussed in Note 2, current and deferred income
tax expense is presented below on an actual and pro-forma basis for 2001, 2000,
and 1999. The components of actual and pro-forma income tax expense for the
years ended December 31, 2001, 2000 and 1999 were as follows (dollars in
thousands):
Actual Actual Pro-Forma
---------- ---------- ----------
2001 2000 1999
- -------------------------------------------------------------------------------- ----------
Current - expense
Federal $ 273,845 $ 316,642 $ 439,035
State 19,563 22,636 31,244
---------- ---------- ----------
293,408 339,278 470,279
---------- ---------- ----------
Deferred - (benefit)/expense
Federal 9,480 2,393 (12,628)
State 428 61 (492)
---------- ---------- ----------
9,908 2,454 (13,120)
---------- ---------- ----------
Total income tax expense $ 303,316 $ 341,732 $ 457,159
========== ========== ==========
A reconciliation of the expected federal income tax expense, based on the
federal statutory rate of 35 percent for 2001, 2000 and 1999, to the actual
income tax expense for the years ended December 31, 2001, 2000 and 1999, is as
follows (dollars in thousands):
Actual Actual Pro-Forma
---------- ---------- ----------
2001 2000 1999
- -------------------------------------------------------------------------------- ----------
Expected federal tax expense $ 283,099 $ 318,929 $ 439,999
Increase (decrease) in taxes resulting from
State tax expense, net of federal benefit 13,144 14,774 19,816
Other 7,073 8,029 (2,656)
---------- ---------- ----------
Total income tax expense $ 303,316 $ 341,732 $ 457,159
========== ========== ==========
19
Significant components of Main Place's actual deferred tax assets and
(liabilities) on December 31, 2001 and 2000 are as follows (dollars in
thousands):
Actual Actual
---------- ---------
2001 2000
- -------------------------------------------------------------------------------
Deferred tax liabilities
Securities available for sale $ (10,293) $ (4,253)
Discount Accretion (1,440) (2,102)
Other, net (6,598) (6,142)
---------- ---------
Gross deferred tax liabilities (18,331) (12,497)
---------- ---------
Deferred tax assets
Allowance for credit losses 2,831 12,945
---------- ---------
Gross deferred tax assets 2,831 12,945
---------- ---------
Net deferred tax assets/(liabilities) $ (15,500) $ 448
========== =========
Note 8 - Fair Values of Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures About Fair
Value of Financial Instruments," requires the disclosure of the estimated fair
values of financial instruments. The fair value of an instrument is the amount
at which the instrument could be exchanged in a current transaction between
willing parties, other than in a forced or liquidation sale. Quoted market
prices, if available, are utilized as estimates of the fair values of financial
instruments. Fair values of items for which no quoted market prices exist have
been derived based on management's assumptions, the estimated amount and timing
of future cash flows and estimated discount rates. The estimation methods for
individual classifications of financial instruments are more fully described
below. Different assumptions could significantly affect these estimates.
Accordingly, the net realizable values could be materially different from the
estimates presented below. In addition, the estimates are only indicative of
individual instruments' values and should not be considered an indication of the
fair value of Main Place.
Short-Term Financial Instruments
The carrying value of short-term financial instruments, including cash and cash
equivalents, repurchase agreements, accounts receivable from affiliates,
interest receivable and time deposits placed with affiliates, approximates the
fair value. These financial instruments generally expose Main Place to limited
credit risk, have no stated maturities or have maturities of less than 30 days
and carry interest rates which approximate market.
Loans
Fair values were estimated for the loans based on type of loan and maturity. The
fair value of loans was determined by discounting estimated cash flows using
interest rates approximating the December 31, 2001 origination rates of the
Corporation and its affiliates for similar loans and using credit factors.
Contractual cash flows for residential mortgage loans were adjusted for
estimated prepayments using published industry data. Where quoted market prices
were available, such market prices were utilized as estimates of fair value.
20
Long-Term Debt
The Series 1999-1 mortgage-backed bonds are variable rate instruments and the
fair value approximated book value at December 31, 2001 and 2000.
Held-to-Maturity and Available-for-Sale Securities
The carrying value of held-to-maturity and available-for-sale securities
approximates the fair value. (see Note 3)
The book and fair values of financial instruments for which book and fair value
differed on December 31 were (dollars in thousands):
2001 2000
-------------------------------------------------
Book Fair Book Fair
Value Value Value Value
- -----------------------------------------------------------------------------------------------
Financial assets
Loans, net of unearned income ........ $ 5,152,713 $ 5,292,894 $ 9,741,301 $ 9,779,541
21
Report of Independent Accountants on
Financial Statement Schedule
To the Members of Main Place Funding, LLC
Our audits of the financial statements referred to in our report dated February
8, 2002 also included an audit of the financial statement schedule listed in
Item 14(a) of this Form 10-K. In our opinion, this financial statement schedule
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related financial statements.
/s/ PricewaterhouseCoopers LLP
Charlotte, North Carolina
March 27, 2002
22
Main Place Funding, LLC
Schedule IV - Mortgage Loans on Real Estate
December 31, 2001 (Dollars in Thousands)
- --------------------------------------------------------------------------------
Principal Amount
Final Carrying of Loans Subject
Interest Maturity Periodic Amount of to Delinquent
Description Rate Date Payment Terms Mortgage Loans Principal/Interest/(1)/
- ------------------------------------------------------------------------------------------------------------------------------------
Conventional loans original balance
$0 to $50.................... 6.00%.to 10.00% Varies Int and prin monthly $ 50,032 $ 8,768
Number of Loans 2,516 366
$50 to $100.................. 6.00% to 10.00% Varies Int and prin monthly $ 105,557 $ 16,752
Number of Loans 2,068 298
$100 to $150................. 6.00% to 10.00% Varies Int and prin monthly $ 62,284 $ 8,836
Number of Loans 666 86
$150 to $200................. 6.00% to 10.00% Varies Int and prin monthly $ 38,001 $ 3,298
Number of Loans 286 22
Greater than $200............ 6.00% to 10.00% Varies Int and prin monthly $ 379,477 $ 9,653
Number of Loans 1,792 45
Government loans original balance
$0 to $50.................... 6.00%.to 10.00% Varies Int and prin monthly $ 11,068 $ 1,934
Number of Loans 300 51
$50 to $100.................. 6.00% to 10.00% Varies Int and prin monthly $ 87,370 $ 9,776
Number of Loans 1,338 148
$100 to $150................. 6.00% to 10.00% Varies Int and prin monthly $ 34,608 $ 2,652
Number of Loans 330 24
$150 to $200................. 6.00% to 10.00% Varies Int and prin monthly $ 5,698 $ 595
Number of Loans 41 4
Greater than $200............ 7.01% to 9.50% Varies Int and prin monthly $ 324 $ -
Number of Loans 1
Jumbo loans original balance
Greater than $200............ 6.00% to 10.00% Varies Int and prin monthly $ 3,992,801 $ 41,148
Number of Loans 11,922 114
Loans serviced by others.......... 6.46% to 10.18% Varies Int and prin monthly $ 385,493 $ -
Number of Loans 5
- ------------------------------------------------------------------------------------------------------------------------------------
Total mortgage loans on
real estate............................................................................... $ 5,152,713 $ 103,412
====================================================================================================================================
Total number of mortgage loans on
real estate............................................................................... 21,265 1,158
====================================================================================================================================
(1) Loans are deemed delinquent at 30 days past due.
23
Main Place Funding, LLC
Form 10-K
Index to Exhibits
Exhibit No. Description
2(a) Agreement of Merger merging Main Place Holdings Corporation into
Main Place Holdings, LLC, dated as of October 15, 1998. (1)
2(b) Agreement and Plan of Merger between Main Place Real Estate
Investment Trust and Main Place Funding, LLC, dated as of
December 22, 1998.(1)
3(a) Limited Liability Company Agreement of Main Place Holdings, LLC,
dated as of October 15, 1998. (1)
3(b) Amended and Restated Limited Liability Company Agreement of Main
Place Funding, LLC, dated as of December 14, 1998. (1)
4(a) Indenture of Trust dated as of October 31, 1995, between Main
Place Funding Corporation and First Trust National Association,
pursuant to which Main Place Funding Corporation issued
Mortgage-Backed Bonds, Series 1995-2. (incorporated by reference
from the Form 8-K previously filed on October 31, 1995)
4(b) First Supplemental Indenture of Trust dated as of November 1,
1996 to Indenture of Trust dated as of October 31, 1995 between
Main Place Funding Corporation and First Trust National
Association, as Trustee. (incorporated by reference from the
Form 10-Q previously filed on November 14, 1996)
4(c) Indenture of Trust dated as of March 18, 1997, between Main
Place Funding Corporation and First Trust National Association,
as Trustee. (incorporated by reference from the Form 10-Q
previously filed on May 13, 1997)
4(d) Second Supplemental Indenture of Trust, dated as of December 23,
1998, between Main Place Funding, LLC and U.S. Bank Trust
National Association, as Trustee, in connection with the
Indenture of Trust dated as of October 31, 1995. (1)
4(e) First Supplemental Indenture of Trust, dated as of December 23,
1998, between Main Place Funding, LLC and U.S. Bank Trust
National Association, as Trustee, in connection with the
Indenture of Trust dated as of March 18, 1997. (1)
4(f) Indenture of Trust dated as of May 25, 1999, between Main Place
Funding, LLC and U.S. Bank National Association, as Trustee.
(incorporated by reference from the Form 8-K filed on May 25,
1999)
4(g) Assignment and Assumption Agreement between NationsBank, N.A.
and Main Place Trust, dated as of December 14, 1998. (1)
4(h) Trust Agreement of Main Place Trust, dated as of December 14,
1998. (1)
10(a) Servicing Agreement dated as of July 18, 1995, between Main
Place Funding Corporation and NationsBanc Mortgage Corporation.
(incorporated by reference from the Current Report on Form 8-K
previously filed on July 18, 1995)
24
10(b) Servicing Agreement dated as of October 31, 1995, between Main
Place Funding Corporation and NationsBanc Mortgage Corporation.
(incorporated by reference from the Current Report on Form 8-K
previously filed on October 31, 1995)
10(c) Servicing Agreement dated November 1, 1996, between Main Place
Real Estate Investment Trust and NationsBanc Mortgage
Corporation. (incorporated by reference from the Quarterly
Report on Form 10-Q previously filed on November 14, 1996)
10(d) Servicing Agreement dated as of November 1, 1996, between Main
Place Real Estate Investment Trust and NationsBank, N.A.
(incorporated by reference from the Quarterly Report on Form
10-Q previously filed on November 14, 1996)
10(e) Servicing Agreement dated as of March 18, 1997, between Main
Place Funding Corporation and NationsBanc Mortgage Corporation.
(incorporated by reference from the Quarterly Report on Form
10-Q previously filed on May 13, 1997)
10(f) Servicing Agreement dated as of May 25, 1999, by and between
Main Place Funding LLC and Nationsbanc Mortgage Corporation.
(incorporated by reference from the Form 8-K filed on May 25,
1999)
12 Ratio of Earnings to Fixed Charges.
23 Consent of PricewaterhouseCoopers LLP.
(1) Incorporated by reference from the Form 10-K previously filed on March 31,
2001
25