<PAGE>
UNITED STATES SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark one)
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 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 FUNDING CORPORATION
------------------------------
(Exact name of registrant as specified in its charter)
Delaware 75-2547042
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1201 Main Street, 29th Floor, Dallas, Texas 75202
--------------------------------------------------
(Address of principal executive offices) (Zip Code)
(214) 743-9999
--------------
(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
----- -----
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)
(a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE
REDUCED DISCLOSURE FORMAT.
On May 14, 1996, there were 100 shares of the registrant's common
stock outstanding, all of which shares are held by NationsBank of Texas,
N.A., an indirect, wholly owned subsidiary of NationsBank Corporation.
<PAGE>
MAIN PLACE FUNDING CORPORATION
INDEX TO FINANCIAL STATEMENTS
Page
----
Part I. Financial Information
Item 1. Financial Statements:
Balance Sheet on March 31, 1996 and December 31, 1995................ 1
Statement of Income for the Three Months Ended March 31, 1996
and 1995............................................................. 2
Statement of Cash Flows for the Three Months Ended March 31, 1996 and
1995................................................................. 3
Statement of Changes in Shareholder's Equity for the Three Months
Ended March 31, 1996 and 1995........................................ 4
Notes to Financial Statements........................................ 5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................ 7
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K..................................... 7
Signature..................................................................... 8
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
Main Place Funding Corporation
Balance Sheet
(Dollars in Thousands)
<CAPTION>
March 31 December 31
1996 1995
<S> <C> <C>
- --------------------------------------------------------------------------------------
Assets
Cash and cash equivalents.......................... $ 6,767 $ 4,870
Amount due from Trustee............................ 144,375 106,531
Mortgage loans, net of unearned income............. 4,716,516 4,523,744
Allowance for credit losses........................ (19,149) (17,805)
Interest receivable................................ 24,965 21,907
Other assets....................................... 9,042 9,199
--------------------------------
$ 4,882,516 $ 4,648,446
================================
Liabilities
Accrued expenses................................... $ 25,886 $ 22,137
Mortgage-backed bonds.............................. 2,999,393 2,999,342
Subordinated notes................................. 1,037,261 1,320,183
---------------------------------
Total liabilities................................ 4,062,540 4,341,662
---------------------------------
Shareholder's Equity
Common stock, $.01 par value:
authorized - 1,000 shares; issued - 100 shares... - -
Additional paid-in capital......................... 802,134 299,648
Retained earnings.................................. 17,842 7,136
--------------------------------
Total shareholder's equity....................... 819,976 306,784
--------------------------------
$ 4,882,516 $ 4,648,446
================================
See accompanying notes to financial statements.
</TABLE>
1
<PAGE>
<TABLE>
Main Place Funding Corporation
Statement of Income
(Dollars in Thousands)
<CAPTION>
Three Months
Ended March 31
--------------------------
1996 1995
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest and fees on mortgage loans................................. $ 87,747 $ 28,044
--------------------------
Expenses
Interest.......................................................... 67,915 25,990
Other operating expenses.......................................... 3,356 951
---------------------------
Total expenses.................................................. 71,271 26,941
---------------------------
Income before income taxes.......................................... 16,476 1,103
Income tax expense.................................................. 5,770 386
---------------------------
Net income.......................................................... $ 10,706 $ 717
===========================
See accompanying notes to financial statements.
</TABLE>
2
<PAGE>
<TABLE>
Main Place Funding Corporation
Statement of Cash Flows
(Dollars in Thousands)
<CAPTION>
Three Months
Ended March 31
-----------------------------
1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operating Activities
Net income...................................................................... $ 10,706 $ 717
Reconciliation of net income to net cash provided by operating activities
Net increase in interest receivable........................................... (25) (149)
Net increase in accrued expenses.............................................. 3,749 26,375
Other operating activities.................................................... 343 (31)
------------------------------
Net cash provided by operating activities................................... 14,773 26,912
------------------------------
Investing Activities
Net increase in amount due from Trustee......................................... (37,844) -
Net reduction of mortgage loans outstanding..................................... 307,890 25,011
-------------------------------
Net cash provided by investing activities..................................... 270,046 25,011
Financing Activities
Retirement of long-term debt.................................................... (282,922) -
--------------------------------
Net cash used by financing activities........................................ (282,922) -
--------------------------------
Net increase in cash and cash equivalents......................................... 1,897 51,923
Cash and cash equivalents at beginning of period.................................. 4,870 66,933
--------------------------------
Cash and cash equivalents at March 31............................................. $ 6,767 $ 118,856
================================
Supplemental cash flow disclosure
Cash paid for interest $ 82,148 $ -
Cash paid for income taxes 1,911 -
See accompanying notes to financial statements.
</TABLE>
3
<PAGE>
<TABLE>
Main Place Funding Corporation
Statement of Changes in Shareholder's Equity
(Dollars in Thousands)
<CAPTION>
Additional Total
Common Stock Paid-In Retained Shareholer's
----------------------
Shares Amount Capital Earnings Equity
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance on December 31, 1994............................ 100 $ - $ 270,566 $ 3,549 $ 274,115
Net income............................................. 717 717
----------------------------------------------------------------
Balance on March 31, 1995............................... 100 $ - $ 270,566 $ 4,266 $ 274,832
Balance on December 31, 1995............................ 100 $ - $ 299,648 $ 7,136 $ 306,784
Net income............................................. 10,706 10,706
Net assets contributed by the Parent................... 502,486 502,486
----------------------------------------------------------------
Balance on March 31, 1996............................... 100 $ - $ 802,134 $ 17,842 $ 819,976
================================================================
See accompanying notes to financial statements.
</TABLE>
4
<PAGE>
Main Place Funding Corporation
Notes to Financial Statements
Note 1 - Accounting Policies
Basis of Presentation
Main Place Funding Corporation (MPFC) was incorporated on June 24, 1994. It is
a wholly owned, limited-purpose, finance subsidiary of NationsBank of Texas,
N.A. (Parent), which is an indirect, wholly owned subsidiary of NationsBank
Corporation (Corporation). MPFC's sole purpose is to issue and sell mortgage-
backed bonds and subordinated indebtedness and to acquire, own, hold and pledge
the related mortgage notes and other assets serving as collateral in connection
therewith. Its operations commenced on September 20, 1994 (Inception).
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles and reflect all normal recurring
adjustments which are, in the opinion of management, necessary for the fair
presentation of the results for the interim periods presented.
Accounting policies followed in the presentation of interim financial results
are presented on pages F-7 and F-8 of the Annual Report on Form 10-K for the
year ended December 31, 1995.
Note 2 - Mortgage Loans
Mortgage loans were composed of (dollars in thousands):
<TABLE>
<CAPTION>
March 31 December 31
1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C>
Fixed-rate loans.............................. $ 1,315,204 $ 1,292,457
Adjustable-rate loans......................... 3,401,312 3,231,287
-----------------------------
Total loans................................. $ 4,716,516 $ 4,523,744
=============================
</TABLE>
Transactions in the allowance for the credit losses were (dollars in thousands):
<TABLE>
<CAPTION>
1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
Balance on January 1......................... $ 17,805 $ 10,993
Allowance applicable to contributed loans.... 1,344 -
------------------------------
Balance on March 31.......................... $ 19,149 $ 10,993
===============================
Nonperforming loans totaled $1.5 million and $188 thousand on March 31, 1996 and
December 31, 1995, respectively.
Other real estate owned amounted to $741 thousand on March 31, 1996 compared to
$763 thousand on December 31, 1995.
Note 3 - Affiliate Transactions
On February 1, 1996, the Parent contributed an additional $502 million of
mortgage loans including accrued interest and net of an allowance for credit
losses of $1.3 million, to MPFC.
MPFC has entered into an agreement with NationsBanc Mortgage Corporation, a
subsidiary of the Parent, for the servicing and administration of its mortgage
portfolio. Servicing expense for the three months ended March 31, 1996 and
1995 approximated $3.3 million and $950 thousand, respectively.
MPFC maintains its cash and cash equivalent accounts primarily with the Parent.
5
<PAGE>
Note 4 - 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 Bonds, which are issuable in
series pursuant to separate indentures, will be generally subject to the
following terms. The Bonds, collateralized primarily by 1 to 4 family mortgage
loans, will be obligations solely of MPFC. The Bonds will not be prepayable at
the option of MPFC, but will be subject to redemption in whole or in part under
certain circumstances. Under the terms of an indenture relating to a series of
Bonds, MPFC 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, MPFC 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, MPFC
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, MPFC issued $1.5 billion of Mortgage-Backed Bonds, Series
1995-1, due 1998 (Series 1995-1 Bonds), bearing interest at the one-month London
interbank offered rate (LIBOR) plus 21 basis points with a maximum interest rate
of 12 percent. The proceeds from the issuance of the Series 1995-1 Bonds were
used to return to the Parent approximately $982 million of capital and to repay
a portion of the October 1994 subordinated note discussed below. On October 31,
1995, MPFC 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. The proceeds from the issuance of the Series 1995-2 Bonds were used to
return to the Parent approximately $1.5 billion of capital. On March 31, 1996,
all of the Series 1995-1 and 1995-2 Bonds were outstanding with interest rates
of 5.61 percent and 5.67 percent, respectively, based on the rate in effect on
March 31, 1996, and were collateralized by mortgage loans with a book value of
approximately $2.5 billion and $2.2 billion, respectively. On April 5, 1996,
the discounted value of the eligible collateral for the Series 1995-1 and 1995-2
Bonds, as computed by the Trustee, was approximately $1.9 billion and $1.7
billion, respectively, and exceeded the amount required by the terms of the
related indentures by approximately $352 million and $129 million, respectively.
On October 2, 1994, MPFC borrowed $1.3 billion under a subordinated note from
the Parent. On November 30, 1995, MPFC borrowed $925 million under an
additional subordinated note from the Parent, which note subsequently was
increased to $934 million. The proceeds from the notes were used to return
capital to the Parent. The subordinated notes bear interest at 8.0% and 6.5%,
respectively, which is payable quarterly in arrears. The notes mature on
September 25, 1999 and September 25, 2000, respectively, and are subordinated to
all of MPFC's senior debt, including the Bonds. MPFC may repay amounts, from
time to time, owed under the subordinated notes from funds which are not subject
to the lien of any indenture relating to any senior debt. On March 31, 1995,
$594 million and $443 million, respectively, was owed on the subordinated notes.
Interest expense on the subordinated notes for the three months ended March 31,
1996 and 1995 was $23.6 million and $26.0 million, respectively. Interest
expense on the Series 1995-1 and Series 1995-2 Bonds for the three months ended
March 31, 1996 was $44.3 million.
As of May 14, 1996, MPFC had $1 billion of remaining shelf capacity under the
Registration Statement.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Net income for the three months ended March 31, 1996 was $10.7 million
compared to $717 thousand earned in the first quarter of 1995.
MPFC's net income reflects the impact of several factors such as the levels
and the average interest rates of the mortgage loan portfolio and the issuance
of the Series 1995-1 and 1995-2 Bonds and the subordinated notes, including
securities market conditions and the volatility of interest rates. The results
of operations for any particular interim period may not be indicative of results
to be expected for a full year.
The average yield on the mortgage loans for the three months ended March
31, 1996 and 1995 was 7.37 percent and 7.34 percent, respectively. Changes in
such 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 of mortgage
loans and normal scheduled amortization of the portfolio as a whole.
The average interest rates on the outstanding mortgage-backed bonds and
subordinated notes for the three months ended March 31, 1996 were 5.91 percent
and 7.19 percent, respectively.
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27. Financial Data Schedule
(b) Reports on Form 8-K:
None
7
<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, thereunto duly authorized.
Main Place Funding Corporation
Date: May 14, 1996 /s/ Joe L. Price
--------------------------------
Joe L. Price
Senior Vice President--Accounting
(Principal Accounting and
Duly Authorized Officer)
8
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
The schedule contains summary information extracted from the March 31, 1996,
Form 10-Q for Main Place Funding Corporation and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 6,767
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 4,716,516
<ALLOWANCE> (19,149)
<TOTAL-ASSETS> 4,882,516
<DEPOSITS> 0
<SHORT-TERM> 0
<LIABILITIES-OTHER> 25,886
<LONG-TERM> 4,036,654
<COMMON> 0
0
0
<OTHER-SE> 819,976
<TOTAL-LIABILITIES-AND-EQUITY> 4,882,516
<INTEREST-LOAN> 87,747
<INTEREST-INVEST> 0
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 87,747
<INTEREST-DEPOSIT> 0
<INTEREST-EXPENSE> 67,915
<INTEREST-INCOME-NET> 19,832
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,356
<INCOME-PRETAX> 16,476
<INCOME-PRE-EXTRAORDINARY> 16,476
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,706
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 0
<LOANS-NON> 1,459
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 17,805
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 19,149
<ALLOWANCE-DOMESTIC> 19,149
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
