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 June 30, 1998
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 August 14, 1998, 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
June 30, 1998 Form 10-Q
Index
Part I. Financial Information
Item 1. Financial Statements
Statement of Income for the Three Months and Six Months Ended
June 30, 1998 and 1997
Balance Sheet on June 30, 1998 and December 31, 1997
Statement of Cash Flows for the Six Months Ended
June 30, 1998 and 1997
Statement of Changes in Shareholders' Equity for the Six Months
Ended June 30, 1998 and 1997
Notes to Financial Statements
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition
Part II. Other Information
Item 5. 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 Six Months
Ended June 30 Ended June 30
--------------------------------------
1998 1997 1998 1997
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Income
Interest and fees on loans...... $ 287,064 $ 264,658 $ 599,863 $ 533,146
Interest on securities.......... 379,979 11,517 764,246 25,502
Interest on time deposits
placed......................... 191,653 25,464 438,007 35,223
Gains on sales of available
for sale securities............ 14,483 15,940 15,757 15,990
--------------------------------------------
Total income.................. 873,179 317,579 1,817,873 609,861
--------------------------------------------
Expenses
Interest on securities sold
under agreements to repurchase. 222,921 9,368 524,078 18,952
Interest on long-term debt...... 59,931 59,755 119,922 119,669
Provision for credit losses..... - - 7,400 -
Other operating expenses........ 11,263 7,899 21,685 16,065
--------------------------------------------
Total expense................. 294,115 77,022 673,085 154,686
--------------------------------------------
Net income....................... $ 579,064 $ 240,557 $ 1,144,788 $ 455,175
============================================
See accompanying notes to financial statements.
</TABLE>
<TABLE>
Main Place Real Estate Investment Trust
Balance Sheet
(Dollars in Thousands)
<CAPTION>
June 30 December 31
1998 1997
- ------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and cash equivalents..................... $ 1,195,909 $ 1,709,804
Time deposits placed with affiliates.......... 14,550,000 17,950,000
Securities:
Held for investment, at cost
(market value - $310,531 and $479,491)...... 309,348 478,371
Available for sale........................... 21,643,847 22,022,424
------------------------------
Total securities............................ 21,953,195 22,500,795
------------------------------
Amount due from Trustee....................... 257,366 233,273
Loans, net of unearned income................. 14,974,450 16,612,818
Allowance for credit losses................... (47,515) (41,412)
------------------------------
Loans, net of unearned income and
allowance for credit losses................. 14,926,935 16,571,406
------------------------------
Interest receivable........................... 216,421 233,202
Accounts receivable from affiliates........... 216,042 396,965
Other assets.................................. 11,373 76,810
------------------------------
$ 53,327,241 $ 59,672,255
==============================
Liabilities
Accrued expenses.............................. $ 21,479 $ 95,131
Accrued expenses due to affiliate............. - 9,610
Securities sold under agreements to
repurchase from affiliates................... 14,528,363 22,134,599
Long-term debt................................ 3,999,846 3,999,745
------------------------------
18,549,688 26,239,085
------------------------------
Shareholders' Equity
Class A Trust Shares, $1 par value-
authorized: 200,000 shares; issued and
outstanding: 100,000 shares.................. 100 100
Class B Trust Shares, $10,000 par value-
authorized: 200 shares; issued and
outstanding: 110 shares...................... 1,100 1,100
Additional paid-in capital..................... 33,158,748 33,083,566
Retained earnings.............................. 1,235,950 91,162
Accumulated other comprehensive income......... 381,655 257,242
------------------------------
Total shareholders' equity.................... 34,777,553 33,433,170
------------------------------
$ 53,327,241 $ 59,672,255
==============================
See accompanying notes to financial statements.
</TABLE>
<TABLE>
Main Place Real Estate Investment Trust
Statement of Cash Flows
(Dollars in Thousands)
<CAPTION>
Six Months
Ended June 30
----------------------------
1998 1997
- -------------------------------------------------------------------------------
<S> <C> <C>
Operating Activities
Net income...................................... $ 1,144,788 $ 455,175
Reconciliation of net income to net cash provided
by operating activities
Provision for credit losses................... 7,400 -
Net increase in amount due from Trustee....... (24,093) (25,186)
Net decrease in interest receivable........... 16,781 15,967
Net decrease in accounts receivable from
affiliates................................... 180,923 35,998
Net (decrease) increase in accrued
expenses..................................... (73,652) 24,625
Net decrease in accrued expenses due to
affiliate.................................... (9,610) -
Gains on sales of securities.................. (15,757) (15,990)
Other operating activities.................... 87,555 (14,237)
----------------------------
Net cash provided by operating activities... 1,314,335 476,352
----------------------------
Investing Activities
Proceeds from maturities of securities held for
investment..................................... 168,872 -
Proceeds from sales and maturities of securities
available for sale............................. 2,271,218 843,666
Purchases of securities available for sale...... (168,485) -
Net decrease (increase) in time deposits placed. 3,400,000 (2,588,161)
Purchases of loans.............................. (2,942,902) -
Collections of loans outstanding................ 3,049,303 1,137,597
----------------------------
Net cash provided by (used in) investing
activities................................. 5,778,006 (606,898)
----------------------------
Financing Activities
Increase in securities sold under agreements
to repurchase from affiliates.................. - 738,403
Decrease in securities sold under agreements
to repurchase from affiliates.................. (7,606,236) (738,403)
Issuance of long-term debt...................... - 1,000,000
Repayment of subordinated debt.................. - (1,072,733)
----------------------------
Net cash (used in) provided by financing
activities................................. (7,606,236) (72,733)
----------------------------
Net decrease in cash and cash equivalents........ (513,895) (203,279)
Cash and cash equivalents at beginning of period. 1,709,804 253,578
----------------------------
Cash and cash equivalents at end of period....... $ 1,195,909 $ 50,299
============================
Supplemental disclosure of noncash transactions
Securities available for sale contributed
from affiliate................................. $ 75,182 $ -
Loans securitized and retained in the securities
portfolio...................................... 1,520,041 -
See accompanying notes to financial statements.
</TABLE>
<TABLE>
Main Place Real Estate Investment Trust
Statement of Changes in Shareholders' Equity
(Dollars in Thousands)
Accumulated
Class A Class B Additional Other Total
Trust Trust Paid-In Retained Comprehensive Shareholders' Comprehensive
Shares Shares Capital Earnings Income Equity Income
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance on December 31, 1996.. $ 100 $ 1,100 $ 12,044,801 $ 13,315 $ 8,530 $ 12,067,846
Net income................... 455,175 455,175 $ 455,175
Net change in unrealized
gains (losses) on securities
available for sale.......... (8,530) (8,530) (8,530)
------------
Comprehensive income......... $ 446,645
--------------------------------------------------------------------------- ============
Balance on June 30, 1997...... $ 100 $ 1,100 $ 12,044,801 $ 468,490 $ - $ 12,514,491
===========================================================================
Balance on December 31, 1997.. $ 100 $ 1,100 $ 33,083,566 $ 91,162 $ 257,242 $ 33,433,170
Net income................... 1,144,788 1,144,788 $ 1,144,788
Net assets contributed by
NationsBank, N.A............ 75,182 75,182
Net change in unrealized
gains (losses) on securities
available for sale.......... 124,413 124,413 124,413
------------
Comprehensive income......... $ 1,269,201
--------------------------------------------------------------------------- ============
Balance on June 30, 1998...... $ 100 $ 1,100 $ 33,158,748 $ 1,235,950 $ 381,655 $ 34,777,553
===========================================================================
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 acquires, owns, holds and pledges the
related mortgage notes and other assets serving as collateral in connection
therewith. In connection with the merger of MPFC with and into MPREIT, MPFC's
obligation under the Series 1995-1 and Series 1995-2 mortgage-backed bonds was
assumed by MPREIT. 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 the beginning of the earliest period presented.
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 through 13 of the Annual Report on Form 10-K for the
year ended December 31, 1997, as updated by Note 1 of MPREIT's quarterly report
on Form 10-Q for March 31, 1998 and the following.
Income Taxes
MPREIT was taxed as a real estate investment trust from November 1, 1996 until
May 19, 1998. MPREIT has elected to be taxed as a partnership subsequent to May
19, 1998. Accordingly, no current or deferred tax expense was provided after
November 1, 1996.
Note 2 - Loans
The following table presents the composition of loans (dollars in thousands):
June 30 December 31
1998 1997
- -------------------------------------------------------------------
Residential mortgage.................... $ 14,925,090 $ 16,551,952
Other consumer.......................... 29,615 39,281
Commercial real estate.................. 19,745 21,585
------------ ------------
Total loans, net of unearned income... $ 14,974,450 $ 16,612,818
============ ============
Mortgage loans collateralizing mortgage-backed bonds were comprised of the
following (dollars in thousands):
June 30 December 31
1998 1997
- -------------------------------------------------------------------
Fixed-rate.............................. $ 1,558,236 $ 1,331,860
Adjustable-rate......................... 3,491,710 4,604,436
------------ ------------
Total mortgage loans.................. $ 5,049,946 $ 5,936,296
============ ============
Transactions in the allowance for credit losses were as follows (dollars in
thousands):
Six Months
Ended June 30
----------------------
1998 1997
----------------------
Balance on January 1............................... $ 41,412 $ 42,396
Loans charged off.................................. (1,297) -
Recoveries of loans previously charged off......... - 2
Provision for credit losses........................ 7,400 -
----------------------
Balance on June 30................................. $ 47,515 $ 42,398
======================
MPREIT had $87.7 million of nonperforming loans on June 30, 1998 compared to
$66.8 million on December 31, 1997. Foreclosed properties on June 30, 1998
totaled $6.2 million compared to $1.2 million on December 31, 1997.
During the first six months of 1998, $1.5 billion of residential mortgage loans
were securitized and retained as mortgage-backed securities in the available for
sale securities portfolio.
Note 3 - Affiliate Transactions
MPREIT maintains its cash and cash equivalent accounts with NationsBank, N.A.
At June 30, 1998, MPREIT had $216.0 million of accounts receivable from
affiliates of the Corporation. These receivables are related to mortgage
payments and securities principal and interest payments in process and generally
clear within 30 days.
As of June 30, 1998, MPREIT had $14.6 billion of time deposits placed with
NationsBank, N.A. Interest income on time deposits for the three months and six
months ended June 30, 1998 was $191.7 million and $438.0 million, respectively.
On June 30, 1998, MPREIT had a total of $14.5 billion outstanding in securities
sold under agreements to repurchase from NationsBank, N.A. and NationsBanc
Montgomery Securities LLC, a wholly-owned indirect subsidiary of the
Corporation. Interest expense on these securities for the three months and six
months ended June 30, 1998 was $222.9 million and $524.1 million, respectively.
MPREIT has entered into agreements with NationsBanc Mortgage Corporation
(NationsBanc Mortgage), a wholly-owned indirect subsidiary of the Corporation,
and NationsBank, N.A. for the servicing and administration of its mortgage
portfolio. Servicing fees paid to NationsBanc Mortgage approximated $9.1
million and $19.0 million for the three months and six months ended June 30,
1998, respectively, compared to $7.4 million and $15.5 million for the same
periods in 1997, 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 first six months of 1998, MPREIT purchased
$1.7 billion of loans from NationsBanc Mortgage. In addition, during the first
six months of 1998, MPREIT purchased $790 million of loans from NationsBank,
N.A. and $425 million of loans in the secondary market through NationsBanc
Mortgage.
During the first quarter of 1998, NationsBank, N.A. contributed $75.2 million in
available for sale securities to MPREIT.
Additionally, a subsidiary of NationsBank, N.A., NationsBanc Services, Inc.
(NBSI), provides data processing and other support services to MPREIT and
certain other subsidiaries of the Corporation. These services include
completing substantially all of MPREIT's Year 2000 software conversion projects
by the end of 1998. The related costs, which are expensed when billed, are
included in "Other operating expenses". NBSI is reimbursed through affiliate
allocations to the other subsidiaries.
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 June 30, 1998 (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% 5.858% 5.706%
Maturity........................... 1998 2000 2000
Mortgage loans collateralizing
mortgage-backed bonds:
Collateral - book value.......... $ 1,882,957 $ 1,828,495 $ 1,338,494
Collateral - discounted value.... 1,691,243 1,781,908 1,228,519
Collateral - approximate amount
exceeding minimum indenture
requirements................... 146,000 199,000 174,000
Interest expense on the Series 1995-1, 1995-2 and 1997-1 mortgage-backed bonds
for the three months and six months ended June 30, 1998 was $59.9 million and
$119.9 million, respectively, compared to $59.8 million and $105.7 million for
the same periods in 1997. Interest expense on subordinated notes repaid on
March 18, 1997 was $14.0 million for the six months ended June 30, 1997.
On July 17, 1998, MPREIT repaid its obligations on the Series 1995-1
mortgage-backed bonds of $1.5 billion.
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
Net income for the three months and six months ended June 30, 1998 was $579.1
million and $1.1 billion, respectively, compared to $240.6 million and $455.2
million, respectively, in the comparable 1997 periods. The change in net income
reflects the impact of several factors, including the levels of securities
investments and short-term borrowings, the levels and average interest yields on
time deposits placed with affiliates of the Corporation, the levels and average
interest yields on the mortgage loan portfolio and the volatility of interest
rates.
Interest income increased $557.1 million and $1.2 billion for the three months
and six months ended June 30, 1998, respectively, compared to the same periods
in 1997 due primarily to increases in average securities and, to a lesser
extent, increases in average time deposits placed and average loans outstanding.
During the three months and six months ended June 30, 1998, MPREIT sold
available for sale securities, resulting in gains of $14.5 million and $15.8
million, respectively. Interest expense increased $213.7 million and $505.4
million for the three months and six months ended June 30, 1998, respectively,
over interest expense for the same periods in 1997 due primarily to interest
expense associated with higher average securities sold under agreements to
repurchase.
The provision for credit losses was $7.4 million for the six months ended June
30, 1998 compared to no provision expense for the same period in 1997, due to
the seasoning of the loan portfolio and management's assessment of the adequacy
of the allowance for credit losses.
Other operating expenses increased $3.4 million and $5.6 million during the
three months and six months ended June 30, 1998, respectively, compared to the
same periods in 1997, due mainly to higher mortgage servicing costs associated
with the increase in average loans outstanding and higher foreclosed properties
expense.
The average yields on mortgage loans for the three months and six months ended
June 30, 1998 were 7.39 percent and 7.46 percent, respectively, compared to 7.63
percent and 7.53 percent in the same periods of 1997. 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 six months ended June 30, 1998 were 5.99 percent and 6.00
percent, respectively, compared to 5.98 percent and 5.90 percent for the same
prior year periods.
MPREIT had $87.7 million of nonperforming loans on June 30, 1998 compared to
$66.8 million on December 31, 1997. The increase was due primarily to the
seasoning of the loan portfolio. Furthermore, future economic conditions,
levels of loans purchased and contributed and continued seasoning of the loan
portfolio may result in higher levels of nonperforming loans.
Part II. OTHER INFORMATION
Item 5. Other Information
For income tax purposes, MPREIT has elected to be taxed as a
partnership subsequent to May 19, 1998. For additional information,
see Note 1 - Accounting Policies - Income Taxes.
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, as
amended, 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: August 14, 1998 /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>
Six Months Year Year Year From Inception
Ended Ended Ended Ended Through
June 30, December 31, December 31, December 31, December 31,
1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income before taxes................ $ 1,144,788 $ 1,293,866 $ 216,709 $ 48,070 $ 5,459
Fixed charges:
Interest expense................ 641,954 595,818 255,318 145,822 25,701
Amortization of debt discount and
appropriate issuance costs..... 2,046 3,713 2,856 983 -
---------------------------------------------------------------------------
Total fixed charges........... 644,000 599,531 258,174 146,805 25,701
Earnings before fixed charges...... $ 1,788,788 $ 1,893,397 $ 474,883 $ 194,875 $ 31,160
===========================================================================
Fixed charges...................... $ 644,000 $ 599,531 $ 258,174 $ 146,805 $ 25,701
===========================================================================
Ratio of Earnings to Fixed Charges. 2.78 3.16 1.84 1.33 1.21
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary information extracted from the June 30, 1998 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,195,909
<INT-BEARING-DEPOSITS> 14,550,000
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 21,643,847
<INVESTMENTS-CARRYING> 309,348
<INVESTMENTS-MARKET> 310,531
<LOANS> 14,974,450
<ALLOWANCE> (47,515)
<TOTAL-ASSETS> 53,327,241
<DEPOSITS> 0
<SHORT-TERM> 14,528,363
<LIABILITIES-OTHER> 21,479
<LONG-TERM> 3,999,846
0
0
<COMMON> 1,200
<OTHER-SE> 34,776,353
<TOTAL-LIABILITIES-AND-EQUITY> 53,327,241
<INTEREST-LOAN> 599,863
<INTEREST-INVEST> 764,246
<INTEREST-OTHER> 438,007
<INTEREST-TOTAL> 1,802,116
<INTEREST-DEPOSIT> 0
<INTEREST-EXPENSE> 644,000
<INTEREST-INCOME-NET> 1,158,116
<LOAN-LOSSES> 7,400
<SECURITIES-GAINS> 15,757
<EXPENSE-OTHER> 21,685
<INCOME-PRETAX> 1,144,788
<INCOME-PRE-EXTRAORDINARY> 1,144,788
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,144,788
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 0
<LOANS-NON> 87,740
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 41,412
<CHARGE-OFFS> 1,297
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 47,515
<ALLOWANCE-DOMESTIC> 47,515
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
