OWENS REALTY MORTGAGE INC WALNUT CREEK, Calif., Aug. 8, 2017 /PRNewswire/ -- Owens Realty Mortgage, Inc. (the "Company") (NYSE MKT: ORM) today reported financial results for the second quarter ended June 30, 2017.
Second Quarter 2017 Financial Highlights
-- Net income attributable to common stockholders of $12,755,947, or $1.24
per fully-diluted common share
-- Book value attributable to common stockholders of $22.12 per common
share at June 30, 2017 as compared to $21.03 per common share at
December 31, 2016
-- Declared quarterly dividends of $0.10 per share of common stock
Second Quarter 2017 Operational Highlights
-- Originated seven new loans in the quarter totaling $32,730,000 (note
amount) and received full or partial payoffs on six loans totaling
$6,012,000
-- Average balance of performing loans for the three months ended June 30,
2017 as compared to the three months ended June 30, 2016 increased by
approximately 28%
-- Sold the land held within Tahoe Stateline Venture, LLC and six
condominium units at Zalanta for net proceeds of $51,206,000 resulting
in net gains totaling $13,878,000
Subsequent Events
Share Repurchase
-- As of August 4, 2017, the Company had repurchased 44,253 shares of its
Common Stock under the 2017 Repurchase Plan that commenced on July 13,
2017 for a total cost of approximately $762,000 (including commissions)
and an average cost of $17.21 per share
Adjustment to Management Fee
-- On August 8, 2017, the Company announced that its Board of Directors and
its external manager, Owens Financial Group, Inc. (the "Manager") have
agreed to adjust the methodology used to calculate the annual fee
payable to the Manager. The revised agreement, effective July 2017 and
in place until the end of the month in which the Company's next
stockholders' meeting is held, is expected to result in a reduced
management fee during this interim period.
"The first quarter's results were significantly affected by the sale of the land held within Tahoe Stateline Venture, LLC. The capital provided from this transaction will further support our announced stock repurchases and loan production going forward. The net increase in our funded loan portfolio of approximately $23 million in the second quarter accompanied by a decrease in delinquent loans demonstrates our ability to effectively invest this capital," said Bryan Draper, the Company's CEO.
Mr. Draper added, "In addition to our encouraging loan performance, successful origination efforts and continued property sales, the second quarter was highlighted by the ongoing steps our Board is taking to create long-term value for our stockholders. An agreement has been reached to adjust the fee paid to our Manager, thereby providing better terms to our stockholders that are expected to enhance their returns. In addition to increasing the quarterly dividend, the Board also authorized a $10,000,000 stock repurchase plan, the Company's fourth plan in the past four years. Collectively, these efforts demonstrate our sustained focus on creating, enhancing and responsibly returning value to our stockholders."
Summary of Second Quarter 2017 Financial Results
The Company reported net income attributable to common stockholders of $12,755,947, or $1.24 per fully-diluted common share, for the quarter ended June 30, 2017 as compared to net income of $5,118,733, or $0.50 per fully-diluted common share, for the quarter ended June 30, 2016. The increase was primarily a result of the following:
-- An increase in gain on sales of real estate of $13,878,000 during the
three months ended June 30, 2017, as compared to 2016, as a result of
the sales of two real estate properties during the three months ended
June 30, 2017, resulting in gain on sales of real estate totaling
$13,878,000. We sold no properties during the three months ended June
30, 2016.
-- An increase in interest income on loans of $445,000 during the three
months ended June 30, 2017, as compared to 2016, due primarily to an
increase in the average balance of performing loans between the three
months ended June 30, 2017 and 2016 of 28%.
-- A decrease in interest expense of $644,000 during the three months ended
June 30, 2017, as compared to 2016, due to the sale of the TOTB Miami
properties and the repayment of the debt securing the properties during
the third quarter of 2016 and due to a decrease in the average balance
on our line of credit during the three months ended June 30, 2017, as
compared to 2016, as we repaid the line of credit in full with the sale
of the TSV land in April 2017.
-- A decrease in impairment losses on real estate properties of $1,829,000
during the three months ended June 30, 2017, as compared to 2016, as a
result of an impairment loss recorded on the unimproved residential and
commercial land located in Gypsum, Colorado during 2016 (which was
subsequently sold), whereas we recorded an impairment loss of $282,000
on the marina located in Bethel Island, California during the three
months ended June 30, 2017.
These items that increased net income during the three months ended June 30, 2017 were partially offset by the following:
-- An increase in income tax expense (from income tax benefit) of
$8,193,000 for the three months ended June 30, 2017, as compared to
2016, as a result of the sale of six condominium units in ZRV during
2017 for gains of approximately $667,000 and an increase in the
valuation allowance recorded against deferred tax assets as a result of
higher construction costs and lower expected gains from the sales of the
ZRV assets in the future. The income tax benefit during 2016 was due to
the conversion of ZRV into a taxable REIT subsidiary and the
contribution of additional real estate assets into ZRV with book and tax
basis differences that required the recording of deferred tax assets.
-- A decrease in rental and other income from real estate properties net of
expenses on such properties of $659,000 for the three months ended June
30, 2017 (from income of $402,000 during the three months ended June 30,
2016 to loss of $256,000 during the three months ended June 30, 2017) as
a result of the sale of four properties during 2016, a one-time increase
in property assessments levied on our property located in Tacoma,
Washington, decreased revenue on our golf course located in Auburn,
California primarily a result of inclement weather in Northern
California, increased operating expenses on our assisted living facility
located in Bensalem, Pennsylvania and increased marketing and other
operating costs related to the ZRV condominiums recently completed. Many
of the remaining properties held by us are non-operating properties that
do not generate income and, thus, will likely continue to generate a
loss until they are disposed of in 2017 and beyond.
-- An increase in management and service fees of $198,000 due to an
increase in the average balance of loans in the Company's portfolio of
22% during the three months ended June 30, 2017, as compared to the
three months ended June 30, 2016.
We believe, from period to period in the near term, there could be fluctuations in earnings and net income resulting from the lag time between the sale of our income-producing real estate assets and deployment of the proceeds into new loan investments.
Quarter End Loan Portfolio Summary
The following tables set forth certain information regarding the Company's loan portfolio at June 30, 2017 and December 31, 2016.
June 30, December 31,
2016
2017
----
By Property Type:
-----------------
Commercial $136,198,098 $102,442,111
Residential 15,858,723 19,001,677
Land 7,595,000 8,238,523
--------- ---------
$159,651,821 $129,682,311
============ ============
By Position:
------------
Senior loans $156,844,559 $126,873,673
Junior loans 2,807,262 2,808,638
--------- ---------
$159,651,821 $129,682,311
============ ============
The types of property securing the Company's commercial real estate loans are as follows:
June 30, December 31,
2017 2016
---- ----
Commercial Real
Estate Loans:
---------------
Apartment $34,640,655 $11,366,570
Office 30,554,072 33,608,898
Retail 30,243,858 19,959,635
Storage 13,935,606 13,015,175
Hotel 9,951,235 9,567,143
Industrial 3,940,000 7,376,477
Marina 3,500,000 3,500,000
Warehouse 3,000,000 -
Parking garage 2,200,000 -
Assisted care 1,512,672 1,328,213
Church 1,175,000 1,175,000
Golf course 1,145,000 1,145,000
Restaurant 400,000 400,000
$136,198,098 $102,442,111
============ ============
Loans by geographic location:
June 30, 2017 December 31, 2016
------------- -----------------
Balance Percentage Balance Percentage
------- ---------- ------- ----------
California $109,379,913 68.51% $98,319,923 75.81%
Arizona 2,613,225 1.64% 4,655,517 3.59%
Colorado 5,168,619 3.24% 1,595,000 1.23%
Hawaii 1,450,000 0.91% 1,450,000 1.12%
Indiana 89,346 0.06% - -%
Michigan 10,316,539 6.46% 10,337,157 7.97%
Nevada 2,945,107 1.84% 3,669,584 2.83%
Ohio 3,755,000 2.35% 3,627,506 2.80%
Texas 6,384,072 4.00% 6,027,624 4.65%
Washington 17,550,000 10.99% - -%
---------- ----- --- ---
$159,651,821 100.00% $129,682,311 100.00%
============ ====== ============ ======
Quarter End Real Estate Property Portfolio
The following tables set forth certain information regarding the Company's real estate portfolio at June 30, 2017 and December 31, 2016.
Real Estate Held for Sale:
June 30, December 31,
2017 2016
---- ----
Residential $25,618,065 $ -
Land (including land under
development) 12,759,511 73,140,659
Retail 7,500,622 -
Golf course 1,970,437 1,970,437
Marina 1,181,250 -
Office - 732,539
$49,029,885 $75,843,635
=========== ===========
Real Estate Held for Investment:
June 30, December 31,
2017 2016
---- ----
Retail $16,836,174 $16,829,995
Land 3,861,785 4,234,806
Residential 2,381,216 2,405,439
Assisted care 5,737,417 5,820,709
Office 3,890,996 3,962,869
Marina 2,538,901 4,025,945
$35,246,489 $37,279,763
=========== ===========
Conference Call
The Company will host a conference call to discuss the results on Wednesday, August 9, 2017, at 10:00 a.m. PT / 1:00 p.m. ET.
To participate in the call, please dial (844) 850-0545 (United States) or (412) 317-5202 (International) and request the Owens Realty Mortgage call. A live webcast of the call will also be available on the Company's website at www.owensmortgage.com. Please allow 10 minutes prior to the call to visit this site to download and install any necessary audio software.
An archive of the webcast will be available approximately one hour after completion of the live event and will be accessible on the Investor Relations section of the Company's website at www.owensmortgage.com until September 8, 2017. To access the replay, dial (877) 344-7529 (United States) or (412) 317-0088 (International) and enter code: 10110935.
About Owens Realty Mortgage, Inc.
Owens Realty Mortgage, Inc., a Maryland corporation, is a specialty finance mortgage company organized to qualify as a real estate investment trust ("REIT") that focuses on the origination, investment, and management of small balance and middle-market commercial real estate loans. We provide customized, short-term acquisition and transition capital to commercial real estate investors that require speed and flexibility. Our primary objective is to provide investors with attractive current income and long-term shareholder value. Owens Realty Mortgage, Inc., is headquartered in Walnut Creek, California, and is externally managed and advised by Owens Financial Group, Inc.
Additional information can be found on the Company's website at www.owensmortgage.com.
Forward-Looking Statements
This press release includes "forward-looking statements" within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements about Owens Realty Mortgage Inc.'s plans, strategies, prospects, and anticipated events, including the maximum borrowings available under its credit facilities, anticipated construction progress and completion, potential leasing activities, and repositioning and possible sale of real estate assets, are based on current information, estimates, and projections; they are subject to, risks and uncertainties, as well as known and unknown risks, which could cause actual results to differ from expectations, estimates and projections and, consequently, readers should not rely on these forward-looking statements as predictions of future events. Words such as "expect," "target," "assume," "estimate," "project," "budget," "forecast," "anticipate," "intend," "plan," "may," "will," "could," "should," "believe," "predicts," "potential," "continue," and similar expressions are intended to identify such forward-looking statements.
Readers are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made. The Company does not undertake or accept any obligation to release publicly any updates or revisions to any forward-looking statement to reflect any change in its expectations or any change in events, conditions or circumstances on which any such statement is based. Additional information concerning these and other risk factors is contained in the Company's most recent filings with the Securities and Exchange Commission. All subsequent written and oral forward-looking statements concerning the Company or matters attributable to the Company or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above.
Selected Financial Data:
OWENS REALTY MORTGAGE, INC.
Consolidated Balance Sheets
(UNAUDITED)
June 30, 2017 December 31, 2016
------------- -----------------
ASSETS
------
Cash and cash equivalents $4,671,746 $434,243
Restricted cash 6,500,000 6,500,000
Loans, net of allowance for loan
losses of $2,621,455 in 2017
and $2,706,822 in 2016 157,030,366 126,975,489
Interest and other receivables 2,375,808 2,164,335
Other assets, net of accumulated
depreciation and amortization
of $281,007 in 2017 and
$251,729 in 2016 817,038 803,676
Deferred financing costs, net of
accumulated amortization of
$184,805 in 2017 and $107,744
in 2016 107,294 171,855
Deferred tax assets, net 6,434,850 7,248,977
Investment in limited liability
company 2,140,565 2,140,482
Real estate held for sale 49,029,885 75,843,635
Real estate held for investment,
net of accumulated depreciation
of $3,652,206 in 2017 and
$3,151,427 in 2016 35,246,489 37,279,763
---------- ----------
Total assets $264,354,041 $259,562,455
============ ============
LIABILITIES AND EQUITY
----------------------
LIABILITIES:
Dividends payable $1,024,748 $1,402,496
Due to Manager 428,652 360,627
Accounts payable and accrued
liabilities 5,205,068 3,699,859
Deferred gains on sales of real
estate 209,662 209,662
Lines of credit payable - 4,976,000
Notes and loans payable on real
estate 30,854,955 33,385,934
---------- ----------
Total liabilities 37,723,085 44,034,578
---------- ----------
Commitments and Contingencies
(Note 13)
EQUITY:
Stockholders' equity:
Preferred stock, $.01 par value
per share, 5,000,000 shares
authorized, no shares issued
and outstanding at June 30,
2017 and December 31, 2016 - -
Common stock, $.01 par value per
share, 50,000,000 shares
authorized, 11,198,119 shares
issued, 10,247,477 shares
outstanding at June 30, 2017
and December 31, 2016 111,981 111,981
Additional paid-in capital 182,437,522 182,437,522
Treasury stock, at cost -
950,642 shares at June 30, 2017
and December 31, 2016 (12,852,058) (12,852,058)
Retained earnings 56,933,511 45,830,432
---------- ----------
Total stockholders' equity 226,630,956 215,527,877
Total liabilities and equity $264,354,041 $259,562,455
============ ============
OWENS REALTY MORTGAGE, INC.
Consolidated Statements of Income
(UNAUDITED)
For the Three Months Ended For the Six Months Ended
-------------------------- ------------------------
June 30, 2017 June 30, 2016 June 30, 2017 June 30, 2016
------------- ------------- ------------- -------------
Revenues:
Interest income on loans $2,641,363 $2,196,012 $5,188,405 $4,239,020
Rental and other income from real
estate properties 1,179,835 2,451,416 2,126,206 4,591,401
Income from investment in limited
liability company 46,092 44,686 90,084 87,310
Total revenues 3,867,290 4,692,114 7,404,695 8,917,731
--------- --------- --------- ---------
Expenses:
Management fees to Manager 1,006,680 825,149 1,954,194 1,590,664
Servicing fees to Manager 91,516 75,014 177,654 144,606
General and administrative expense 545,872 349,927 1,029,686 903,345
Rental and other expenses on real
estate properties 1,436,001 2,048,929 2,639,320 3,839,307
Depreciation and amortization 303,782 309,271 613,742 652,920
Interest expense 362,174 1,005,703 648,975 1,688,755
Provision for loan losses 137,244 274,920 175,280 385,995
Impairment losses on real estate
properties 281,626 2,110,150 281,626 2,110,150
-------
Total expenses 4,164,895 6,999,063 7,520,477 11,315,742
--------- --------- --------- ----------
Operating loss (297,605) (2,306,949) (115,782) (2,398,011)
Gain on sales of real estate, net 13,877,715 - 13,877,534 4,838,815
---------- --- ---------- ---------
Net income (loss) before income taxes 13,580,110 (2,306,949) 13,761,752 2,440,804
Income tax (expense) benefit (824,163) 7,368,835 (814,127) 7,368,835
-------- --------- -------- ---------
Net income 12,755,947 5,061,886 12,947,625 9,809,639
Less: Net loss attributable to non-
controlling interests - 56,847 - 43,355
--- ------ --- ------
Net income attributable to common
stockholders $12,755,947 $5,118,733 $12,947,625 $9,852,994
Per common share data:
Basic and diluted earnings per common
share $1.24 $0.50 $1.26 $0.96
===== ===== ===== =====
Basic and diluted weighted average
number of common shares outstanding 10,247,477 10,247,477 10,247,477 10,247,477
========== ========== ========== ==========
Dividends declared per share of
common stock $0.10 $0.08 $0.18 $0.16
===== ===== ===== =====
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SOURCE Owens Realty Mortgage, Inc.
