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 September 30, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission File Number 33-82040
--------
MAIN PLACE REAL ESTATE INVESTMENT TRUST
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 56-1996001
- ------------------------------- -----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
100 North Tryon Street, 23rd floor, Charlotte, NC 28255
-------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(704) 388-7436
----------------------------------------------------
(Registrant's telephone number, including area code)
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
--- ---
On November 13, 1997, there were 100,000 shares of the registrant's Class A
Trust shares outstanding and 110 shares of the registrant's Class B Trust shares
outstanding.
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H (1) (a)
AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED
DISCLOSURE FORMAT.
Main Place Real Estate Investment Trust
September 30, 1997 Form 10-Q
Index
Part I. Financial Information
Item 1. Financial Statements
Statement of Income for the Three Months and Nine Months Ended
September 30, 1997 and 1996
Balance Sheet on September 30, 1997 and December 31, 1996
Statement of Cash Flows for the Nine Months Ended
September 30, 1997 and 1996
Statement of Changes in Shareholders' Equity for the Nine Months
Ended September 30, 1997 and 1996
Notes to Financial Statements
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signature
Index to Exhibits
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
Main Place Real Estate Investment Trust
Statement of Income
(Dollars in Thousands)
<CAPTION>
Three Months Nine Months
Ended September 30 Ended September 30
---------------------- ----------------------
1997 1996 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Income
Interest and fees on loans........ $ 259,778 $ 85,472 $ 792,924 $ 259,390
Interest on securities
Held for investment.......... 4,487 - 4,487 -
Available for sale........... 103,524 1,365 129,026 1,365
Interest on time deposits placed.. 87,974 - 123,197 -
Gains on sales of available for
sale securities............... 546 - 16,536 -
-------------------------------------------
Total income.................. 456,309 86,837 1,066,170 260,755
-------------------------------------------
Expenses
Interest on securities sold under
agreements to repurchase........ 72,098 - 91,050 -
Interest on long-term and
subordinated debt.............. 61,042 64,509 180,711 197,804
Other operating expenses.......... 7,592 3,166 23,657 9,806
-------------------------------------------
Total expenses................ 140,732 67,675 295,418 207,610
-------------------------------------------
Income before income taxes.......... 315,577 19,162 770,752 53,145
Income tax expense.................. - 7,281 - 20,195
-------------------------------------------
Net income.......................... $ 315,577 $ 11,881 $ 770,752 $ 32,950
===========================================
See accompanying notes to financial statements.
</TABLE>
<TABLE>
Main Place Real Estate Investment Trust
Balance Sheet
(Dollars in Thousands)
<CAPTION>
September 30 December 31
1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and cash equivalents...................... $ 1,464,189 $ 253,578
Time deposits placed with affiliates........... 14,263,457 -
Securities:
Held for investment, at cost
(market value - $582,936 and $0)......... 581,024 -
Available for sale.......................... 14,773,856 836,938
-----------------------------
Total securities......................... 15,354,880 836,938
-----------------------------
Amount due from Trustee........................ 177,528 101,325
Loans, net of unearned income.................. 14,131,609 14,704,375
Allowance for credit losses.................... (42,283) (42,396)
-----------------------------
Loans, net of unearned income and
allowance for credit losses............... 14,089,326 14,661,979
-----------------------------
Interest receivable............................ 182,397 91,836
Accounts receivable from affiliates............ 106,702 214,856
Other assets................................... 7,342 6,927
-----------------------------
$ 45,645,821 $ 16,167,439
=============================
Liabilities
Accrued expenses............................... $ 94,085 $ 27,316
Accrued expenses due to affiliate.............. 590,461 -
Securities sold under agreements to repurchase
from affiliate.............................. 14,869,254 -
Mortgage-backed bonds.......................... 3,999,695 2,999,544
Subordinated notes............................. - 1,072,733
-----------------------------
19,553,495 4,099,593
-----------------------------
Shareholders' Equity
Class A Trust shares, $1 par value -
authorized: 200,000 shares;
issued: 100,000 shares..................... 100 100
Class B Trust shares, $10,000 par value -
authorized: 200 shares;"
issued: 110 shares......................... 1,100 1,100
Additional paid-in capital.................... 25,200,382 12,044,801
Retained earnings............................. 768,048 13,315
Net unrealized gains on securities
available for sale......................... 122,696 8,530
------------------------------
Total shareholders' equity.................. 26,092,326 12,067,846
------------------------------
$ 45,645,821 $ 16,167,439
==============================
See accompanying notes to financial statements.
</TABLE>
<TABLE>
Main Place Real Estate Investment Trust
Statement of Cash Flows
(Dollars in Thousands)
<CAPTION>
Nine Months
Ended September 30
-------------------------
1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Operating Activities
Net income......................................... $ 770,752 $ 32,950
Reconciliation of net income to net cash
provided by (used in) operating activities
Net (increase) decrease in amount due from
Trustee......................................... (76,203) 31,741
Net increase in interest receivable.............. (90,561) (1,047)
Net decrease in accounts receivable from
affiliates...................................... 108,154 -
Net increase in accrued expenses................. 66,769 17,403
Net increase in accrued expenses due to
affiliate....................................... 590,461 -
Gains on sales of securities..................... (16,536) -
Other operating activities....................... 1,731 5,648
-------------------------
Net cash provided by operating activities...... 1,354,567 86,695
-------------------------
Investing Activities
Proceeds from maturities of securities
held for investment............................... 37,906 -
Proceeds from sales of securities
available for sale................................ 968,057 -
Purchases of securities available for sale......... (2,235,190) -
Net increase in time deposits placed with
affiliates........................................ (14,263,457) -
Purchases of loans................................. (1,397,605) -
Collections of loans outstanding................... 1,940,831 677,220
-------------------------
Net cash (used in) provided by investing
activities.................................... (14,949,458) 677,220
-------------------------
Financing Activities
Increase in securities sold under
agreements to repurchase from affiliate........... 14,869,254 -
Issuances of long-term debt........................ 1,000,000 516,593
Retirement of subordinated debt.................... (1,072,733) (764,043)
Capital contribution from NationsBank, N.A......... 25,000 -
Distribution of capital and cash dividends paid to
former shareholder................................ - (516,592)
Cash dividends paid to NationsBank, N.A............ (16,019) -
-------------------------
Net cash provided by (used in) financing
activities.................................... 14,805,502 (764,042)
-------------------------
Net increase (decrease) in cash and cash equivalents.. 1,210,611 (127)
Cash and cash equivalents at beginning of period...... 253,578 4,870
-------------------------
Cash and cash equivalents at end of period............ $ 1,464,189 $ 4,743
=========================
Supplemental disclosure of noncash transactions
Securities held for investment contributed from
affiliate....................................... $ 619,144 $ -
Securities available for sale contributed from
affiliate....................................... 12,495,418 79,280
Net loans contributed from affiliate............. 16,019 844,272
Loans securitized and retained in the securities
portfolio....................................... 44,889 -
See accompanying notes to financial statements.
</TABLE>
<TABLE>
Main Place Real Estate Investment Trust
Statement of Changes in Shareholders' Equity
(Dollars in Thousands)
<CAPTION>
Class A Class B Additional Total
Trust Trust Paid-In Retained Shareholders'
Shares Shares Capital Earnings Other Equity
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance on December 31, 1995... $ - $ - $ 299,648 $ 7,136 $ - $ 306,784
Net income................ 32,950 32,950
Cash dividends paid to
NationsBank Texas...... (17,842) (17,842)
Net assets contributed by
NationsBank, N.A....... 421,934 421,934
Net assets contributed by
NationsBank Texas...... 502,486 502,486
Distribution of capital to
NationsBank Texas...... (505,553) (505,553)
Net change in unrealized
gains (losses) on
securities available
for sale............... (845) (845)
--------------------------------------------------------------------
Balance on September 30, 1996.. $ - $ - $ 718,515 $ 22,244 $ (845) $ 739,914
====================================================================
Balance on December 31, 1996... $ 100 $ 1,100 $ 12,044,801 $ 13,315 $ 8,530 $ 12,067,846
Net income................ 770,752 770,752
Cash dividends paid to
NationsBank, N.A. ..... (16,019) (16,019)
Net assets contributed by
NationsBank, N.A. ..... 13,155,581 13,155,581
Net change in unrealized
gains (losses) on
securities available
for sale............... 114,166 114,166
--------------------------------------------------------------------
Balance on September 30, 1997.. $ 100 $ 1,100 $ 25,200,382 $ 768,048 $ 122,696 $ 26,092,326
====================================================================
There were 100 common shares outstanding at December 31, 1995 and September 30, 1996 with a par value
of one cent. There were no common shares outstanding subsequent to the merger of MPFC into MPREIT on
November 1, 1996.
See accompanying notes to financial statements.
</TABLE>
Main Place Real Estate Investment Trust
Notes to Financial Statements
Note 1 - Accounting Policies
Main Place Real Estate Investment Trust (MPREIT) is an indirect subsidiary of
NationsBank, N.A., which is a wholly owned indirect subsidiary of NationsBank
Corporation (the Corporation). MPREIT was established on October 29, 1996 as a
Maryland real estate investment trust to consolidate the acquisition, holding
and management of certain closed-end residential mortgage loans owned by certain
affiliates of the Corporation. Main Place Funding Corporation (MPFC) merged
with and into MPREIT on November 1, 1996, and, as the surviving entity, MPREIT
issues and sells mortgage-backed bonds and subordinated indebtedness and
acquires, owns, holds and pledges the related mortgage notes and other assets
serving as collateral in connection therewith. The merger between MPREIT and
MPFC was accounted for in a manner similar to a pooling of interests and,
accordingly, the accompanying financial statements include the results of
operations and financial condition of MPFC since inception.
The information contained in the financial statements is unaudited. In the
opinion of management, all normal recurring adjustments necessary for a fair
presentation of the interim period results have been made. Certain prior period
amounts have been reclassified to conform to current period classifications.
Accounting policies followed in the presentation of interim financial results
are presented on pages 11 and 12 of the Annual Report on Form 10-K for the year
ended December 31, 1996, as updated by Note 1 on page 7 of MPREIT's quarterly
report on Form 10-Q for June 30, 1997.
A real estate investment trust (REIT) is subject to a number of organizational
and operational requirements, including the requirement that it currently
distribute to beneficial holders at least 95 percent of its "real estate
investment trust taxable income." Prior to November 1, 1996, MPREIT did not
qualify as a REIT and its operating results were included in the consolidated
federal income tax return of the Corporation. For the periods subsequent to
November 1, 1996, MPREIT qualified as a REIT and, accordingly, no current or
deferred tax expense was provided.
Note 2 - Loans
The following table presents the composition of loans (dollars in thousands):
September 30 December 31
1997 1996
- --------------------------------------------------------------------------------
Residential mortgage............................. $ 14,106,201 $ 14,671,836
Commercial real estate........................... 25,408 32,539
-----------------------------
Total loans, net of unearned income......... $ 14,131,609 $ 14,704,375
=============================
Mortgage loans collateralizing mortgage-backed bonds were comprised of the
following (dollars in thousands):
September 30 December 31
1997 1996
- --------------------------------------------------------------------------------
Fixed-rate ...................................... $ 1,314,189 $ 1,473,739
Adjustable-rate.................................. 4,828,195 2,955,181
-----------------------------
Total mortgage loans.......................... $ 6,142,384 $ 4,428,920
=============================
Transactions in the allowance for credit losses were as follows (dollars in
thousands):
Nine Months
Ended September 30
---------------------
1997 1996
- --------------------------------------------------------------------------------
Balance on January 1.................................... $ 42,396 $ 17,805
Loans charged off....................................... (115) -
Recoveries of loans previously charged off.............. 2 -
Allowance acquired with contributed loans............... - 1,344
---------------------
Balance on September 30................................. $ 42,283 $ 19,149
=====================
MPREIT had $56.0 million of nonperforming loans on September 30, 1997 compared
to $27.5 million on December 31, 1996. The increase is due primarily to the
seasoning of the loan portfolio. Management expects nonperforming loans to
continue to grow throughout the remainder of the seasoning period. Other
real estate owned on September 30, 1997 was $.6 million compared to $.5
million on December 31, 1996.
Note 3 - Affiliate Transactions
MPREIT maintains its cash and cash equivalent accounts with NationsBank, N.A.
and NationsBank of Texas, N.A. (NationsBank Texas). At September 30, 1997,
MPREIT had $106.7 million of accounts receivable from affiliates of the
Corporation. These receivables are related to mortgage payments in process and
generally clear within 30 days. Accrued expenses due to an affiliate of the
Corporation, NationsBank, N.A., totaled $590.5 million on September 30, 1997.
As of September 30, 1997, MPREIT had $14.3 billion of time deposits placed with
NationsBank Texas and NationsBank, N.A. Interest income on time deposits for
the three months and nine months ended September 30, 1997 was $88.0 million and
$123.2 million, respectively.
On September 30, 1997, MPREIT had $14.9 billion outstanding in securities sold
under agreements to repurchase from NationsBank, N.A. Interest expense on these
securities for the three months and nine months ended September 30, 1997 was
$72.1 million and $91.1 million, respectively.
MPREIT has entered into agreements with NationsBanc Mortgage Corporation
(NationsBanc Mortgage), a wholly-owned subsidiary of NationsBank Texas, and with
NationsBank, N.A. for the servicing and administration of its mortgage
portfolio. Servicing fees paid to NationsBanc Mortgage approximated $23.1
million and $9.7 million for the nine months ended September 30, 1997 and 1996,
respectively, and are included in "Other operating expenses" on the accompanying
statement of income.
On a monthly basis, MPREIT purchases certain mortgage loans originated by
NationsBanc Mortgage. During the third quarter of 1997, MPREIT purchased $1.4
billion of loans from NationsBanc Mortgage.
During the third quarter of 1997, NationsBank, N.A. contributed approximately
$13.1 billion in mortgage-backed securities and collateralized mortgage
obligations, approximately $16.0 million of mortgage loans and $25.0 million in
cash to MPREIT.
In September 1997, MPREIT paid cash dividends of $16.0 million to NationsBank,
N.A. upon finalization of taxable income for 1996 and the filing of the 1996
MPREIT tax return.
In addition, in October 1997, NationsBank, N.A. contributed securities in the
amount of $4.2 billion to MPREIT.
Note 4 - Long-Term Debt
The following table displays the primary terms of MPREIT's Series 1995-1, 1995-
2 and 1997-1 Mortgage-Backed Bonds as of September 30, 1997 (dollars in
thousands):
Series Series Series
1995-1 1995-2 1997-1
(Issued (Issued (Issued
July 1995) October 1995) March 1997)
------------------------------------------
Amount issued....................... $ 1,500,000 $ 1,500,000 $ 1,000,000
Reference rate...................... 1-mo. LIBOR 3-mo. LIBOR 3-mo. LIBOR
+21 bps +17 bps +5 bps
Period-end interest rate............ 5.866% 5.889% 5.769%
Maturity............................ 1998 2000 2000
Mortgage loans collateralizing
mortgage-backed bonds:
Collateral - book value......... $ 2,131,501 $ 1,816,540 $ 2,194,343
Collateral - discounted value... 1,667,397 1,762,963 1,541,361
Collateral - approximate amount
exceeding minimum indenture
requirements.................. 122,000 180,000 486,000
Interest expense on the Series 1995-1, 1995-2 and 1997-1 Bonds for the three
months and nine months ended September 30, 1997 was $61.0 million and $166.7
million, respectively, compared to $44.4 million and $132.4 million,
respectively, on the Series 1995-1 and 1995-2 Bonds for the three months and
nine months ended September 30, 1996. Interest expense on subordinated notes
repaid on March 18, 1997 was $14.0 million for the nine months ended September
30, 1997 compared to $20.1 million and $65.4 million for the three months and
nine months ended September 30, 1996, respectively.
On November 14, 1997, MPREIT had no remaining capacity available for the
issuance of additional mortgage-backed bonds under its existing shelf
registration.
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
Net income for the three months and nine months ended September 30, 1997 was
$315.6 million and $770.8 million, respectively, compared to $11.9 million and
$33.0 million, respectively, in the comparable 1996 periods. The change in net
income reflects the impact of several factors including the levels and average
interest yields on the mortgage loan portfolio, the issuance of the Series 1997-
1 Bonds, the levels of short-term borrowings and securities investments, the
effects of securities market conditions, the volatility of interest rates and
MPREIT's election to be taxed as a REIT.
Interest income increased $368.9 million and $788.9 million for the three months
and nine months ended September 30, 1997, respectively, compared to the same
periods in 1996 due primarily to increases in average loans outstanding and, to
a lesser extent, increases in average securities and average time deposits
placed. During the first nine months of 1997, MPREIT sold available for sale
securities resulting in gains of $16.5 million. Interest expense increased
$68.6 million and $74.0 million for the three months and nine months ended
September 30, 1997, respectively, over interest expense for the same periods in
1996 due primarily to interest expense associated with securities sold under
agreements to repurchase. This increase was partially offset by lower interest
expense on subordinated debt due to the repayment of the subordinated notes in
March 1997. The lower interest expense on subordinated debt more than offset
the impact of interest expense associated with the Series 1997-1 Mortgage-Backed
Bonds issued in March 1997. Other operating expenses increased $4.4 million and
$13.9 million during the three months and nine months ended September 30, 1997,
respectively, due primarily to higher mortgage servicing costs associated with
the increase in average loans outstanding during 1997. Due to MPREIT's election
to be taxed as a REIT, there was no income tax expense in the three months and
nine months ended September 30, 1997.
The average yield on mortgage loans was 7.53 percent for both the three months
and nine months ended September 30, 1997 compared to 7.61 percent and 7.48
percent in the respective periods of 1996. Changes in the average yields were
primarily related to the mix between fixed- and adjustable-rate loans, the
repricing terms of adjustable rate loans, the impact of the general level of
interest rates, the levels of prepayments on mortgage loans and scheduled
amortization of the portfolio as a whole.
The weighted average interest rates on mortgage-backed bonds outstanding for the
three months and nine months ended September 30, 1997 were 6.10 percent and 5.97
percent, respectively, compared to 5.93 percent and 5.88 percent, for the
respective periods in 1996.
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
12 Ratio of Earnings to Fixed Charges.
27 Financial Data Schedule.
(b) Reports on Form 8-K:
None.
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 Real Estate Investment Trust
---------------------------------------
Date: November 14, 1997 /s/ Karin Hirtler-Garvey
---------------------------------------
Karin Hirtler-Garvey
Senior Vice President/Principal
Accounting Officer
(Principal Accounting and Duly
Authorized Officer)
Main Place Real Estate Investment Trust
Form 10-Q
Index to Exhibits
Exhibit Description
- ------- -----------
12 Ratio of Earnings to Fixed Charges.
27 Financial Data Schedule.
<TABLE>
Main Place Real Estate Investment Trust
Exhibit 12
Ratio of Earnings to Fixed Charges
- --------------------------------------------------------------------------------
(Dollars in Thousands)
<CAPTION>
Nine Months Year Year From Inception
Ended Ended Ended Through
September 30, December 31, December 31, December 31,
1997 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Income before taxes........ $ 770,752 $ 216,709 $ 48,070 $ 5,459
Fixed charges:
Interest expense ........ 269,035 255,318 145,822 25,701
Amortization of debt
discount and appropriate
issuance costs......... 2,726 2,856 983 -
-------------------------------------------------
Total fixed charges... 271,761 258,174 146,805 25,701
Earnings................... $ 1,042,513 $ 474,883 $ 194,875 $ 31,160
=================================================
Fixed charges.............. $ 271,761 $ 258,174 $ 146,805 $ 25,701
=================================================
Ratio of Earnings to Fixed
Charges............... 3.84 1.84 1.33 1.21
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary information extracted from the September 30, 1997
Form 10-Q for Main Place Real Estate Investment Trust and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,464,189
<INT-BEARING-DEPOSITS> 14,263,457
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 14,773,856
<INVESTMENTS-CARRYING> 581,024
<INVESTMENTS-MARKET> 582,936
<LOANS> 14,131,609
<ALLOWANCE> (42,283)
<TOTAL-ASSETS> 45,645,821
<DEPOSITS> 0
<SHORT-TERM> 14,869,254
<LIABILITIES-OTHER> 684,546
<LONG-TERM> 3,999,695
0
0
<COMMON> 1,200
<OTHER-SE> 26,091,126
<TOTAL-LIABILITIES-AND-EQUITY> 45,645,821
<INTEREST-LOAN> 792,924
<INTEREST-INVEST> 133,513
<INTEREST-OTHER> 123,197
<INTEREST-TOTAL> 1,049,634
<INTEREST-DEPOSIT> 0
<INTEREST-EXPENSE> 271,761
<INTEREST-INCOME-NET> 777,873
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 16,536
<EXPENSE-OTHER> 23,657
<INCOME-PRETAX> 770,752
<INCOME-PRE-EXTRAORDINARY> 770,752
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 770,752
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 0
<LOANS-NON> 56,011
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 42,396
<CHARGE-OFFS> (115)
<RECOVERIES> 2
<ALLOWANCE-CLOSE> 42,283
<ALLOWANCE-DOMESTIC> 42,283
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
