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FORM 10-Q
Securities and Exchange Commission
Washington, D. C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended: September 30, 2000
Commission File Numbers: 2-97573, 33-12626 and 33-19023
NATIONAL MORTGAGE ACCEPTANCE CORPORATION
(Exact name of registrant as specified in its charter)
Virginia 54-1294217
(State or other Jurisdiction (I.R.S. Employer
of incorporation) Identification number)
909 East Main Street
P.O. Box 1575
Richmond, Virginia
(Address of principal executive offices)
23218
(Zip Code)
(804) 775-7904
(Registrant's telephone number, including area code)
Indicate by checkmark 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 of time 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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Class A Common Stock: 730 shares
Class B Common Stock: 1,665 shares
Part I: FINANCIAL INFORMATION
September 30, 2000
Item 1. Financial Statements
Attached as Appendix A.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations
Attached as Appendix B.
Part II: OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Defaults on Senior Securities - None
Item 4. Submission of Matters to Vote of Security Holders Information regarding election of directors by the registrant's voting shareholders previously reported in registrant's report on Form 10-K for its year ending December 31, 1999, as filed March 31, 2000. There were no other matters submitted to a vote of security holders during the quarter.
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K There were no reports on Form 8-K filed during the
quarter. Exhibits, See index to exhibits.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
NATIONAL MORTGAGE ACCEPTANCE CORPORATION
(Registrant)
By: ______________________________________________
Randall B. Saufley
Secretary/Treasurer
Principal financial officer and duly authorized officer
Date: November 13, 2000
EXHIBIT INDEX
2. Not Applicable.
4.1 Indenture dated as of May 1, 1985 ("Indenture") between NMAC and Texas Commerce Bank National Association as trustee ("Trustee"), previously filed as Exhibit 4.1 to Amendment No. 1 to NMAC's Registration Statement on Form S-11, Registration No. 2-97573 and incorporated by reference.
4.2 General Supplement relating to Subsequent Series dated as of January 1, 1987, previously filed as Exhibit to NMAC's Form 8-K filed on February 10, 1985, and incorporated by reference.
4.3 Series Supplement to the Indenture, dated as of July 1, 1985, relating to Series 1985-A Bonds, previously filed as Exhibit 4 to NMAC's Form 8-K filed on July 23, 1985, and incorporated by reference.
4.4 Series Supplement to the Indenture, dated as of January 20, 1987, relating to Series B Bonds, previously filed as Exhibit 4.3 to NMAC's Form 8-K filed on February 10, 1987, and incorporated by reference.
4.5 Series Supplement to the Indenture, dated as of March 20, 1987, relating to Series C Bonds, previously filed as Exhibit 4.3 to NMAC's Form 8-K filed on April 8, 1987, and incorporated by reference.
4.6 Series Supplement to the Indenture, dated as of October 30, 1987, relating to Series D Bonds, previously filed as Exhibit 4.3 to NMAC's form 8-K filed on November 12, 1987, and incorporated by reference.
4.7 Form of Second General Supplement to Indenture relating to Subsequent Series previously filed as Exhibit 4.4 to NMAC's Post-Effective Amendment No. 1 on Form S-3 to S-11 Registration No. 33-19023 and incorporated by reference.
11. Not applicable. Information in Appendix A.
15. Not applicable.
18. Not applicable.
19. Not applicable.
20. Not applicable.
23. Not applicable.
24. Not applicable.
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APPENDIX A (1/4) |
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Consolidated Statements of Financial Condition |
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NATIONAL MORTGAGE ACCEPTANCE CORPORATION |
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September 30, 2000 |
December 31, 1999 |
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(unaudited) |
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ASSETS |
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Cash |
$ |
30,217 |
$ |
19,308 |
|
Trading securities, at fair value |
78,498 |
151,645 |
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Loans receivable from affiliates |
6,477,570 |
8,484,012 |
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Accrued interest receivable |
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from affiliates |
182,182 |
477,226 |
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Other assets |
163,244 |
104,713 |
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TOTAL ASSETS |
$ |
6,931,711 |
$ |
9,236,904 |
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LIABILITIES AND SHAREHOLDERS' EQUITY |
||||
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LIABILITIES |
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Bonds payable |
$ |
6,477,570 |
$ |
8,484,012 |
|
Accrued interest payable |
182,182 |
477,226 |
||
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Other liabilities, principally to affiliates |
56,265 |
38,714 |
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TOTAL LIABILITIES |
6,716,017 |
8,999,952 |
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SHAREHOLDERS' EQUITY |
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Common stock; $1 par value: |
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Class A (without right to dividend)-- |
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authorized 7,500 shares, issued and |
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outstanding 730 shares |
730 |
730 |
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Class B (non-voting)-- authorized |
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7,500 shares, issued and outstanding |
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1,665 shares |
1,665 |
1,665 |
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Paid-in capital |
182,565 |
182,565 |
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Retained earnings |
30,734 |
51,992 |
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SHAREHOLDERS' EQUITY |
215,694 |
236,952 |
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TOTAL LIABILITIES AND |
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SHAREHOLDERS' EQUITY |
$ |
6,931,711 |
$ |
9,236,904 |
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The accompanying notes are an integral part of these financial statements. |
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Consolidated Statements of Operations and Retained Earnings |
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NATIONAL MORTGAGE ACCEPTANCE CORPORATION |
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Three Months Ended |
Nine Months Ended |
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September 30, |
September 30, |
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2000 |
1999 |
2000 |
1999 |
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(unaudited) |
(unaudited) |
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REVENUES |
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Interest on loans |
$ |
182,182 |
$ |
238,613 |
$ |
598,997 |
$ |
793,449 |
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Other interest |
850 |
2,758 |
3,787 |
10,400 |
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Management fees |
14,750 |
15,250 |
48,174 |
45,941 |
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Net unrealized securities trading gains |
(1,449) |
(2,292) |
(8,839) |
(1,217) |
||||||
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196,333 |
254,329 |
642,119 |
848,573 |
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COSTS AND EXPENSES |
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Interest on bonds |
182,182 |
238,613 |
598,997 |
793,449 |
||||||
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Management fees |
14,750 |
15,250 |
48,174 |
45,941 |
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Other |
4,033 |
4,040 |
21,550 |
12,632 |
||||||
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200,965 |
257,903 |
668,721 |
852,022 |
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NET INCOME/(LOSS) |
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BEFORE INCOME TAXES |
(4,632) |
(3,574) |
(26,602) |
(3,449) |
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INCOME TAX EXPENSE/(BENEFIT) |
(919) |
(715) |
(5,345) |
(690) |
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NET INCOME (LOSS) |
(3,713) |
(2,859) |
(21,258) |
(2,759) |
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RETAINED EARNINGS AT |
||||||||||
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BEGINNING OF PERIOD |
34,447 |
53,594 |
51,992 |
53,494 |
||||||
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RETAINED EARNINGS AT |
||||||||||
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END OF PERIOD |
$ |
30,734 |
$ |
50,735 |
$ |
30,734 |
$ |
50,735 |
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EARNINGS (LOSS) PER SHARE |
$ |
(1.55) |
$ |
(1.19) |
$ |
(8.88) |
$ |
(1.15) |
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The accompanying notes are an integral part of these financial statements. |
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Consolidated Statements of Cash Flows |
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NATIONAL MORTGAGE ACCEPTANCE CORPORATION |
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Nine Months Ended |
Nine Months Ended |
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September 30, 2000 |
September 30, 1999 |
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(unaudited) |
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Cash flows from operating activities: |
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Net income (loss) |
$ |
(21,258) |
$ |
(2,759) |
|
|
Adjustments to reconcile net |
|||||
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income to net cash provided by |
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operating activities: |
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Trading securities |
73,147 |
15,904 |
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Cash and related investments |
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restricted - Series 1985-A |
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Working capital reserve |
0 |
(556) |
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Accrued interest receivable |
|||||
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from affiliates |
295,044 |
386,033 |
|||
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Decrease in accrued interest payable |
-295,044 |
(386,033) |
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Other assets |
(58,531) |
(3,936) |
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Other liabilities, principally |
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to affiliates |
17,551 |
(2,407) |
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Total adjustments |
32,167 |
9,005 |
|||
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Net cash provided by |
|||||
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operating activities |
10,909 |
6,246 |
|||
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Cash flows from investing activities: |
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Payments received on loans to |
|||||
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affiliates |
2,006,442 |
2,620,798 |
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Cash flows from financing activities: |
|||||
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Payments on bonds payable |
(2,006,442) |
(2,620,798) |
|||
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Net increase in cash |
10,909 |
6,246 |
|||
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Cash at beginning of period |
19,308 |
11,289 |
|||
|
Cash at end of period |
$ |
30,217 |
$ |
17,535 |
|
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The accompanying notes are an integral part of these financial statements. |
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APPENDIX A (4/4)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NATIONAL MORTGAGE ACCEPTANCE CORPORATION
September 30, 2000
NOTE A (Unaudited)
These financial statements should be read in conjunction with the financial statements and notes thereto in National Mortgage Acceptance Corporation's ("NMAC") Annual Report for the year ended December 31, 1999. The financial statements for the nine months ended September 30, 2000, include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the results of operations, financial position, and cash flows for the interim periods. These amounts are not necessarily indicative of results for a full year.
NOTE B (New Accounting Pronouncements)
In June 1999, the FASB issued SFAS No. 137, Accounting for Derivative Instruments and Hedging Activities Deferral of the Effective Date of FASB Statement No. 133, which delayed the original effective date of SFAS No. 133 until fiscal years beginning after June 15, 2000. In June 2000, the FASB issued SFAS No. 138, Accounting for Derivative Instruments and Hedging Activities , which amends SFAS No. 133. SFAS No. 138 addresses a limited number if issues related to the implementation of SFAS No. 133. SFAS No. 133 replaces existing pronouncements and practices with a single, integrated accounting framework for derivatives and hedging activities requiring companies to formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. Management believes there will be no material effect on the financial statements from the adoption of the pronouncement.
APPENDIX B
TO FORM 10-Q
Management's Discussion and Analysis of Financial Condition and Results of Operations
NATIONAL MORTGAGE ACCEPTANCE CORPORATION
September 30, 2000
During the quarter ended September 30, 2000, National Mortgage Acceptance Corporation ("NMAC") did not issue any new series of its TIMCO (Thrift Industry Mortgage Collateralized Obligation) or Mortgage Collateralized Obligation Bonds .
During the nine (9) month period ending, September 30, 2000, NMAC revenues were $642,119 which consisted primarily of i) interest on loans receivable under funding agreements between NMAC and the participating borrowers for NMAC's TIMCO Bonds, Series 1985-A (FHLMC Certificates) (the "Series 1985-A Bonds") and ii) Management Fees received for the on-going administration of two outstanding Bond Series: Series 1985-A Bonds, (FHLMC Certificates), and Series D Bonds (GNMA Certificates). Future revenues are expected to be provided from interest payments on funding agreements for the Series A Bonds.
NMAC has caused an election to be made under the Internal Revenue Code of 1986, as amended (the "Code"), to have the Trust Estate for the Series D Bonds taxed as a separate real estate mortgage investment conduit (a "REMIC"), in which the Series D Bonds are "regular interests," as defined in the Code, with respect to the REMIC. Other than its on-going fees for administration of the Series D Bond REMIC, NMAC has no future economic benefit in the segregated asset pool comprising of the Series D Bond REMIC. The "residual interest" in the Series D Bond REMICs was sold by NMAC for cash in 1987. Accordingly, neither the collateral for the Series D Bonds nor the Series D Bonds are recorded as assets or liabilities, respectively, of NMAC. The interest income on the collateral for, and the related interest expense on, the Series D Bonds will be recorded only within the Series D Bond REMIC. Neither the interest income nor the related interest expense on REMIC will have an impact on NMAC's financial statements.
Interest on NMAC's outstanding Series 1985-A Bonds was the major source of costs and expenses for the period. Cash flow from payments on the loans receivable securing the Series 1985-A Bonds are anticipated to provide cash sufficient to make all required payments on the related 1985-A Bonds. Consequently, NMAC anticipates that it will have no additional cash requirements with respect to any of its outstanding Bonds.
NMAC believes sufficient liquidity and capital resources exist to pay all amounts due on the Series 1985-A Bonds and all other expenses of NMAC. Furthermore, because each Series of Bonds is secured by collateral paying interest at specified or determinable maximum rates and payments on each Series of Bonds are designed not to exceed payments received on the collateral for the related Series, inflationary pressures have not affected, and are not expected to affect, significantly the ability of NMAC to meet its obligations as they become due.
NMAC has no salaried employees and has entered into management and administrative service agreements with Scott & Stringfellow, Inc. (formerly Craigie Incorporated), an affiliate of NMAC and a wholly-owned subsidiary of BB& T Corporation, pursuant to which Scott & Stringfellow, Inc. (S&S, Inc.) provides NMAC with administrative, accounting and clerical services, office space and the use of the service mark "TIMCO" for the registrant's Bonds. Under these agreements, S&S, Inc. receives fees from NMAC in connection with each funding agreement executed between NMAC and the participating borrowers and with respect to the residual interests with respect to the registrant's Series D Bonds. Fees paid to NMAC by participating borrowers with respect to its Series A Bonds and the holders of the residual interest with respect to its Series D Bonds are expected by NMAC to be sufficient to provide for all on-going costs and expenses with respect to the outstanding Series of its Bonds. NMAC therefore anticipates that it will have no additional cash or liquidity requirements with respect to its obligations under any outstanding Series of its Bonds. Payments under the management and administrative services agreements between NMAC and S&S, Inc. are not expected to exceed the amount received by NMAC as on-going fees paid to it by participating borrowers under their funding agreements and/or holders of the residual interest with respect to the Series D REMIC Bonds. Chase Bank of Texas, N.A., trustee for all outstanding Series of NMAC's Bonds, also holds funds in expense reserve accounts established under the Series Supplements for certain of NMAC's outstanding Bonds to provide for future expenses of the Trustee with respect to the related Series Supplement if other funds are insufficient therefore. Such amounts are held under the respective Series Supplements and are not recorded in the financial statements for NMAC.
The Series 1985-A Working Capital Reserve, established by NMAC with respect to its Series 1985-A Bonds, was funded by the Series 1985-A participating borrowers from their funding agreements. These amounts were available solely to pay any fees, charges, taxes, assessments, impositions or other expenses of NMAC, other than bond administration expenses, in connection with the Series 1985-A Bonds. The Series 1985-A Working Capital Reserve is not available to pay expenses or claims of NMAC other than with respect to the Series 1985-A Bonds, is not pledged to secure the Series 1985-A Bonds and is not pledged to secure any other Series of NMAC's Bonds.
With respect to certain of its administration duties for the Series D REMIC, NMAC has contracted with Asset Investors, Inc. (formerly Financial Asset Management Corporation and M.D.C. Consulting, Inc.). Amounts due Asset Investors, Inc. for services rendered are paid from amounts received by NMAC for administrative services from holders of the Series D REMIC residual interest and are less than the gross amount payable by such holders to NMAC.
On November 12, 1996 Scott & Stringfellow, Inc. (Craigie Incorporated at time of purchase) purchased from the Federal Deposit Insurance Corporation ("FDIC") the stock of three of the affiliates who participated in the Series 1985-A Bonds. The affiliates were Atlantic Financing Corporation, Security Federal Financing Corporation and Mountain Financial Corporation. Effective June 30, 1998, Atlantic Financing and Security Federal were merged into Mountain Financial Corporation. In addition, the parent company of S&S Inc., BB&T Corporation, purchased Life Savings Bank on March 1, 1998 which owned a fourth affiliate of NMAC named Life Capital Corporation. Life Capital was purchased by S&S, Inc. and subsequently merged into Mountain Financial Corporation effective September 30, 1998.
On September 17, 1999, NMAC offered to subscribe to 1,000 shares of the Common Stock ("Stock") of National Mortgage Securities Corporation ("NMSC") and agreed, in consideration therefor, to transfer cash in the amount of $10,000 to NMSC. NMAC also represented that the Stock would be held for investment and not for the purpose of distribution or resale. NMAC transferred cash in December 1999 and recorded an investment in subsidiary on its books. This investment is included in "Other Assets" on the Balance Sheet for December 31, 1999 and subsequent quarters. NMSC is a wholly owned subsidiary of NMAC.
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NMSC was formed to purchase or otherwise acquire, own, hold, pledge, finance, transfer, assign and otherwise deal in or with mortgage assets (including mortgage loans), mortgage-backed securities, asset-backed securities, mortgage collateralized obligations, other interests in real estate, and any combination of the foregoing, including, but not limited to, (1) mortgage assets secured by senior or subordinate liens on residential property, (2) participation interests in mortgage assets, (3) pass-through, mortgage-backed certificates as to which Federal National Mortgage Association guarantees the timely payment of interest at the pass-through rate and the timely payment of principal, and other securities as dictated in NMSC's Articles of Incorporation. NMSC has no salaried employees and its officers and directors also hold offices in NMAC. There was no business activity in NMSC in 1999 or to date in 2000.
As of September 30, 2000, NMAC's assets were $6,931,711 including $98,608 in unrestricted cash and trading securities. This cash and security balance, plus interest earnings from the investment thereof, is available to pay NMAC's annual operating expenses, and, if and to the extent necessary, amounts in connection with the outstanding Bonds of NMAC.
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