Back to GetFilings.com
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, 1996
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 33-82040
________
MAIN PLACE REAL ESTATE INVESTMENT TRUST
(Exact name of registrant as specified in its charter)
Maryland 56-1996001
________ __________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
100 North Tryon Street, 23rd floor, 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 ]
No shares of voting securities of the registrant are held by non-affiliates.
On February 28, 1997, there were 100,000 shares of the registrant's Class A
Trust shares outstanding and 110 shares of the registrant's Class B Trust shares
outstanding.
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 Real Estate Investment Trust (MPREIT) is an indirect subsidiary of
NationsBank Corporation (the Corporation). 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 also issues and sells
mortgage-backed bonds and subordinated indebtedness and acquires, owns, holds
and pledges the related mortgage notes and other assets serving as collateral in
connection therewith. On November 1, 1996, Main Place Funding Corporation (MPFC)
was merged with and into MPREIT, and MPREIT assumed MPFC's obligations under its
mortgage-backed bonds and subordinated indebtedness.
ITEM 2. PROPERTIES
MPREIT does not own or lease any physical property.
ITEM 3. LEGAL PROCEEDINGS
MPREIT has no legal actions or proceedings pending.
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 public trading market for MPREIT's Class A Trust Shares (Class A
common shares) or Class B Trust Shares (Class B common shares). On December 31,
1996, all of MPREIT's outstanding shares of Class A common shares were held by
Main Place Holdings Corporation (MP Holdings), a wholly owned subsidiary of
NationsBank, N.A. On December 31, 1996, all of the outstanding shares of MPREIT
Class B common shares were held by NationsBank, N.A. During 1996 and 1995, MPFC
paid aggregate cash dividends of $47.3 million and $27.7 million, respectively,
on its common shares to affiliated entities. In 1996, MPREIT paid aggregate cash
dividends of $139.5 million and $15 thousand, respectively, on its Class A
common shares and Class B common shares.
ITEM 6. SELECTED FINANCIAL DATA
Omitted in accordance with General Instruction I to Form 10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Net income for the years ended December 31, 1996 and 1995 was $193.0 million and
$31.2 million, respectively. The increase in net income reflects the impact of
several factors including the levels and average interest yields on the mortgage
loan portfolio, the issuance of the Series 1995-1 and 1995-2 Bonds and the
subordinated notes, the effects of securities market conditions, the
volatility of interest rates and MPREIT's election for real estate investment
trust status.
2
Interest income increased $289 million in 1996 when compared to 1995 due
primarily to a $3.7 billion increase in average loans outstanding to $6.4
billion in 1996. The increase in average loans in 1996 was primarily due to the
contribution of loans from affiliates of the Corporation. Interest expense
increased $111 million in 1996 when compared to 1995 due primarily to a $2.1
billion increase in average mortgage-backed bonds outstanding. Other operating
expenses increased $8.5 million to $17.6 million in 1996 compared to 1995 due
primarily to higher mortgage servicing costs associated with the increase in
year-to-date average loans outstanding as discussed above and a $1.0 million
intercompany charge primarily for services performed in connection with the
formation of the real estate investment trust.
The average yields on the mortgage loans for the years ended December 31, 1996
and 1995 were 7.53 percent and 7.34 percent, respectively. Changes in the
average yield are primarily related to the mix between fixed- and
adjustable-rate loans, the repricing terms of adjustable rate loans, the impact
of the general level of interest rates, the levels of prepayments on mortgage
loans and scheduled amortization of the portfolio as a whole. The average
yield on securities available for sale was 7.08 percent for the year ended
December 31, 1996.
The average interest rates on the outstanding mortgage-backed bonds for the
years ended December 31, 1996 and 1995 were 5.89 percent and 6.27 percent,
respectively. The average interest rates on the outstanding subordinated notes
for the years ended December 31, 1996 and 1995 were 6.36 percent and 7.90
percent, respectively. To manage its interest rate risk MPREIT utilizes
generic option products, primarily interest rate caps and floors. Interest
rate caps and floors are agreements where, for a fee, the purchaser obtains
the right to receive interest payments when a variable interest rate moves
above or below a specified cap or floor rate, respectively. At December
31, 1996, MPREIT had a gross notional amount of $2.0 billion in outstanding
interest rate cap and floor contracts.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements required by this Item are listed in the Index to
Financial Statements on page 5.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
There were no changes in or disagreements with accountants on accounting or
financial disclosure.
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.
3
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 Real Estate Investment Trust
---------------------------------------
Date: February 28, 1997 /s/ Karin Hirtler-Garvey
------------------------
Karin Hirtler-Garvey
Senior Vice President/
Principal Accounting 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
/s/ John E. Mack President, Treasurer and February 28, 1997
- ---------------------------- Trustee
John E. Mack (Principal Executive and
Financial Officer)
/s/ Karin Hirtler-Garvey Senior Vice President/ February 28, 1997
- -------------------------- Principal Accounting Officer
Karin Hirtler-Garvey (Principal Accounting Officer)
/s/ James H. Luther Vice President and Trustee February 28, 1997
- -------------------------------
James H. Luther
/s/ G. Patrick Phillips Trustee February 28, 1997
- -----------------------
G. Patrick Phillips
MAIN PLACE REAL ESTATE INVESTMENT TRUST
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Accountants 6
Financial Statements:
Balance Sheet on December 31, 1996 and 1995 7
Statement of Income for the Years Ended December 31, 1996 and 1995
and for the Period from Inception through December 31, 1994 8
Statement of Cash Flows for the Years Ended December 31, 1996 and 1995
and for the Period from Inception through December 31, 1994 9
Statement of Changes in Shareholders' Equity for the Years Ended December 31,
1996 and 1995 and for the Period from Inception through December 31, 1994 10
Notes to Financial Statements 11
5
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of
Main Place Real Estate Investment Trust
In our opinion, the accompanying balance sheets and related statements of
income, of changes in shareholders' equity and of cash flows present fairly, in
all material respects, the financial position of Main Place Real Estate
Investment Trust (the Trust) at December 31, 1996 and 1995, and the results of
its operations and its cash flows for each of the two years in the period ended
December 31, 1996 and for the period from inception through December 31, 1994 in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Trust'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 generally accepted
auditing standards 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 the opinion expressed above.
/s/ Price Waterhouse LLP
Charlotte, North Carolina
February 28, 1997
6
Main Place Real Estate Investment Trust
Balance Sheet
(Dollars in Thousands)
December 31
--------------------------------
1996 1995
- ----------------------------------------------------------------------------------------------------------------
Assets
Cash and cash equivalents.......................................................$ 253,578 $ 4,870
Securities available for sale ................................................... 836,938 --
Amount due from Trustee ......................................................... 101,325 106,531
Loans, net of unearned income ................................................... 14,704,375 4,523,744
Allowance for credit losses ..................................................... (42,396) (17,805)
------------ ------------
Loans, net of unearned income and allowance for credit losses ............... 14,661,979 4,505,939
Interest receivable ............................................................. 91,836 21,907
Accounts receivable from affiliates ............................................. 214,856 --
Deferred tax asset .............................................................. -- 6,370
Other assets..................................................................... 6,927 9,198
------------ ------------
$ 16,167,439 $ 4,654,815
============ ============
Liabilities
Accrued expenses................................................................$ 27,316 $ 28,506
Mortgage-backed bonds .......................................................... 2,999,544 2,999,342
Subordinated notes.............................................................. 1,072,733 1,320,183
----------- ------------
4,099,593 4,348,031
----------- -----------
Shareholders' Equity
Class A common shares, $1 par value-authorized 200,000 shares;
issued: 1996- 100,000 shares; 1995- 0 shares ............................... 100 --
Class B common shares, $10,000 par value-authorized 200 shares;
issued: 1996- 110 shares; 1995- 0 shares ................................... 1,100 --
Common shares, $.01 par value-authorized 1,000 shares;
issued: 1996- 0 shares; 1995- 100 shares ................................... -- --
Additional paid-in capital .................................................... 12,044,801 299,648
Retained earnings ............................................................. 13,315 7,136
Net unrealized gains on securities available for sale ......................... 8,530 --
----------- ------------
Total shareholders' equity .................................................. 12,067,846 306,784
------------ ------------
$ 16,167,439 $ 4,654,815
============ ============
See accompanying notes to financial statements.
7
Main Place Real Estate Investment Trust
Statement of Income
(Dollars in Thousands)
Year Year From Inception
Ended Ended Through
December 31, December 31, December 31,
1996 1995 1994
- -----------------------------------------------------------------------------------------
Income
Interest and fees on loans................... $ 484,191 $ 204,024 $ 32,209
Interest on securities available for sale.... 8,335 - -
------------------------------------
Total income.............................. 492,526 204,024 32,209
------------------------------------
Expenses
Interest...................................... 258,174 146,805 25,701
Other operating expenses...................... 17,643 9,149 1,049
------------------------------------
Total expenses............................. 275,817 155,954 26,750
------------------------------------
Income before income taxes....................... 216,709 48,070 5,459
Income tax expense............................... 23,737 16,825 1,910
------------------------------------
Net income....................................... $ 192,972 $ 31,245 $ 3,549
====================================
See accompanying notes to financial statements.
8
Main Place Real Estate Investment Trust
Statement of Cash Flows
(Dollars in Thousands)
Year Year From Inception
Ended Ended Through
December 31, December 31, December 31,
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net income ............................. $ 192,972 $ 31,245 $ 3,549
Reconciliation of net income to net cash provided by operating activities ..............
Deferred income tax expenses (benefit) ............................................ 6,370 (2,523)
Net increase in accounts receivable from affiliates ............................... (214,856) - -
Net increase in interest receivable ............................................... (69,929) (14,283) (7,321)
Net increase/(decrease) in accrued expenses ....................................... (1,190) (5,474) 27,606
Other operating activities ........................................................ 2,049 5,288 -
-------------------------------------
(84,584) 14,253 23,834
-------------------------------------
INVESTING ACTIVITIES
Proceeds from sales and maturities of securities available for sale ..................... 6,127 - -
Net decrease (increase) in amount due from Trustee ..................................... 5,206 (67,731) -
Net reduction of mortgage loans outstanding ............................................ 1,259,402 399,908 40,176
-------------------------------------
Net cash provided by investing acticities ......................................... 1,270,735 332,177 40,176
-------------------------------------
FINANCING ACTIVITES
Issuances of long-term debt ............................................................ 516,593 3,925,633 1,297,924
Retirement of long-term debt ........................................................... (764,043) (913,451) -
Proceeds from issuance of common shares ................................................ 1,100 - 5,000
Distribution of capital to NationsBank Texas ........................................... (498,750) (3,393,017) -
Distribution of capital to NationsBank South ........................................... (5,550)
Cash dividends paid .................................................................... (186,793) (27,658) (1,300,001)
------------------------------------
Net cash used by financing activities ............................................. (937,443) (408,493) 2,923
------------------------------------
Net increase/(decrease) in cash and cash equivalents ........................................ 248,708 (62,063) 66,933
Cash and cash equivalents at beginning of period ............................................ 4,870 66,933 -
------------------------------------
Cash and cash equivalents at end of period .................................................. $ 253,578 $ 4,870 $ 66,933
====================================
Supplementatl cash flow disclosure
Cash paid for interest ................................................................. $ 258,197 $ 169,106 $ -
Cash paid for income taxes ............................................................. 19,432 - -
Mortgage loans converted to mortgage-backed securities ................................. $ 755,213 - -
Contribution of available for sale securities .......................................... 79,280 - -
Contributions of loans, net ............................................................ 12,222,202 3,422,099 -
Noncash dividends of loans to affiliates ............................................... 52,030 - -
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
9
Main Place Real Estate Investment Trust
Statement of Changes in Shareholders' Equity
(Dollars in Thousands)
Class A Class B Additional Total
Common Stock Common Shares Common Shares Paid-In Retained Shareholders'
Shares Amount Shares Amount Shares Amount Capital Earnings Other Equity
- ------------------------------------------------------------------------------------------------------------------------------------
Net income ................ - $ - $ $ $ - $ 3,549 $ - $ 3,549
Common shares issued ...... 100 5,000 5,000
Net assets contributed by
NationsBank Texas ....... 1,565,567 1,565,567
Distribution of capital to
NationsBank Texas ....... (1,300,001) (1,300,001)
------------------------------------------------------------------------------------------------------
Balance on December 31, 1994. 100 - 270,566 3,549 - 274,115
Net income ................ 31,245 31,245
Cash dividends paid to
NationsBank Texas ....... 3,422,099 3,422,099
Distribution of capital to
NationsBank Texas ....... (3,393,017) (3,393,017)
------------------------------------------------------------------------------------------------------
Balance on December 31, 1995. 100 - 299,648 7,136 - 306,784
Net income ................ 192,972 192,972
Cash dividends paid ....... (186,793) (186,793)
Common shares issued ...... 100,000 100 110 1,100 1,200
Retirement of common
shares ..................(100)
Net assets contributed by
NationsBank South ....... 3,909,319 3,909,319
Distribution of capital to
NationsBank South ....... (50,776) (50,767)
Net assets contributed by
NationsBank Texas ....... 6,364,905 6,364,905
Distribution of capital to
NationsBank Texas ....... (505,553) (505,533)
Net assets contribution by
NationsBank, N.A. ....... 2,027,258 2,027,258
Net change in unrealized
gains/(losses) on
securities available for
sale .................... 8,530 8,530
------------------------------------------------------------------------------------------------------
Balance on December 31, 1996. - $ - 100,000 $ 100 110 $1,100 $12,044,801 $ 13,315 $ 8,530 $12,067,846
======================================================================================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATMENTS.
10
MAIN PLACE REAL ESTATE INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ACCOUNTING POLICIES
BASIS OF PRESENTATION
Main Place Real Estate Investment Trust (MPREIT) is a wholly owned indirect
subsidiary of NationsBank, N.A., which is a wholly owned indirect subsidiary of
NationsBank Corporation (the Corporation). 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 afilliates of the Corporation.
As a result of the merger of Main Place Funding Corporation (MPFC) with and into
MPREIT on November 1, 1996, MPREIT issues and sells mortgage-backed bonds and
subordinated indebtedness and acquires, owns, holds and pledges the related
mortgage notes and other assets serving as collateral in connection therewith.
The merger between MPREIT and MPFC was accounted for as a pooling of interests
of entities under common control and, accordingly, the accompanying financial
statements include the results of operations and financial condition of MPFC
since inception.
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles. The preparation of the financial
statements in conformity with generally accepted accounting principles 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.
Certain prior period amounts have been reclassified to conform to current period
classifications.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes 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. Securities which management has the intent and ability to hold to
maturity are classified as held for investment 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 shareholders' equity.
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
charge-offs and unamortized premiums or discounts. Discounts and premiums are
amortized to income using methods that approximate the interest method.
NONPERFORMING LOANS
Residential mortgages are generally placed on nonperforming status at 120 days
past due or upon inception of foreclosure proceedings. Ordinarily, interest
accrued but not collected is charged off along with the principal.
11
ALLOWANCE FOR CREDIT LOSSES
The allowance for credit losses is available to absorb losses inherent in the
credit extension process. 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.
MPREIT's process for determining an appropriate allowance for credit losses
includes management's judgment and use of estimates. The adequacy of the
allowance for credit losses is reviewed regularly by management. Additions to
the allowance for credit losses are made by charges to the provision for credit
losses. On a quarterly basis, a comprehensive review of the adequacy of the
allowance for credit losses is performed. This assessment is made in the context
of historical losses, as well as existing economic conditions and performance
trends within specific portfolio segments and individual concentrations of
credit.
OTHER REAL ESTATE OWNED
Loans are classified as other real estate owned when MPREIT forecloses on a
property or when physical possession of the collateral is taken regardless of
whether foreclosure proceedings have taken place. Other real estate owned is
carried at the lower of (1) the recorded amount of the loan for which the
foreclosed property previously served as collateral or (2) the fair value of the
property minus estimated costs to sell. Prior to foreclosure, the recorded
amount of the loan is reduced, if necessary, to the fair value, minus estimated
costs to sell, of the real estate to be acquired by charging the allowance for
credit losses.
Subsequent to foreclosure, gains or losses on the sale of and losses on the
periodic revaluation of other real estate owned are credited or charged to
expense. Net costs of maintaining and operating foreclosed properties are
expensed as incurred.
Risk Management Instruments
Interest rate caps and floors are used to modify the interest rate
characteristics of MPREIT's mortgage-backed bonds. These instruments are
designated as hedges and must be effective throughout the hedge period. These
instruments are accounted for on the accrual basis with revenues or expenses
recognized as adjustments to interest expense on the mortgage-backed bonds.
Option premiums are amortized over the option life on a straight-line basis.
INCOME TAXES
A real estate investment trust (REIT) is subject to a number of organizational
and operational requirements, including the requirement that it currently
distribute to beneficial holders at least 95 percent of its "real estate
investment trust taxable income." For the period subsequent to November 1, 1996,
MPREIT is electing to be taxed as a real estate investment trust and
accordingly, no current or deferred tax expense was provided after
November 1, 1996.
Prior to November 1, 1996, MPREIT did not qualify as a real estate investment
trust and its operating results were included in the consolidated federal income
tax return of the Corporation. The method of allocating federal income tax
expense was determined under a tax allocation agreement with the Corporation.
This agreement specified that income tax expense be computed for all
subsidiaries on a separate company method, taking into account tax planning
strategies and the tax position of the consolidated group. There were two
components of income tax provision: current and deferred. Current income tax
provisions approximated taxes to be paid or refunded for the applicable period.
Balance sheet amounts of deferred taxes were recognized on the temporary
differences between the bases of assets and liabilities as measured by tax laws
and their bases as reported in the financial statements. Deferred tax expense or
benefit was then recognized for the change in deferred tax liabilities or assets
between periods. Recognition of deferred tax balance sheet amounts was based on
management's belief that it was more likely than not that the tax benefit
associated with certain temporary differences, tax operating loss carryforwards
and tax credits would be realized.
12
NOTE 2 - SECURITIES
During 1996, MPREIT securitized $755.2 million of mortgage loans which are
included in securities available for sale at December 31, 1996. Securities
available for sale on December 31, 1996 consisted of the following (dollars in
thousands):
GROSS GROSS
UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
Mortgage-backed
securities $ 828,408 $ 8,542 $(12) $836,938
The expected maturities of securities available for sale on December 31, 1996
are summarized in the table below (dollars in thousands). Actual maturities may
differ from contractual maturities or maturities shown below since borrowers may
have the right to prepay obligations with or without prepayment penalties.
NET
MARKET UNREALIZED
COST VALUE GAINS
Due after one year through five years....$ 448,022 $ 450,842 $ 2,820
Due after five years through ten years... 284,785 290,284 5,499
Due after ten years ..................... 95,601 95,812 211
------------- ------------ ----------
$ 828,408 $ 836,938 $ 8,530
------------- ------------ ----------
NOTE 3 - LOANS
The following table presents the composition of loans on December 31 (dollars in
thousands):
1996 1995
- ---------------------------------------------------------------------
Residential mortgage......................$14,671,836 $4,523,744
Commercial real estate.................... 32,539 -
------------- --------------
Total loans, net of unearned income...$14,704,375 $4,523,744
------------- --------------
Mortgage loans collateralizing mortgage-backed bonds were comprised of the
following on December 31 (dollars in thousands):
1996 1995
-------------------------------------------------------
Fixed-rate ...................$ 1,473,739 $ 1,292,457
Adjustable-rate............... 2,955,181 3,231,287
-------------------------
Total mortgage loans.......$.4,428,920 $ 4,523,744
-------------------------
13
Transactions in the allowance for credit losses were (dollars in thousands):
1996 1995 1994
- --------------------------------------------------------------------------------
Balance on January 1.........................$ 17,805 $ 10,993 $ -
Residential mortgage loans charged-off....... (15) (104) -
Allowance acquired with contributed loans.... 24,606 6,916 10,993
------------------------------------
Balance on December 31.......................$ 42,396 $ 17,805 $ 10,993
------------------------------------
MPREIT had $28 million of nonperforming loans on December 31, 1996 and $.2
million on December 31, 1995. The increase of nonperforming loans was the result
of a higher average loans balance during 1996.
Other real estate owned amounted to $.5 million on December 31, 1996 compared to
$.8 million on December 31, 1995.
NOTE 4 - AFFILIATE TRANSACTIONS
In connection with the merger of MPFC into MPREIT on November 1, 1996,
NationsBank, N.A., NationsBank of Texas, N.A. (NationsBank Texas) and
NationsBank, N.A. (South) (NationsBank South), each wholly owned indirect
subsidiaries of the Corporation, contributed an aggregate of approximately $10.9
billion of mortgage loans to MPREIT.
During 1996 and 1995, NationsBank Texas contributed $502 million and $3.4
billion, respectively, of mortgage loans to MPREIT at fair value in order to
establish or maintain collateral requirements on the mortgage-backed bonds.
During 1996, NationsBank South contributed an aggregate of approximately $871
million of mortgage loans and Federal National Mortgage Association (FNMA)
certificates to MPREIT at fair value in order to maintain collateral
requirements on the mortgage-backed bonds.
During 1996, MPREIT distributed a dividend of certain assets with a book value
of $52 million to NationsBank South and NationsBank Texas. Also, MPREIT made
other capital distributions totaling $504.3 million to NationsBank Texas and
NationsBank South.
MPREIT has entered into agreements with NationsBanc Mortgage Corporation, a
subsidiary of NationsBank Texas, and with NationsBank, N.A. for the servicing
and administration of its mortgage portfolio. Servicing fees paid to NationsBanc
Mortgage Corporation approximated $16.3 million and $7.7 million for the years
ended December 31, 1996 and 1995, respectively.
During 1996, MPREIT entered into an agreement with NationsBank, N.A. for
advisory services. Advisory fees paid to NationsBank, N.A. were not significant
in 1996.
MPREIT maintains its cash and cash equivalent accounts primarily with
NationsBank Texas. At December 31, 1996, MPREIT had $214.9 million of accounts
receivable from affiliates of the Corporation. These receivables are related to
mortgage payments in process and generally clear within 30 days.
14
NOTE 5 - LONG-TERM DEBT
In September 1994, the Securities and Exchange Commission declared effective
MPFC's shelf registration statement (Registration Statement) to issue up to $4
billion of Mortgage-Backed Bonds (Bonds). The obligations of MPFC under the
Bonds were assumed by MPREIT pursuant to the merger of MPFC with and into MPREIT
on November 1, 1996. The Bonds, which are issuable 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 MPREIT. The Bonds are not prepayable at the option of
MPREIT, 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,
MPREIT 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, MPREIT must provide additional or substitute
mortgage loans or other acceptable collateral with respect to such series to
meet the required amount 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, MPEIT
must redeem a portion of the outstanding Bonds of such series such that the
existing amount of eligible collateral meets the collateral requirements of the
indenture relating to the Bonds of such series that remain outstanding after the
redemption.
On July 18, 1995, MPREIT issued $1.5 billion of Mortgage-Backed Bonds, Series
1995-1, due 1998 (Series 1995-1 Bonds), bearing interest at the one-month LIBOR
plus 21 basis points with a maximum interest rate of 12 percent. On October 31,
1995, MPREIT issued $1.5 billion of Mortgage-Backed Bonds, Series 1995-2, due
2000 (Series 1995-2 Bonds), bearing interest at the three-month LIBOR plus 17
basis points. On December 31, 1996, all of the Series 1995-1 and 1995-2 Bonds
were outstanding with interest rates of 5.878 percent and 5.701 percent,
respectively, based on the rates in effect on December 31, 1996. On December 31,
1996, the Series 1995-1 Bonds were collateralized by mortgage loans with a book
value of approximately $2.2 billion and the Series 1995-2 Bonds were
collateralized by mortgage loans and FNMA certificates with an aggregate book
value of approximately $2.2 billion. On January 5, 1997, the discounted value
of the eligible collateral for the Series 1995-1 and 1995-2 Bonds, as computed
by the Trustee, was approximately $1.7 billion and $1.8 billion, respectively,
and exceeded the amount required by the terms of the related indentures by
approximately $151 million and $180 million, respectively.
On December 31, 1996, $629 million was owed on a subordinated note from
NationsBank South (the NationsBank South note). In addition, $444 million was
owed under a subordinated note from NationsBank Texas dated November 30, 1995
(the NationsBank Texas note). The NationsBank South note bears interest at a
floating rate based on 3-month LIBOR plus 14 basis points and matures on
September 25, 1999. The NationsBank Texas note bears interest at 6.50 percent
and matures on September 25, 2000. The notes are subordinated to all of MPREIT's
senior debt, including the Bonds. MPREIT may repay amounts, from time to time,
owed under the notes from funds which are not subject to the lien of any
indenture relating to any senior debt. During 1996, payments in the amount of
$764 million were made and additional borrowings under the notes amounted to
$517 million.
Interest expense on the Series 1995-1 and 1995-2 Bonds for the years ended
December 31, 1996 and 1995 was $176.6 million and $59.0 million, respectively.
Interest expense on the subordinated notes for the years ended December 31, 1996
and 1995 was $81.5 million and $87.8 million, respectively.
As of February 28, 1997, MPREIT had $1.0 billion of capacity available to issue
additional mortgage-backed bonds under its existing Registration Statement.
15
NOTE 6 - INCOME TAXES
The components of income tax expense for the years ended December 31 were
(dollars in thousands):
1996 1995 1994
- --------------------------------------------------------------------------------
Current portion-expense:
Federal ................... $17,367 $19,075 $1,910
State ..................... - 273 -
----------------------------------------
$17,367 $19,348 $1,910
----------------------------------------
Deferred portion- expense (benefit):
Federal ................... $ 6,232 $ (2,385) -
State ..................... 138 (138) -
----------------------------------------
$ 6,370 $ (2,523) -
----------------------------------------
Total tax expense ............. $23,737 $ 16,825 $1,910
----------------------------------------
A reconciliation of the expected federal tax expense, based on the federal
statutory rate of 35 percent for 1996, 1995 and 1994, to the actual tax
expense for the years ended December 31 is as follows (dollars in thousands):
1996 1995 1994
- --------------------------------------------------------------------------------
Expected federal tax expense ......... $75,849 $16,825 $1,910
Increase (decrease) in taxes resulting
from:
Qualified REIT income.............. (54,053) - -
State tax expense, net of federal
benefits ........................ 138 39 -
Other ............................. 1,803 (39) -
----------------------------------------
Total tax expense .................... $23,737 $16,825 $1,910
----------------------------------------
Significant components of the deferred tax assets on December 31 are as follows
(dollars in thousands):
1996 1995
- ---------------------------------------------------------------------------
Deferred tax assets:
Allowance for credit losses ......... $ - $6,232
Other ............................... - 138
------------------------------
Net deferred tax asset ................. $ - $6,370
There were no deferred tax assets at December 31, 1996 due to MPREIT's tax
status (see Note 1). Current income tax expense is determined as if MPREIT filed
a separate tax return and the amount so determined is payable to or receivable
from the Corporation. Current federal taxes payable to the Corporation of $23
million and $25 million are included in the balance sheet on December 31, 1996
and 1995, respectively.
16
NOTE 7 - 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 price is available
have been derived based on management's assumptions with respect to future
economic conditions, the 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 MPREIT.
SHORT-TERM FINANCIAL INSTRUMENTS
The carrying value of short-term financial instruments, including cash and cash
equivalents, accounts receivable from affiliates, interest receivable and
amounts due from the Trustee, approximates the fair value. These financial
instruments generally expose MPREIT to limited credit risk and have no stated
maturities or maturities of less than 30 days.
LOANS
Fair values were estimated for the loans based on credit quality and maturity.
The fair value of fixed-rate loans was estimated by discounting estimated future
cash flows using the December 31 origination rate of the Corporation and its
affiliates for similar loans. Contractual cash flows were adjusted for
prepayments using published industry data. For variable-rate loans, the carrying
amount was considered to approximate fair value as loans reprice frequently
based on current market rates. Where credit deterioration has occurred, cash
flows for fixed- and variable-rate loans have been reduced to incorporate
estimated losses. Where quoted market prices were available, such market prices
were utilized as estimates of fair value.
LONG-TERM DEBT
The fair value of the NationsBank Texas note was estimated by using the December
31 market rates on similar debt. The Series 1995-1 and Series 1995-2 Bonds and
the NationsBank South note are variable rate instruments and the fair value
approximates book value.
17
SECURITIES AVAILABLE FOR SALE
The carrying value of securities available for sale approximates the fair value.
Off-balance sheet Instruments
MPREIT uses interest rate caps and floors to manage the interest rate
characteristics of its mortgage-backed bonds. At December 31, 1996, MPREIT had
a gross notional amount of $2.0 billion in outstanding interest rate cap and
floor contracts. The unrealized depreciation on these contracts was $.7 million
as of December 31, 1996. No such contracts were outstanding prior to January 1,
1996.
The book and fair values of financial instruments for which book and fair value
differed on December 31 were (dollars in thousands):
1996 1995
------------------------------------------------------------------------
Book Fair Book Fair
Value Value Value Value
- --------------------------------------------------------------------------------------------------------------------------
FINANCIAL ASSETS
Loans, net of unearned income ............. $14,704,375 $14,637,953 $4,523,744 $4,494,991
Allowance for credit losses ............... (42,396) - (17,805) -
FINANCIAL LIABILITIES
Subordinated notes ........................ 1,072,733 1,071,953 1,320,183 1,374,280
For all other financial instruments, book value approximated fair value on
December 31.
18
INDEX TO EXHIBITS *
EXHIBIT NO. DESCRIPTION
2 (a) Stock Purchase Agreement, dated as of
November 1, 1996, by and between
NationsBank, N.A. and NationsBank, N.A.
(South), incorporated by reference to
Exhibit 2 (a) of the registrant's Quarterly
Report on Form 10-Q dated November 14,
1996.
2 (b) Contribution Agreement, dated as of
November 1, 1996, by and between
NationsBank, N.A. and Main Place Holdings
Corporation ("MP Holdings"), incorporated
by reference to Exhibit 2 (b) of the
registrant's Quarterly Report on Form 10-Q
dated November 14, 1996.
2 (c) Agreement of Merger, dated November 1,
1996, between MP Holdings, Main Place
Funding Corporation ("MPFC") and Main Place
Real Estate Investment Trust ("MPREIT"),
incorporated by reference to Exhibit 2 (c)
of the registrant's Quarterly Report on
Form 10-Q dated November 14, 1996.
2 (d) Stock Purchase Agreement, dated as of
November 1, 1996, by and between
NationsBank, N.A. and NationsBank, N.A.
(South), incorporated by reference to
Exhibit 2 (d) of the registrant's Quarterly
Report on Form 10-Q dated November 14,
1996.
2 (e) Stock Purchase Agreement, dated as of
November 1, 1996, by and between
NationsBank, N.A. and NationsBank of Texas,
N.A., incorporated by reference to Exhibit
2 (e) of the registrant's Quarterly Report
on Form 10-Q dated November 14, 1996.
2 (f) Contribution Agreement, dated as of
November 1, 1996, by and between
NationsBank, N.A. and MP Holdings,
incorporated by reference to Exhibit 2 (f)
of the registrant's Quarterly Report on
Form 10-Q dated November 14, 1996.
3 (a) Declaration of Trust of MPREIT,
incorporated by reference to Exhibit 3 (a)
of the registrant's Quarterly Report on
Form 10-Q dated November 14, 1996.
3 (b) Bylaws of MPREIT, incorporated by
reference to Exhibit 3 (b) of the
registrant's Quarterly Report on Form 10-Q
dated November 14, 1996.
4 (a) Indenture dated as of July 18, 1995
between Main Place Funding Corporation
(MPFC) and First Trust National
Association, pursuant to which MPFC issued
Mortgage-Backed Bonds, Series 1995-1,
bearing interest at the one-month LIBOR
rate plus 21 basis points, due 1998,
incorporated by reference to Exhibit 4.1 of
MPFC's Current Report on Form 8-K dated
July 18, 1995.
19
4 (b) Indenture dated as of October 31, 1995
between MPFC and First Trust National
Association, pursuant to which MPFC issued
Mortgage- Backed Bonds, Series 1995-2,
bearing interest at the three-month LIBOR
rate plus 17 basis points, due 2000,
incorporated by reference to Exhibit 4.1 of
MPFC's Current Report on Form 8-K dated
October 31, 1995.
4 (c) First Supplemental Indenture dated as
of November 1, 1996 to Indenture dated as
of July 18, 1995 between MPFC and First
Trust National Association, as Trustee,
incorporated by reference to Exhibit 4 (a)
of the registrant's Quarterly Report on
Form 10-Q dated November 14, 1996.
4 (d) First Supplemental Indenture dated as
of November 1, 1996 to Indenture dated as
of October 31, 1995 between MPFC and First
Trust National Association, as Trustee,
incorporated by reference to Exhibit 4 (b)
of the registrant's Quarterly Report on
Form 10-Q dated November 14, 1996.
10 (a) Servicing Agreement dated as of July
18, 1995 between MPFC and NationsBanc
Mortgage Corporation, incorporated by
reference to Exhibit 10.1 of MPFC's Current
Report on Form 8-K dated July 18, 1995.
10 (b) Credit Agreement dated as of July 18,
1995 among MPFC, NationsBank of Texas,
N.A., and First Trust National Association,
as trustee, incorporated by reference to
Exhibit 10.2 of MPFC's Current Report on
Form 8-K dated July 18, 1995.
10 (c) Mortgage Note Transfer and Contribution
Agreement dated as of September 20, 1994
among MPFC, NationsBank of Texas, N.A., and
NationsBanc Mortgage Corporation,
incorporated by reference to Exhibit 10.3
of MPFC's Current Report on Form 8-K dated
July 18, 1995.
10 (d) Mortgage Note Transfer and Contribution
Agreement dated as May 31, 1995 among MPFC,
NationsBank of Texas, N.A., and NationsBanc
Mortgage Corporation, incorporated by
reference to Exhibit 10.4 of MPFC's Current
Report on Form 8-K dated July 18, 1995.
10 (e) Servicing Agreement dated as of October
31, 1995 between MPFC and NationsBanc
Mortgage Corporation, incorporated by
reference to Exhibit 10.1 of MPFC's Current
Report on Form 8-K dated October 31, 1995.
10 (f) Credit Agreement dated as of October
31, 1995 among MPFC, NationsBank of Texas,
N.A. and First Trust National Association,
as trustee, incorporated by reference to
Exhibit 10.2 of MPFC's Current Report on
Form 8-K dated October 31, 1995.
20
10 (g) Amended and Restated Credit Agreement
dated as of October 31, 1995 among MPFC,
NationsBank of Texas, N.A. and First Trust
National Association, as trustee,
incorporated by reference to Exhibit 10.3
of MPFC's Current Report on Form 8-K dated
October 31, 1995.
10 (h) Mortgage Note Transfer and Contribution
Agreement dated as of October 1,1995 among
MPFC, NationsBank of Texas, N.A. and
NationsBanc Mortgage Corporation,
incorporated by reference to Exhibit 10.4
of MPFC's Current Report on Form 8-K dated
October 31, 1995.
10 (i) Subordinated Note dated November 30,
1995 between MPFC and NationsBank of Texas,
N.A., incorporated by reference to Exhibit
10 (f) of MPFC's Annual Report on Form 10-K
dated March 25, 1996.
10 (j) Mortgage Note Transfer and Contribution
Agreement dated as of October 31, 1995
among MPFC, NationsBank of Texas, N.A. and
NationsBanc Mortgage Corporation,
incorporated by reference to Exhibit 10 (a)
of MPFC's Quarterly Report on Form 10-Q
dated August 14, 1996.
10 (k) Mortgage Note Transfer and Contribution
Agreement dated as of February 1, 1996
among MPFC, NationsBank of Texas, N.A. and
NationsBanc Mortgage Corporation,
incorporated by reference to Exhibit 10 (b)
of MPFC's Quarterly Report on Form 10-Q
dated August 14, 1996.
10 (l) Subordinated Note dated May 20, 1996
between MPFC and NationsBank, N.A. (South),
incorporated by reference to Exhibit 10 (c)
of MPFC's Quarterly Report on Form 10-Q
dated August 14, 1996.
10 (m) Note Assignment and Assumption
Agreement dated as of May 20, 1996 between
NationsBank of Texas, N.A. and NationsBank,
N.A. (South), incorporated by reference to
Exhibit 10 (d) of MPFC's Quarterly Report
on Form 10-Q dated August 14, 1996.
10 (n) Contribution Agreement dated as of June
4, 1996 between MPFC and NationsBank, N.A.
(South), incorporated by reference to
Exhibit 10 (e) of MPFC's Quarterly Report
on Form 10-Q dated August 14, 1996.
10 (o) Contribution Agreement dated as of
September 20, 1996 between MPFC and
NationsBank, N.A. (South), incorporated by
reference to Exhibit 10 (a) of the
registrant's Quarterly Report on Form 10-Q
dated November 14, 1996.
10 (p) Mortgage Loan Contribution Agreement,
dated October 30, 1996, by and between
NationsBank of Texas, N.A. and MPREIT,
incorporated by reference to Exhibit 10 (b)
of the registrant's Quarterly Report on
Form 10-Q dated November 14, 1996.
21
10 (q) Mortgage Loan Assignment, dated as of
November 1, 1996, among MPREIT, NationsBank
of Texas, N.A. and NationsBanc Mortgage
Corporation, incorporated by reference to
Exhibit 10 (c) of the registrant's
Quarterly Report on Form 10-Q dated
November 14, 1996.
10 (r) Mortgage Loan Contribution Agreement,
dated October 30, 1996, by and between
NationsBank, N.A. (South) and MPREIT,
incorporated by reference to Exhibit 10 (d)
of the registrant's Quarterly Report on
Form 10-Q dated November 14, 1996.
10 (s) Mortgage Loan Assignment, dated as of
November 1, 1996, among MPREIT,
NationsBank, N.A. (South) and NationsBanc
Mortgage Corporation, incorporated by
reference to Exhibit 10 (e) of the
registrant's Quarterly Report on Form 10-Q
dated November 14, 1996.
10 (t) Mortgage Loan Contribution Agreement, dated
October 30, 1996, by and between
NationsBank, N.A. and MPREIT, incorporated
by reference to Exhibit 10 (f) of the
registrant's Quarterly Report on Form 10-Q
dated November 14, 1996.
10 (u) Mortgage Loan Assignment, dated as of
November 1, 1996, among MPREIT,
NationsBank, N.A. and NationsBanc Mortgage
Corporation, incorporated by reference to
Exhibit 10 (g) of the registrant's
Quarterly Report on Form 10-Q dated
November 14, 1996.
10 (v) Assignment, as of November 1, 1996, by
MPFC to MPREIT of Amended and Restated
Credit Agreement dated as of October 31,
1995, incorporated by reference to Exhibit
10 (h) of the registrant's Quarterly Report
on Form 10-Q dated November 14, 1996.
10 (w) Consent of NationsBank of Texas, N.A.,
dated November 1, 1996, to assignment of
Amended and Restated Credit Agreement dated
as of October 31, 1995, incorporated by
reference to Exhibit 10 (i) of the
registrant's Quarterly Report on Form 10-Q
dated November 14, 1996.
10 (x) Assignment as of November 1, 1996 by
MPFC to MPREIT of Credit Agreement dated as
of October 31, 1995, incorporated by
reference to Exhibit 10 (j) of the
registrant's Quarterly Report on Form 10-Q
dated November 14, 1996.
10 (y) Consent of NationsBank of Texas, N.A.,
dated November 1, 1996, to assignment of
Credit Agreement dated as of October 31,
1995, incorporated by reference to Exhibit
10 (k) of the registrant's Quarterly Report
on Form 10-Q dated November 14, 1996.
10 (z) Servicing Agreement, dated November 1,
1996, between MPREIT and NationsBanc
Mortgage Corporation, incorporated by
reference to Exhibit 10 (l) of the
registrant's Quarterly Report on Form 10-Q
dated November 14, 1996.
10 (aa) Servicing Agreement, dated November 1,
1996, between MPREIT and NationsBank, N.A.,
incorporated by reference to Exhibit 10 (m)
of the registrant's Quarterly Report on
Form 10-Q dated November 14, 1996.
22
10 (bb) Advisory Agreement, dated November 1,
1996, between MPREIT and NationsBank, N.A.,
incorporated by reference to Exhibit 10 (n)
of the registrant's Quarterly Report on
Form 10-Q dated November 14, 1996.
10 (cc) Contribution Agreement dated as of
October 31, 1996 between MPFC and
NationsBank, N.A. (South), incorporated by
reference to Exhibit 10 (o) of the
registrant's Quarterly Report on Form 10-Q
dated November 14, 1996.
23 Consent of Price Waterhouse LLP
27 Financial Data Schedule.
* The registrant agrees to furnish
supplementally a copy of any omitted
schedule or exhibit to the Commision
upon request.
23