Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
Quarterly Report under Section 13 or 15 (d)
Of The Securities Exchange Act of 1934
For the Quarter Ended: March 31, 1999 Commission File Number: 000-23745
BNP U.S. FUNDING L.L.C.
-----------------------
(Exact name of registrant as specified in its charter)
------------------------------------------------------
Delaware 13-3972207
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or organization)
499 Park Avenue, New York, New York
-----------------------------------
(Address of principal executive offices)
10022
-----
(Zip Code)
(212) 449-9600.
---------------
(Registrant's telephone number, including area code)
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 [ ]
Common Stock, $10,000 Par Value 53,011
------------------------------- ------
Number of shares outstanding of each of the issuer's classes of common stock on
March 31, 1999
<PAGE>
Form 10-Q Index
Part I Page
Item 1. Financial Statements - BNP U.S. FUNDING L.L.C.:
Balance Sheet at March 31, 1999 and December 31, 1998 3
Statement of Income for the quarters ended March 31, 1999
and March 31, 1998 4
Statement of Comprehensive Income for the quarters ended
March 31, 1999 and March 31, 1998 5
Statement of Changes in Securityholders' Equity for the
quarters ended March 31, 1999 and March 31, 1998 6
Statement of Cash Flows for the quarters ended March 31,
1999 and March 31, 1998 7
Notes to Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation 6
Item 3. Quantitative and Qualitative Disclosures about Market Risk 20
Part II
Item 1. Legal Proceedings 23
Item 2. Changes in Securities and Use of the Proceeds 23
Item 3 Defaults Upon Senior Securities 23
Item 4. Submission of Matters to a Vote of Security Holders 23
Item 5 Other Information 23
Item 6 Exhibits and Current Reports on Form 8-K 23
<PAGE>
Part I Item 1.
BNP U.S. FUNDING L.L.C.
BALANCE SHEET
(in thousands, except per share data)
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
------------------------- ---------------------------
(unaudited) (audited)
ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 56,589 $ 84,013
Investment securities (Notes 3 and 4) 1,020,831 962,027
Available-for-sale, at fair value
Receivable arising from payment for securities, 463,821 521,644
pursuant to the application of SFAS 125 (Note 3)
Accounts Receivable 458
Other Assets 1,244
Accrued interest receivable 7,549 4,784
----------- -----------
TOTAL ASSETS $ 1,548,790 $ 1,574,170
=========== ===========
LIABILITIES:
Obligation arising from the receipt of securities, pursuant to $ 463,733 $ 529,905
the application of SFAS 125 (Note 3)
Account Payable 26,400
Other Liability 9,348
Accrued expenses 119 114
----------- -----------
TOTAL LIABILITIES 499,600 530,019
----------- -----------
Redeemable common securities, par value and redeemable value
$10,000 per security; 150,000 securities authorized,
53,011 securities issued and outstanding (Note 5) 530,110 530,110
Preferred securities, liquidation preference
$10,000 per security; 150,000 securities authorized,
50,000 securities issued and outstanding 500,000 500,000
Additional paid in capital 6 6
Accumulated other comprehensive income 659 9,285
Retained earnings 18,415 4,750
----------- -----------
TOTAL REDEEMABLE COMMON SECURITIES,
PREFERRED SECURITIES AND
SECURITYHOLDERS' EQUITY 1,049,190 1,044,151
----------- -----------
TOTAL LIABILITIES AND TOTAL REDEEMABLE COMMON SECURITIES,
PREFERRED SECURITIES AND SECURITYHOLDERS' EQUITY $ 1,548,790 $ 1,574,170
========== ===========
The accompanying Notes to Financial Statements are an integral part of these Statements.
</TABLE>
<PAGE>
BNP U.S. FUNDING L.L.C.
STATEMENT OF INCOME
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three-month period Three-month period
ended March 31, 1999 ended March 31, 1998
------------------------ ------------------------
(unaudited) (audited)
INTEREST INCOME:
<S> <C> <C>
Collateralized Mortgage Obligations:
Floating-rate REMICs $ 2,314 $ 3,797
Fixed-rate REMICs 1,352 756
Mortgage Backed Securities:
Agency ARMs 2,157 2,826
Agency Hybrid ARMs 2,560 3,046
Agency DUSs 138
Agency Debentures 2,187
Treasury Notes 2,141 2,094
Interest on Deposits 929 379
---------- -------
Total 13,778 12,898
---------- -------
NONINTEREST EXPENSE:
Fees and expenses 113 52
---------- -------
NET INCOME APPLICABLE TO PREFERRED AND REDEEMABLE COMMON
SECURITIES $ 13,665 $12,846
========== =======
NET INCOME PER REDEEMABLE COMMON SECURITY $ 257.78 $242.32
========= =======
The accompanying Notes to Financial Statements are an integral part of these Statements.
</TABLE>
<PAGE>
BNP U.S. FUNDING L.L.C.
STATEMENT OF COMPREHENSIVE INCOME
(in thousands)
<TABLE>
<CAPTION>
Three-month period Three-month period
ended March 31, 1999 ended March 31, 1998
--------------------- ----------------------
(unaudited) (audited)
<S> <C> <C>
NET INCOME $ 13,665 $ 12,846
OTHER COMPREHENSIVE INCOME:
Net change in unrealized gain (loss) in fair value of
securities available-for-sale treated as collateral (Note 3) (8,349) 599
Net change in unrealized loss (gain) in fair value
of obligation arising from the receipt of
securities pursuant to the application of SFAS 125 (Note 3) 8,349 (599)
Net change in unrealized gain (loss) in fair value of
securities available-for-sale not treated as
collateral (Note 3) (8,628) (171)
------------ -----------
OTHER COMPREHENSIVE INCOME (8,628) (171)
------------ -----------
COMPREHENSIVE INCOME $ 5,037 $ 12,675
=========== ==========
The accompanying Notes to Financial Statements are an integral part of these Statements.
</TABLE>
<PAGE>
BNP U.S. FUNDING L.L.C.
STATEMENT OF CHANGES IN REDEEMABLE COMMON SECURITIES, PREFERRED SECURITIES
AND SECURITYHOLDERS' EQUITY
(in thousands)
<TABLE>
<CAPTION>
TOTAL REDEEMABLE
COMMON SECURITIES,
ACCUMULATED PREFERRED
REDEEMABLE ADDITIONAL OTHER SECURITIES AND
COMMON PREFERRED PAID IN COMPREHENSIVE RETAINED SECURITYHOLDERS'
SECURITIES SECURITIES CAPITAL INCOME EARNINGS EQUITY
---------- ---------- ------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C>
Net income -- -- -- --
Other comprehensive income -- -- -- -- -- --
----------------
--------------- --------------- -------------- ----------------- ------------ ------------------
Balance at December 31, 1997 530,110 500,000 6 -- 4,142 1,034,258
---------------- --------------- -------------- ----------------- ------------ ------------------
(audited)
----------------
Net income -- -- -- -- 12,846 12,846
Other comprehensive income -- -- -- (171) -- (171)
--------------- --------------- -------------- ----------------- ------------ ------------------
Balance at March 31, 1998 530,110 500,000 6 (171) 16,988 1,046,933
--------------- --------------- -------------- ----------------- ------------ ------------------
Net income -- -- -- 40,586 40,586
Other comprehensive income -- -- -- 9,456 9,456
Dividends Paid - Preferred (38,690) (38,690)
Securities
Dividends Paid - Common (14,134) ( 14,134)
Securities
--------------- --------------- -------------- ----------------- ------------ ------------------
Balance at December 31, 1998 $ 530,110 $ 500,000 $ 6 $ 9,285 $ 4,750 $ 1,044,151
--------------- --------------- -------------- ----------------- ------------ ------------------
(audited)
--------------- --------------- -------------- ----------------- ------------ ------------------
Net income 13,665 13,665
--------------- --------------- -------------- ----------------- ------------ ------------------
Other comprehensive income (8,626) (8,626)
--------------- --------------- -------------- ----------------- ------------ ------------------
--------------- --------------- -------------- ----------------- ------------ ------------------
Balance at March 31, 1999 $ 530,110 $ 500,000 $ 6 $ 659 $ 18,415 $ 1,049,190
--------------- --------------- -------------- ----------------- ------------ ------------------
The accompanying Notes to Financial Statements are an integral part of these Statements.
</TABLE>
<PAGE>
BNP U.S. FUNDING L.L.C.
STATEMENT OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Three-month period Three-month period ended
ended March 31, 1999 March 31, 1998
---------------------- ---------------------------
(unaudited) (audited)
OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 13,665 $ 12,846
Adjustments to reconcile net income to cash provided from operating activities:
Premium amortization 1,371 3,299
Net change in interest receivable (2,064) (1,941)
Net Change in accounts payable 26,400
Net Change in accounts receivable 458
Net change in accrued expenses 5 (10)
Net change in due to affiliates (12)
---------- ----------
Net cash provided from operating activities 39,835 14,182
---------- ----------
INVESTING ACTIVITIES:
Purchase of investment securities:
Floating-rate REMICs (43,668)
Agency ARMs (40,874)
Agency Hybrid ARMs (72,521)
Agency Debentures (156,400)
Agency DUSs (21,606)
Premium paid (112) (2,447)
Interest receivable (86) (789)
Proceeds from principal payments of securities available-for-sale, 54,348 3,702
not treated as collateral
Proceeds from principal payments of securities available-for-sale, treated as
collateral 56,597 127,946
---------- ----------
Net cash provided (used) by investing activities (9,436) 103,405
---------- ----------
FINANCING ACTIVITIES:
Cash dividends - Preferred Securities 0 0
Cash dividends - Common Securities 0 0
---------- ----------
Net cash provided (used) by financing activities (57,823) 132,056
---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (27,424) (14,469)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 84,013 33,762
----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 56,589 $ 19,293
========== ==========
NONCASH FINANCING AND INVESTING ACTIVITIES:
Decrease in receivable arising from payment for securities, 57,823 132,056
pursuant to the application of SFAS #125 (Note 3)
Decrease in obligation arising from receipt of securities,
pursuant to the application of SFAS #125 (Note 3) (57,823) (132,056)
TOTAL NONCASH FINANCING AND INVESTING ACTIVITIES $ 0 $ 0
========== ==========
The accompanying Notes to Financial Statements are an integral part of these Statements.
</TABLE>
<PAGE>
NOTE 1--ORGANIZATION AND BASIS OF PRESENTATION
BNP U.S. Funding L.L.C. (the "Company") is a Delaware limited liability company
formed on October 14, 1997 for the purpose of acquiring and holding certain
types of eligible securities that generate net income for distribution to the
holders of its Series A Preferred Securities and its redeemable Common
Securities. The Company is a wholly owned subsidiary of the New York Branch (the
"Branch") of Banque Nationale de Paris (the "Bank" or "BNP"). BNP is a French
corporation that conducts retail banking activities in France and corporate and
private banking and other financial activities both in France and throughout the
world.
The Company was initially capitalized on October 14, 1997 with the issuance to
the Branch of one share of the Company's redeemable common securities, $10,000
par value (the "Common Securities"). On December 5, 1997 (inception), the
Company commenced operations concurrent with the issuance of 50,000
noncumulative preferred securities, Series A, liquidation preference $10,000 per
security, (the "Series A Preferred Securities") to qualified institutional
buyers, and the issuance of 53,010 Common Securities to the Branch. These
issuances raised in the aggregate $1,030,115,873 of net capital (including
$5,873 of additional paid in capital). This entire amount was used to acquire
from the Branch a portfolio of debt securities (including accrued interest) at
their fair values (the "Initial Portfolio").
The accounting and financial reporting policies of the Company conform to U.S.
generally accepted accounting principles and current industry practices. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make certain estimates and
assumptions that affect the reported amounts of assets and revenues during the
reporting periods. Actual results could differ from those estimates.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT SECURITIES:
Investments in debt securities, both collateral and noncollateral (Note 3), are
classified as available for sale and are carried at fair value. Unrealized gains
and losses on these securities are reported as a component of other
comprehensive income.
Interest on securities is included in interest income and is recognized using
the interest method. Premiums and discounts are amortized using the effective
interest method and are recognized in interest income.
COMPREHENSIVE INCOME:
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income," requires the Company to report items of other comprehensive income by
their nature in a financial statement and display the accumulated balance of
other comprehensive income separately in Total Redeemable Common Securities,
Preferred Securities and Securityholders' Equity. Comprehensive income includes
net income, as reported, as well as the change in unrealized gains and losses on
available-for-sale securities and in the obligation arising from the receipt of
securities, pursuant to the application of SFAS 125 (defined below).
CASH AND CASH EQUIVALENTS:
Cash and cash equivalents include cash and short-term deposits with original
maturities of three months or less.
DIVIDENDS:
Dividends on the Series A Preferred Securities, when, as and if declared by the
Company's Board of Directors, are payable, out of the Company's net income,
determined without regard to capital gains or losses, semi-annually in arrears
on a non-cumulative basis on the fifth day of June and December of each year,
commencing June 5, 1998, at a rate per annum of 7.738% of the liquidation
preference through and including December 5, 2007. Thereafter, dividends, when,
as and if declared by the Company's Board of Directors, will be payable
quarterly in arrears on the third Wednesday of March, June, September, and
December of each year and will be calculated on a weekly basis in each quarter
at a rate per annum of the liquidation preference equal to 2.8% per annum above
one-week LIBOR for the week concerned as determined on the related LIBOR
Determination Date.
Holders of Common Securities are entitled to receive dividends when, as and if
declared by the Company's Board of Directors out of the Company's net income not
required to be applied to fund dividends with respect to the Series A Preferred
Securities.
To date, the Company has declared and paid dividends as follows:
Security Amount Date Paid
- -------- ------ ---------
Series A Preferred Securities $19,345,000 June 5, 1998
$19,345,000 December 5, 1998
Common Securities $5,347,365 June 22, 1998
$8,787,127 December 15, 1998
If the Bank's financial condition were to deteriorate with the consequence that
a Shift Event (as defined below) were to occur, substantially all of the Common
Securities would be redeemed automatically without prior redemption of the
Series A Preferred Securities and dividends payable on each Series A Preferred
Security could be substantially reduced or completely eliminated. In addition,
if the Bank's Tier 1 risk-based capital ratio were to decline below the minimum
percentage required by French banking regulations (currently 4%), the Company
would pay a special dividend consisting of all of the Company's net assets
(other than assets having a total market value of approximately $40 million) to
the Bank as holder of the Common Securities.
A "Shift Event" would be deemed to have occurred if (i) the Bank's total
risk-based capital ratio or Tier 1 risk-based capital ratio were to decline
below the minimum percentages required by French banking regulations, (ii) the
Bank were to become subject to certain specified receivership proceedings or
(iii) the French Banking Commission (Commission bancaire), in its sole
discretion, were to notify the Bank and the Company that it has determined that
the Bank's financial condition was deteriorating such that either of the
foregoing clauses (i) or (ii) would apply in the near term. French banking
regulations currently require French banks to maintain a minimum total
risk-based capital ratio of at least 8.0% and a minimum Tier 1 risk-based
capital ratio of at least 4.0%.
The Company may not pay dividends or make other distributions on the Common
Securities or the Series A Preferred Securities if, after giving effect to the
distributions, the Company's liabilities would exceed the fair value of its
assets. Additionally, as long as any Series A Preferred Securities are
outstanding, except during a Shift Period (i.e., following the occurrence of a
Shift Event causing a shift in dividend preference and before the termination
thereof), the amount of dividends on the Common Securities in any fiscal year
may not exceed the amount by which the net income of the Company for such fiscal
year exceeds the stated dividends on the Series A Preferred Securities scheduled
to be paid during such fiscal year irrespective of whether dividends on the
Series A Preferred Securities are in fact declared and paid. Additionally, other
than during a Shift Period, no dividends may be declared, paid or set apart for
payment on the Common Securities (a) with respect to any period of time included
in any Dividend Period unless full dividends have been or contemporaneously are
declared and paid, or declared and a sum sufficient for the payment thereof is
set apart for such payment on the Series A Preferred Securities for the
then-current Dividend Period and (b) the Company may not declare, pay or set
apart funds for any dividends or other distributions with respect to any Common
Securities unless and until (x) full dividends on the Series A Preferred
Securities for the two most recent preceding Dividend Periods are declared and
paid, or declared and a sum sufficient for payment has been paid over to the
dividend disbursing agent for payment of such dividends and (y) the Company has
declared a cash dividend on the Series A Preferred Securities at the annual
dividend rate for the then-current Dividend Period, and sufficient funds have
been paid over to the dividend disbursing agent for payment of such cash
dividends for such then-current Dividend Period.
NET INCOME PER REDEEMABLE COMMON SECURITY:
Net income per redeemable common security is calculated by dividing net income
after preferred dividends by the weighted average number of Common Securities
outstanding.
INCOME TAXES:
The Company expects to be treated as a partnership for U.S. Federal income tax
purposes. As such, a partnership is not a taxable entity, the Company will not
be subject to U.S. federal, state and local income tax on its income. Instead,
each securityholder is required to take into account its allocable share of
items of income, gain, loss and deduction of the partnership in computing its
U.S. Federal tax liability. Accordingly, the Company has made no provision for
income taxes in the accompanying statement of income.
DERIVATIVES USED IN ASSET MANAGEMENT ACTIVITES:
As part of its asset management activities the Company uses interest rate swaps
to modify the interest rate and foreign exchange characteristics of existing
assets. The interest rate swaps have a high correlation between the instrument
and the asset being hedged, both at inception and throughout the hedge period.
The interest rate swaps are carried at fair value. The accrual of interest
receivable or interest payable on these interest rate swaps is reported in
Interest Income. Changes in the market values of these interest rate swaps,
exclusive of net interest accruals, are reported in Securityholders' Equity:
Accumulated other comprehensive income.
Foreign Currency Translation
Assets denominated in foreign currencies are translated to US dollars using
applicable rates of exchange. The entire change in the fair value of foreign
currency denominated investment securities classified as available for sale
(both the change in the market price of the security as expressed in US Dollars
and the change in the exchange rate between the assets denominated in foreign
currencies and the functional currency), together with the effects of hedging
instruments, is reported in Accumulated other comprehensive income within
Securityholders' Equity. Revenues and expenses are translated monthly at amounts
which approximate weighted average exchange rates.
Accounting for Derivatives and Hedging Activities
In June of 1998, the Financial Accounting Standards Board issued "Accounting for
Derivatives and Hedging Activities" ("SFAS 133"), which establishes accounting
and reporting standards for all derivative instruments and hedging activities.
SFAS 133 requires that an entity measure all hedging activities. SFAS requires
that an entity measure all derivatives at fair value and recognize those
derivatives as either assets or liabilities on the balance sheet. The change in
the derivative's fair value is generally to be recognized in current period
earnings. However, if certain conditions are met, a derivative may be
specifically designated as a hedge of an exposure to changes in fair value,
variability of cash flows, or certain foreign currency exposures. Based on the
hedge designation, special hedge accounting rules would allow the derivative's
change in value to be recognized either in current period earnings, together
with the offsetting change in value of the risk being hedged, or to the extent
the hedge is effective, in comprehensive income and subsequently reclassified
into earnings when the hedge item affects earnings. Depending on the underlying
risk management strategy, these accounting changes could affect reported
earnings, assets, liabilities, and securityholders' equity. As a result, the
Company will have to reconsider their risk management strategies, since the new
standard will not reflect the results of many of those strategies in the same
manner as current accounting practice. The Company is in the process of
evaluating the potential impact of the new accounting standard. SFAS 133 is
effective for all fiscal years beginning after June 15, 1999.
NOTE 3--RECEIVABLE ARISING FROM PAYMENT FOR SECURITIES, PURSUANT TO THE
APPLICATION OF SFAS 125, AND OBLIGATION ARISING FROM THE RECEIPT OF SECURITIES,
PURSUANT TO THE APPLICATION OF SFAS 125
Statement of Financial Accounting Standards No. 125 "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities" ("SFAS
125") governs the accounting for the transfer of financial assets. Under SFAS
125, transfers of financial assets that do not meet certain sale accounting
requirements must be accounted for as a secured borrowing transaction with a
pledge of collateral.
Due to the potential consequences of a Shift Event (as described above), the
Company's purchase of the Initial Portfolio from the Branch did not meet certain
SFAS 125 sale accounting requirements. Therefore, the purchase of the Initial
Portfolio has been accounted for as a secured borrowing transaction with a
pledge of collateral. In accounting for this transaction as a secured borrowing
transaction in accordance with SFAS 125, the Company has recorded a receivable
in an amount equal to the remaining amount paid to the Branch to acquire the
Initial Portfolio. In this case, however, having delivered the securities in the
Initial Portfolio to the Company, neither the Branch nor BNP has any further
obligation to the Company to repay any part of the purchase price for the
Initial Portfolio or otherwise to repurchase or redeem any securities in the
Initial Portfolio.
Other provisions of SFAS 125 govern the accounting for financial assets treated
as collateral that an entity has the right to sell or repledge. In accordance
with such provisions, the Company has recognized the securities in the Initial
Portfolio and recorded a related obligation. In this case, the Company has in
fact no obligation to return any such securities to the Branch or to BNP, except
to the extent that the consequences of a Shift Event (as described above) might
affect securities still held by the Company at the time.
As securities within the Initial Portfolio mature or prepay, the Company will
recognize the cash proceeds as a reduction in a receivable arising from payment
for securities. Concurrent with the receipt of such cash proceeds, the Company
will derecognize such securities and reduce the obligation. In accounting for
this transaction as a secured borrowing transaction in accordance with SFAS 125,
the Company has recorded a receivable of $463,820,507 which is equal to the
remaining amount paid by Branch to acquire the Initial Portfolio.
The obligation arising from the receipt of securities is stated at the fair
value of the related securities. Changes in the value of the obligation due to
corresponding changes in the fair value of the related securities are reported
as an element of other comprehensive income.
NOTE 4--INVESTMENT SECURITIES:
The amortized cost and estimated fair value of available-for-sale securities
were as follows ($ in 000's) based on management's prepayment assumptions:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
March 31, 1999 Cost Gains Losses Value
- -------------- ---- ----- ------ -----
<S> <C> <C> <C> <C>
Collateralized Mortgage Obligations:
Floating-rate REMICs $ 160,678 $ 23 $ 464 $ 160,237
Fixed-rate REMICs 79,876 114 106 79,884
Mortgage Backed Securities:
Agency ARMs 143,464 8 2,104 141,368
Agency Hybrid ARMs 183,218 970 188 184,000
Agency DUSs 41,531 219 41,312
Agency Debentures 256,400 11,139 158 267,381
U.S. Treasury Notes 145,744 905 -- 146,649
----------- --------- -------- -----------
Total $ 1,010,911 $ 13,159 $ 3,239 $ 1,020,831
=========== ========= ======== ===========
</TABLE>
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
December 31, 1998 Cost Gains Losses Value
- ----------------- ---- ----- ------ -----
<S> <C> <C> <C> <C>
Collateralized Mortgage Obligations:
Floating-rate REMICs $ 196,589 $ 20 $ 1,010 $ 195,599
Fixed-rate REMIC 100,057 -- 239 99,818
Mortgage Backed Securities:
Agency ARMs 171,454 28 3,183 168,299
Agency Hybrid ARMs 211,759 1,081 176 212,664
Agency Debentures 119,981 9,303 129,284
U.S. Treasury Notes 145,882 10,481 -- 156,363
----------- --------- -------- -----------
Total $ 945,722 $ 20,913 $ 4,608 $ 962,027
=========== ========= ======== ===========
</TABLE>
The breakdown of the Company's available-for-sale securities by category and
expected weighted average life distribution (stated in terms of amortized cost)
is summarized below ($ in 000's) based on management's prepayment assumptions:
<TABLE>
<CAPTION>
Due after 1 Due after
Due in 1 year through 5 through Due after
March 31, 1999 or less 5 years 10 years 10 years Total
- -------------- ------- ------- -------- -------- -----
<S> <C> <C> <C> <C>
Collateralized Mortgage Obligations:
Floating-rate REMICs $ 11,924 $ 148,754 $ $ -- $ 160,678
Fixed-rate REMICs 33,051 46,825 79,876
Mortgage Backed Securities:
Agency ARMs 19,405 124,059 -- 143,464
Agency Hybrid ARMs 99,902 73,707 4,846 4,763 183,218
Agency DUSs 41,531 41,531
Agency Debentures 256,400 256,400
U.S. Treasury Notes -- -- 145,744 -- 145,744
--------- ------------ --------- ---------- -----------
Total $ 164,282 $ 346,520 $ 495,346 $ 4,763 $ 1,010,911
========= ============ ========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
Due in 1 Due after 1 Due after
year through 5 through Due after
December 31, 1998 or less 5 years 10 years 10 years Total
- ----------------- ------- ------- -------- -------- -----
<S> <C> <C> <C> <C> <C>
Collateralized Mortgage Obligations:
Floating-rate REMICs $ 22,416 $ 174,173 $ -- $ -- $ 196,589
Fixed-rate REMIC 5,982 47,244 46,831 100,057
Mortgage Backed Securities:
Agency ARMs 31,816 139,638 -- 171,454
Agency Hybrid ARMs 117,506 84,006 10,187 211,759
Agency Debenture 119,981 119,981
U.S. Treasury Notes -- -- 145,882 -- 145,882
--------- ---------- ----------- -------- -----------
Total $ 177,720 $ 445,121 $ 312,694 $ 10,187 $ 945,722
========= ========== =========== ======== ===========
</TABLE>
Actual maturities may differ from maturities shown above due to prepayments.
The breakdown of the Company's available-for-sale securities by category and
yield is summarized below:
<TABLE>
<CAPTION>
Due in 1 Due after 1 Due after
year through 5 through Due after
March 31, 1999 Or less 5 years 10 years 10 years Total
- -------------- ------- ------- -------- -------- -----
<S> <C> <C> <C>
Collateralized Mortgage Obligations:
Floating-rate REMICs 4.97% 5.36% --% --% 5.32%
Fixed-rate REMICs 6.28 6.53 6.42
Mortgage Backed Securities:
Agency ARMs 4.20 5.68 -- 5.47
Agency Hybrid ARMs 5.17 5.83 6.31 6.46 5.50
Agency DUSs -- -- 6.16 -- 6.16
Agency Debenture 3.64 3.64
U.S. Treasury Notes -- -- 5.92 -- 5.92
---- ---- ----- ----- ----
Total 5.27% 5.57% 5.10% 6.46% 5.60%
==== ==== ===== ===== ====
</TABLE>
<TABLE>
<CAPTION>
Due in 1 Due after 1 Due after
year through 5 through Due after
December 31, 1998 Or less 5 years 10 years 10 years Total
- ----------------- ------- ------- -------- -------- -----
<S> <C> <C> <C>
Collateralized Mortgage Obligations:
Floating-rate REMICs 5.42% 5.73% --% --% 5.70%
Fixed-rate REMIC 5.77 2.20 6.47 4.41
Mortgage Backed Securities:
Agency ARMs 2.00 6.45 -- 5.63
Agency Hybrid ARMs 6.37 6.39 8.68 6.48
Agency Debentures 2.75 2.75
U.S. Treasury Notes -- -- 5.80 -- 5.80
---- ---- ---- ---- ----
Total 5.44% 5.71% 4.73% 8.60% 5.15%
==== ==== ==== ==== ====
</TABLE>
There were no sales of available-for-sale securities from December 5, 1997
(inception) to June 30, 1998.
NOTE 5--REDEEMABLE COMMON SECURITIES:
General
The Company is authorized to issue up to 150,000 Common Securities; as of March
31, 1999 and December 31, 1998, the Company had outstanding 53,011 Common
Securities, all of which were held by the Branch. The Bank has agreed with the
Company in the Contingent Support Agreement that, so long as any Series A
Preferred Securities are outstanding, it will maintain direct or indirect
ownership of 100% of the outstanding Common Securities.
Dividends
Holders of Common Securities are entitled to receive dividends when, as and if
declared by the Company's Board of Directors out of the Company's net income not
required to be applied to fund dividends with respect to the Series A Preferred
Securities; provided that so long as any Series A Preferred Securities are
outstanding, no dividends or other distributions (including redemptions and
purchases) may be made with respect to the Common Securities unless full
dividends on all Series A Preferred Securities have been paid for the current
and the two immediately preceding Dividend Periods (except during a Shift Period
if the Bank does not distribute dividends on its common stock).
Redemption Requirements
If the Bank's financial condition were to deteriorate with the consequence that
a Shift Event were to occur, substantially all the Common Securities would be
redeemed automatically without prior redemption of any Series A Preferred
Securities.
Voting Rights
Subject to the rights, if any, of the holders of Series A Preferred Securities
(in particular the right to remove and replace any Independent Director and to
elect an additional director, in certain circumstances), all voting rights are
vested in the Common Securities. The holders of Common Securities are entitled
to one vote per security.
Rights Upon Liquidation
In the event of the dissolution, liquidation or winding up of the Company,
whether voluntary or involuntary, after there shall have been paid or set aside
for the holders of all Series A Preferred Securities the full preferential
amounts to which such holders are entitled, the holders of Common Securities
will be entitled to share equally and ratably in any assets remaining after the
payment of all debts and liabilities. Upon a liquidation of the Company during a
Shift Period, the Common Securities will have a preference over the Series A
Preferred Securities to the extent, if any, that the liabilities of the Bank
(including any debt instruments, such as titres participatifs and prets
participatifs) have not been paid in full.
NOTE 6--RELATED PARTY TRANSACTIONS:
The Company entered into a Services Agreement with the Branch on December 5,
1997 pursuant to which the Branch manages the securities portfolio of the
Company and performs other administrative functions. Expenses incurred under
such Agreement were $62,500 as of March 31, 1999. While the amount of the fee
payable under the Agreement is somewhat less than the fee which would be payable
in an arm's length transaction with a third party, Management does not believe
that the difference is material.
French American Banking Corporation (FABC), an affiliate of BNP, serves as the
dividend paying agent, registrar, and transfer agent with respect to the Series
A Preferred Securities. The Company paid FABC an upfront fee of $4,000 and pays
a fee of $4,000 per annum for these services.
The Company maintains a credit balance account with the Branch for clearing
certain transactions.
All of the Company's officers and employees and all but one of the members of
the Company's Board of Directors are officers and employees of the Branch or
BNP.
NOTE 7--FAIR VALUE OF FINANCIAL INSTRUMENTS:
The fair values of securities at March 31,1999 and December 31, 1998 were
obtained from independent market sources and are summarized in Note 4. The
carrying values of investment securities, as shown in Note 4, and the obligation
arising from the receipt of securities, pursuant to the application of SFAS 125,
approximates their fair value. The fair value of the receivable arising from
payment for securities, pursuant to the application of SFAS 125, approximates
the aggregate carrying value of the investment securities treated as collateral
including accrued interest, which at March 31, 1999 and December 31, 1998 was
$463,732,875 and $ 529,905,305 respectively.
The carrying value of cash and cash equivalents, accounts receivable, accrued
interest receivable, accrued expenses, and accounts payable approximates fair
value.
The fair value of the interest rate swaps described in Note 8 below at March 31,
1999 and December 31,1998 was ($9,348,408) and $1,243,783, respectively.
NOTE 8-DERIVATIVE ACTIVITY
In order to modify the interest rate and foreign exchange characteristics of a
portion of its assets, the Company engaged in derivative activities by entering
into interest rate swaps. The assets to which the swaps relate consist of
foreign currency denominated debt instruments and U.S. dollar denominated debt
instruments with fixed rate interest payments. The Company entered into swaps
primarily based on LIBOR, in order to convert fixed rate foreign currency
denominated interest payments on such assets into variable rate U.S. dollar
payments.
At March 31, 1999 and December 31, 1998, the Company had outstanding interest
rate swap agreements with a notional principal amount of $271,624,816 and
$120,000,000, respectively.
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion pertains to the three-month period ended March 31,
1999 (the "1999 Period") and the three-month period ended March 31, 1998 (the
"1998 Period").
General
The Company was formed on October 14, 1997 and commenced operations on December
5, 1997 by the sale to qualified institutional buyers of 50,000 noncumulative,
preferred securities, Series A (the "Series A Preferred Securities") and the
sale to New York Branch of Banque Nationale de Paris (the "Branch") of 53,011
common securities, $10,000 par value per share (the "Common Securities").
Together, such sales raised net capital of $1,030,115,873, which the Company
used to purchase a portfolio of securities (the "Portfolio") from the Branch.
The Company's sole business is to acquire, hold and manage debt instruments,
largely consisting of mortgage obligations, which generate net income for
distribution to securityholders. The Company's sole source of income is interest
generated by the securities in the Portfolio.
Results of Operations
During the 1999 Period and 1998 Period, the Company had revenues of $13,777,558
and $12,897,366, respectively. This amount consisted entirely of interest
income. Interest on the securities in the Portfolio amounted to $12,848,953 and
12,518,074, representing an aggregate average yield of 5.60% and 5.08%,
respectively. Interest earned and average yield with respect to each category of
security in the Portfolio was as follows:
<TABLE>
<CAPTION>
1999 Period 1998 Period
----------- -----------
<S> <C> <C> <C> <C>
Floating-rate REMICs..................... $2,313,785 5.32% $3,797,043 5.79%
Fixed-rate REMICs........................ $1,351,515 6.42% $756,103 6.45%
Agency ARMs.............................. $2,157,244 5.47% $2,826,433 3.37%
Agency Hybrid ARMs....................... $2,560,328 5.50% $3,046,386 6.28%
Agency DUSs ............................. $138,296 6.16%
Agency Debentures........................ $2,187,284 3.64%
U.S. Treasury Notes...................... $2,140,501 5.92% $2,092,109 5.79%
</TABLE>
The average book value of the Portfolio during the 1999 Period and the 1998
Period was $930,959,304 and $984,811,170, respectively. This reflects the
following prepayments and reinvestments:
<TABLE>
<CAPTION>
Prepayments 1999 Period 1998 Period
- ----------- ----------- -----------
<S> <C> <C>
Floating-Rate REMICs..................... $37,180,031 $34,717,384
Fix-rate REMICs.......................... $20,241,924
Agency ARMs.............................. $25,640,512 $80,011,697
Agency Hybrid ARMs....................... $27,826,665 $16,918,979
Agency DUSs ............................. $56,645
</TABLE>
<TABLE>
<CAPTION>
Reinvestments 1999 Period 1998 Period
- ------------- ----------- -----------
<S> <C> <C>
Floating-rate REMICs..................... $43,837,172
Agency ARMs.............................. $29,467,210
Agency Hybrid ARMs....................... $86,206,271
Agency DUSs ............................. $21,605,521
Agency Debentures........................ $156,400,000
</TABLE>
The Company also recorded interest income from the short-term investment for the
1999 Period and 1998 Period of $928,605 and $379,290, respectively. These
amounts are attributable to (i) interest payments on securities in the Portfolio
and (ii) prepayments of principal pending their reinvestment.
The increase in the aggregate yield on the securities in the Portfolio to 5.60%
for the 1999 Period from 5.08% for the 1998 Period was due primarily to
prevailing market conditions resulting in an increasing interest rate
environment in the United States.
As of March 31, 1999, approximately 60.11% of the Portfolio consisted of
collateralized mortgage obligations (Floating-rate REMICS and Fixed-rate REMICS)
and mortgage-backed securities (Agency ARMs, Agency Hybrid ARMS and Agency
DUSs), approximately 14.40% consisted of U.S. Treasury Notes and approximately
25.49% consisted of Agency Debentures. Floating-rate securities accounted for
approximately 48.21% of the portfolio of collateralized mortgage obligations and
mortgage-backed securities. In addition, the Agency Debentures and the Agency
DUSs are hedged so that the fixed rate payments received are converted into
floating rates. This accounted for approximately 29.40% of the portfolio.
The aggregate market value of the securities in the Portfolio as of March 31,
1999 was higher than the book value by approximately .98%, due to a net decrease
in interest rates from the time of their original purchase. These securities are
classified as available for sale and unrealized net gain is recorded in
Accumulated other comprehensive income.
Operating expenses for the 1999 Period and the 1998 Period totaled $ 112,225 and
$51,548, respectively. Operating expenses consisted of accrued audit fees and an
accrued portion of the fees of Citibank as Trustee and of the Branch under the
Services Agreement.
The Company's net income in the 1999 Period was $13,665,333 and for the 1998
Period it was $12,845,817. The Company has neither declared nor paid dividends
during 1999.
SFAS 125 Receivable and Obligation
Under Statement of Financial Accounting Standard (SFAS) 125, transfers of
financial assets that do not meet certain sale accounting requirements must be
accounted for as a secured borrowing transaction with a pledge of collateral.
Due to the potential consequences of a Shift Event, the Company's purchase of
the Initial Portfolio from the Branch did not meet certain SFAS 125 sale
accounting requirements. Accordingly, the Company recorded at December 5, 1997 a
receivable for the consideration paid to the Branch for the Initial Portfolio
treated as collateral. Since the Company has the right to sell and pledge the
securities in the Initial Portfolio treated as collateral, in application of
SFAS 125 the Company recognized the securities in the Initial Portfolio as
assets and recorded at December 5, 1997 a related obligation to return them to
the Branch. As a legal and economic matter, however, there is no such receivable
or obligation since (a) neither the Bank nor the Branch has any obligation to
repay any part of the purchase price for the Initial Portfolio or to repurchase
or redeem any of the securities included therein, and (b) the Company has no
obligation to return any of such securities to the Bank or the Branch (except in
the limited circumstances and to the extent that the occurrence of a Shift Event
under the Charter would require the transfer of any assets held by the Company
at the time).
As the securities in the Initial Portfolio are paid, the receivable will be
deemed to be realized and the obligation will be reduced, each by an amount
corresponding to the amount of the payments received. At March 31, 1999 and
December 31, 1998, respectively, the receivable arising from payment for
securities amounted to $463,820,507 and $521,643,688 and the obligation arising
from the receipt of securities amounted to $463,732,875 and $529,905,305. (The
difference between the amounts of the receivable and the obligation result from
a requirement to mark the obligation to market in parallel with the related
securities). The decrease in the amount of such receivable and such obligation
between the two dates reflects the prepayment of securities in the Initial
Portfolio. The Company recognized the cash proceeds of such prepayments as a
reduction in the receivable and concurrently reduced the associated obligation.
Such decreases in the receivable and the obligation did not affect the Company's
results of operations or cash flow. Such transactions are accounted for as a
purchase under SFAS 125.
Year 2000 Issue
The Year 2000 issue is the result of legacy computer programs that were designed
using coding that defined the applicable year with two digits rather than four.
Such coding may prevent many of these programs from distinguishing the year 2000
from 1900. This "Year 2000 Issue" may affect computer systems that include, but
are not limited to, those imbedded in business data processing systems,
management and planning systems and communications systems. Systems that do not
properly recognize dates on or after January 1, 2000 could generate erroneous
data or fail. The Company uses the Branch's hardware and software for all of its
operations. Failure to be Year 2000 compliant could result in major disruptions
of the operation of the Branch and thus the Company.
The Branch has implemented a comprehensive Year 2000 response program to modify
or replace the affected systems within its own operations and to assist third
parties who maintain material relationships with the Branch with their Year 2000
initiatives.
In May of 1997, the Branch established a committee to: assess the Year 2000
impact; develop an action plan; develop a Year 2000 contingency plan; and
monitor the Branch's progress toward its Year 2000 compliance. The Branch's
action plan addresses compliance of information technology and non-information
technology systems as well as customer preparedness. Since May 1997, the
planning, assessment, renovation and level 1 system testing phases have been
completed. The application testing phase is substantially completed and full
completion is expected by June 30, 1999. The Branch is closely monitoring the
Year 2000 compliance of its significant vendors, facility operators, custodial
banks, fiduciary agents and customers to determine the extent to which the
Branch is vulnerable to failure by those third parties and to remediate their
own year 2000 issues. The Branch has contacted all significant external vendors
in an effort to confirm their readiness for the Year 2000 and is in the process
of testing their Year 2000 compliance.
The Branch has and will continue to utilize internal resources for this project.
No external resources are expected to be used. To date, the amounts incurred and
expensed related to the assessment of, and efforts in connection with, the Year
2000 Issue and the development of a remediation plan are approximately $890,000.
This amount was funded through operating cash flows and expensed as incurred. It
is estimated that the total cost of remediation incurred by the Branch will be
$1,267,500. The Company itself has not incurred any expenses in the preparation
of the Year 2000 issue.
The Branch presently believes that the activities that it is undertaking in the
Year 2000 project should satisfactorily resolve Year 2000 compliance exposures
within its own systems. The Branch has completed the reprogramming and
replacement phases of the project. No Information Technology projects have been
deferred to after the Year 2000. However, if such modifications and conversions
are not operationally effective on a timely basis, the Year 2000 issue could
have a material impact on the operations of the Branch, and thus on the Company.
Furthermore, there can be no assurance that the systems of other companies on
which the Branch's systems rely will be timely converted, or that a failure to
convert by another company, or a conversion that is incompatible with the Branch
systems, would not have a material adverse effect on the Branch or hence on the
Company.
The Branch has developed well-defined business continuity plans in an effort to
mitigate unforeseen risks. The Branch believes that these action plans
significantly reduce the risk of a Year 2000 issue that is serious enough to
cause a business disruption. With regard to Year 2000 compliance of other
external entities, the Branch is monitoring developments closely.
Liquidity and Capital Resources
The objective of liquidity management is to ensure the availability of
sufficient cash flows to meet all of the Company's financial commitments. The
Company's sole liquidity needs are to acquire reinvestment securities as
original securities repay or prepay and to pay dividends on the Series A
Preferred Securities. The acquisition of reinvestment securities is funded with
the proceeds of principal repayments or prepayments on original securities, and
the payments of dividends on the Series A Preferred Securities are funded
through interest income from the securities in the Portfolio. Given the limited
scope of its activities (acquiring and holding eligible securities to fund the
payment of dividends on the Series A Preferred Securities and the Common
Securities), and the fact that the Company is prohibited from incurring
indebtedness, the Company believes that its liquidity and capital resources will
be sufficient to meet its liquidity requirements in the short and long term.
Item 3
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Interest Rate Sensitivity
The Company's principal market risk exposure is to changes in interest rates.
This exposure arises from its investments in collateralized mortgage
obligations, mortgage-backed securities, agency debentures, U.S. Treasury Notes
and certain derivative instruments used by the Company to modify interest rate
exposures.
The outstanding principal amount and estimated fair value as of March 31, 1999,
by each category of investment is depicted in Footnote 4 of the Financial
Statements contained in Item 1 herein.
Interest Rate Risk
The Company's income consists primarily of interest payments on collateralized
mortgage obligations, mortgage-backed securities, agency debentures and U.S.
Treasury Notes. Currently, the Company uses derivative products to manage a
portion of its interest rate risk.
Due to a moderate increase in market interest rates, as occurred throughout 1999
Period, the Company experienced a stabilization in interest income on its
collateralized mortgage obligations, and its mortgage-backed securities. The
increase in interest income resulted from upward adjustments of the indices upon
which the interest rates on floating-rate mortgage loans are based.
The Company is a party to seven interest rate swaps with BNP. In all of these
swaps the Company pays a fixed coupon and receives floating rate payments on the
notional balances as set out below:
(000 omitted)
<TABLE>
<CAPTION>
FAIR VALUE AT NOTIONAL VALUE MATURITY FIXED RECEIVE
MARCH 31, 1999 BALANCE DATE DATE RATE RATE
-------------- ------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
33 $42,000 November 25, 1998 March 26, 2008 JPY 1.75 US Three Month Libor
plus Six Basis Points
(2,211) $58,000 November 25, 1998 October 9, 2007 JPY 2.125 US Three Month Libor
plus Six Basis Points
(690) $20,000 November 25, 1998 August 25, 2008 US 6.15 US One Month Libor
plus Five Basis
Points
(37) $21,625 February 25, 1999 February 25, 2009 US 5.93 US One Month Libor
Plus Three Basis
Points
(2,832) $50,000 February 12, 1999 March 5, 2007 US 6.68 US One Month Libor
minus Two Basis
Points
(3,230) $50,000 February 11, 1999 March 14, 2007 US 6.80 US One Month Libor
minus Two Basis
Points
(381) $30,000 March 30, 1999 October 9, 2007 JPY 1.75 US Three Month Libor
plus Six Basis Points
</TABLE>
The Company regularly reviews its hedging requirements. In the future, the
Company expects to enter into additional swaps, unwind part or all of the
initial and any future swaps in order to rebalance the fixed and floating mix of
interest obligations (including those arising as a result of previous interest
rate swaps entered into) and the fixed and floating mix of interest payments.
The Company's interest rate management strategy will continue to be rebalanced
with any purchase of new investments. There can be no assurance, however, that
the Company's interest rate risk management strategies will be effective in this
regard.
The breakdown of the Company's available-for-sale securities by category and
weighted average life distribution (stated in terms of amortized cost) is
summarized below ($ in 000's) based on management's prepayment assumptions:
<TABLE>
<CAPTION>
Due Due Due Due after Due 2004 and
after after after after after there
1999 2000 2001 2002 2003 after Total
---- ---- ---- ---- ---- ----- -----
March 31, 1999
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed Rate Instruments....................
Fixed-rate REMICs......................... 33,051 46,825 79,876
Agency DUSs .............................. 41,531 41,531
Agency Debentures......................... 256,400 256,400
U.S. Treasury Notes....................... 145,744 145,744
------- ---------
Total Fixed Rate Instruments.............. 33,051 490,500 523,551
------ ------- ---------
Floating-rate Instruments.................
Floating-rate REMICs...................... 11,925 38,325 59,323 32,065 19,040 160,678
Agency ARMs............................... 19,405 63,957 46,230 1,060 12,812 143,464
Agency Hybrid ARMs........................ 99,902 40,478 19,970 13,260 9,608 183,218
------- ------- ------- ------ ------- ---------
Total Floating Rate Instruments........... 131,232 142,760 125,523 46,385 31,852 9,608 487,360
------- ------- ------- ------ ------ ------- ---------
Total..................................... 164,283 142,760 125,523 46,385 31,852 500,108 1,010,911
======= ======= ======= ====== ====== ======= =========
</TABLE>
Actual maturities may differ from maturities shown above due to prepayments.
Part II
- -------
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of the Proceeds
None
Item 3 Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5 Other Information
None
Item 6 Exhibits and Current Reports on Form 8-K
A) Exhibits:
11) Computation of net income per share
12) (a) Computation of ratio of earnings to fixed charges
(b) Computation of ratio of earnings to fixed charges and
preferred security dividend requirements
B) Reports on Form 8-K: NONE
<PAGE>
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
BNP U.S. FUNDING L.L.C.
-----------------------
Registrant
Date: May 14, 1999 By /s/ Eric Deudon
-----------
Eric Deudon
President and Director
Date: May 14, 1999 By /s/ Lisa Hermann
------------
Lisa Hermann
Treasurer
Exhibit 11
BNP U.S. FUNDING L.L.C.
Computation of net income per share
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three-month period ended
March 31, 1999
--------------
<S> <C>
Net Income $ 13,665
Less: Preferred Securities Dividend Requirement.................. 19,345
--------
Net Loss Applicable to Common Securities ........................ $ (5,680)
========
Securities:
Weighted Average Number of Common Securities
Outstanding...................................................... 53,011
Net Loss per Common Security .................................... $(107.15)
========
</TABLE>
Exhibit 12 (a)
BNP U.S. FUNDING L.L.C.
Computation of ratio of earnings to fixed charges
(in thousands, except ratios)
<TABLE>
<CAPTION>
Three-month period ended
March 31, 1999
--------------
<S> <C>
Net income....................................................... $13,665
Fixed Charges
Trustee Fees............................................ 30
Audit Fees.............................................. 7
Administrative Fees..................................... 62
-------
Total Fixed Charges.............................................. 99
-------
Earnings before fixed charges.................................... 13,764
Fixed charges, as above.......................................... 99
-------
Ratio of earnings to fixed charges............................... 139.03
======
</TABLE>
Exhibit 12 (b)
BNP U.S. FUNDING L.L.C.
Computation of ratio of earnings to fixed charges
and preferred securities dividend requirements
(in thousands, except ratios)
<TABLE>
<CAPTION>
Three-month period ended
March 31,1999
-------------
<S> <C>
Net income....................................................... $ 13,665
Fixed Charges
Trustee Fees............................................ 30
Audit Fees.............................................. 7
Administrative Fees..................................... 62
---------
Total Fixed Charges.............................................. 99
---------
Earnings before fixed charges.................................... 13,764
---------
Fixed charges, as above.......................................... 99
Preferred securities dividend.................................... 19,345
Fixed charges including preferred securities dividends........... 19,444
=========
Ratio of earnings to fixed charges and preferred securities ..... .71
=========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 56,589
<SECURITIES> 1,020,831
<RECEIVABLES> 463,821
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,548,790
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
500,000
<COMMON> 530,110
<OTHER-SE> 19,080
<TOTAL-LIABILITY-AND-EQUITY> 1,548,790
<SALES> 0
<TOTAL-REVENUES> 13,778
<CGS> 0
<TOTAL-COSTS> 113
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,665
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
