Owens Realty Mortgage, Inc. Reports Third Quarter 2018 Financial Results

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WALNUT CREEK, Calif., Nov. 7, 2018 /PRNewswire/ — Owens Realty Mortgage, Inc. (the “Company”) (NYSE American: ORM) today reported financial results for the third quarter ended September 30, 2018.

Third Quarter 2018 Financial Highlights

  • Net income of $2,249,239, or $0.26 per fully-diluted common share
  • Book value of $22.54 per common share at September 30, 2018 as compared to $22.10 per common share at December 31, 2017
  • Declared a quarterly dividend of $0.20 per share of common stock

Third Quarter 2018 Operational Highlights

  • Originated three new loans in the quarter totaling approximately $7,150,000 (note amount), received full or partial payoffs on eighteen loans totaling approximately $36,098,000 and extended the maturity dates of two loans with principal balances aggregating approximately $3,340,000
  • Average balance of performing loans for the three months ended September 30, 2018 as compared to the three months ended September 30, 2017 increased 2018 approximately 3%
  • Sold seven real estate properties (including four condominium units at Zalanta) for net proceeds totaling approximately $8,708,000 (including approximately $2,703,000 notes receivable) and net gain totaling approximately $1,373,000
  • Repurchased 250,684 shares of Common Stock pursuant to the 2018 Repurchase Plan, at a total cost of approximately $4,262,000 (including commissions) and an average cost of $17.00 per share. The Plan was terminated during the quarter as the funds authorized pursuant to the Plan were fully utilized to purchase Common Stock.

Subsequent Events

  • In October 2018, sold the unimproved residential and commercial land located in Bethel Island, California and two units in the office condominium complex located in Roseville, California for net sale proceeds totaling approximately $3,326,000 and gain totaling approximately $620,000.
  • In October 2018, the Zalanta Loan, with a balance of approximately $2,925,000 as of September 30, 2018, was repaid in full.

Summary of Third Quarter 2018 Financial Results
The Company reported net income of approximately $2,249,000, or $0.26 per fully-diluted common share, for the quarter ended September 30, 2018 as compared to net income of approximately $156,000, or $0.02 per fully-diluted common share, for the quarter ended September 30, 2017. These variances were primarily a result of the items below.

Items that increased net income during the three months ended September 30, 2018 included primarily the following:

  • An increase in interest and related income from loans of approximately $475,000 for the three months ended September 30, 2018, as compared to the corresponding period in 2017, primarily due to an increase in the average balance of performing loans between the three months ended September 30, 2018 and 2017 of approximately 3% and due to discount and loan fee amortization and late charges collected 2018 the Company on certain loans beginning in 2018.
  • An increase in rental and other income from real estate properties net of expenses on such properties of approximately $186,000 for the three months ended September 30, 2018 (from income of approximately $15,000 during the three months ended September 30, 2017 to income of approximately $201,000 during the three months ended September 30, 2018) due primarily to the sale of certain properties with operating losses in 2017 and 2018.
  • An increase in other income of approximately $96,000 for the three months ended September 30, 2018, as compared to the corresponding period in 2017, primarily due to increased income from our investment in 1850 De La Cruz, LLC as the applicable lease was extended in July 2018 at the current market rate which resulted in an increase in monthly rental income of approximately $74,000 per month of which 50% ($37,000) is earned 2018 the Company.
  • An increase in gain on sales of real estate of approximately $790,000 for the three months ended September 30, 2018, as compared to the corresponding period in 2017, as a result of the sales of seven real estate properties during 2018, resulting in gain on sales of real estate totaling approximately $1,373,000. We sold two properties during the three months ended September 30, 2017, resulting in gain on sales of real estate totaling approximately $582,000.
  • A decrease in management fees of approximately $109,000 and servicing fees of approximately $93,000 for the three months ended September 30, 2018, as compared to the corresponding period in 2017, due to the Interim Management Fee adjustment that reduced management fees in the first quarter of 2018 and the subsequent Amendment to the Management Agreement, effective April 1, 2018, that permanently changed the management fee calculation, eliminated servicing fees paid to the Manager and to make additional changes to the compensation of the Manager (as described in Note 9 – “Transactions with Affiliates”). Management fees for the three months ended September 30, 2018 were approximately $384,000 lower than the fees that would have been payable to the Manager using the Prior Management Fee calculation.
  • A decrease in depreciation and amortization of approximately $129,000 for the three months ended September 30, 2018, as compared to the corresponding period in 2017, due to the sale of certain properties during 2017 and 2018 and the discontinuation of depreciation on certain properties that were moved to Held for Sale in 2017 and 2018.
  • A decrease in income tax expense of approximately $1,125,000 for the three months ended September 30, 2018, as compared to the corresponding period in 2017, primarily as a result of a larger increase in the valuation allowance recorded against deferred tax assets in 2017, due to higher construction costs and lower expected gains from the sales of the Zalanta TRS assets in the future. See also discussion of income tax contingency in “Note 12 – Income Taxes” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Commitments and Contingencies” in the September 30, 2018 Form 10-Q.

The items that increased net income during the three months ended September 30, 2018 were partially offset 2018 the following:

  • An increase in interest expense of approximately $239,000 for the three months ended September 30, 2018, as compared to the corresponding period in 2017, due primarily to higher balances outstanding and a higher average interest rate on the CB&T line of credit during 2018.
  • An increase in impairment losses on real estate properties of approximately $378,000 for the three months ended September 30, 2018, as compared to the corresponding period in 2017, due primarily to a reduction of the listing price of our marina property located in Isleton, California at a price that was lower than book value which resulted in an impairment loss of approximately $692,000 recorded during 2018.
  • An increase in general and administrative expense of approximately $140,000 for the three months ended September 30, 2018, as compared to the corresponding period in 2017, due primarily to increased legal costs and increased director fees in the third quarter, net of the elimination of the salary related expense reimbursements to the Manager beginning April 1, 2018 pursuant to the Amendment to the Management Agreement.

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 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 September 30, 2018 and December 31, 2017.

September 30,

2018

December 31,

2017

By Property Type:

Commercial

$

133,117,592

$

127,873,281

Residential

7,669,017

13,170,795

Land

4,935,200

5,127,574

$

145,721,809

$

146,171,650

By Position:

Senior loans

$

142,072,738

$

142,782,492

Junior loans

3,649,071

3,389,158

$

145,721,809

$

146,171,650

The types of property securing the Company’s commercial real estate loans are as follows:

September 30,

2018

December 31,

2017

Commercial Real Estate Loans:

Office

$

26,052,765

$

29,480,103

Retail

51,889,629

32,329,395

Storage

8,227,439

15,807,016

Apartment

17,877,633

24,582,181

Hotel

8,985,000

11,777,351

Industrial

2,855,602

2,690,000

Warehouse

3,000,000

3,000,000

Marina

3,580,000

3,580,000

Assisted care

7,132,855

1,650,000

Golf course

3,116,669

1,212,851

Restaurant

400,000

1,764,384

$

133,117,592

$

127,873,281

Loans 2018 geographic location:

September 30, 2018

December 31, 2017

Balance

Percentage

Balance

Percentage

California

$

101,563,409

69.70%

$

110,884,117

75.86%

Arizona

—%

815,890

0.56%

Colorado

4,854,906

3.33%

4,380,616

3.00%

Hawaii

1,443,789

0.99%

1,450,000

0.99%

Illinois

—%

1,364,384

0.93%

Indiana

3,702,031

2.54%

388,793

0.27%

Michigan

8,985,000

6.17%

10,714,764

7.33%

Nevada

513,107

0.35%

1,653,107

1.13%

Ohio

—%

3,755,000

2.57%

Pennsylvania

5,482,855

3.76%

—%

Texas

16,788,048

11.52%

6,625,000

4.53%

Washington

—%

3,159,460

2.16%

Wisconsin

2,388,664

1.64%

980,519

0.67%

$

145,721,809

100.00%

$

146,171,650

100.00%

Quarter End Real Estate Property Portfolio

The following tables set forth certain information regarding the Company’s real estate portfolio at September 30, 2018 and December 31, 2017.

Real Estate Held for Sale:

September 30,

2018

December 31,

2017

Residential

$

16,168,337

$

24,627,710

Land

9,704,533

14,389,620

Retail

7,674,211

7,632,893

Golf course

1,999,449

Marina

1,516,000

2,207,675

Office

1,963,012

Assisted care

5,253,125

$

37,026,093

$

56,110,472

Real Estate Held for Investment:

September 30,

2018

December 31,

2017

Retail

$

16,148,516

$

16,623,238

Land

6,561,023

2,018,068

Residential

2,356,995

Office

3,357,352

$

22,709,539

$

24,355,653

Conference Call
The Company has cancelled its previously announced conference call scheduled for Friday, November 9, 2018, at 10:00 a.m. PT / 1:00 p.m. ET.

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 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 2018 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 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 2018 the cautionary statements above.

Selected Financial Data:

OWENS REALTY MORTGAGE, INC.

Consolidated Balance Sheets

(UNAUDITED)

September 30,

December 31,

2018

2017

ASSETS

Cash, cash equivalents and restricted cash

$

20,162,292

$

5,670,816

Loans, net of allowance for losses of $1,509,678 in 2018 and $1,827,806 in 2017

144,212,131

144,343,844

Interest and other receivables

1,082,536

2,430,457

Other assets, net of accumulated depreciation and amortization of $229,236 in 2018 and $309,686 in 2017

430,650

725,341

Deferred financing costs, net of accumulated amortization of $20,659 in 2018 and $265,276 in 2017

413,176

26,823

Deferred tax assets, net

2,940,602

3,207,322

Investment in limited liability company

2,283,558

2,140,545

Real estate held for sale

37,026,093

56,110,472

Real estate held for investment, net of accumulated depreciation of $2,519,004 in 2018 and $3,316,753 in 2017

22,709,539

24,355,653

   Total assets

$

231,260,577

$

239,011,273

LIABILITIES AND EQUITY

LIABILITIES:

Dividends payable

$

1,696,576

$

1,572,047

Due to Manager

238,917

277,671

Accounts payable and accrued liabilities

1,347,598

1,390,329

Deferred gains on sales of real estate

302,895

Forward contract liability – share repurchase

2,731,171

Lines of credit payable

20,942,700

1,555,000

Notes and loans payable on real estate

15,807,566

30,192,433

Total liabilities

40,033,357

38,021,546

Commitments and Contingencies

EQUITY:

Stockholders’ equity:

Preferred stock, $.01 par value per share, 5,000,000 shares authorized, no shares issued and outstanding at September 30, 2018 and December 31, 2017

Common stock, $.01 par value per share, 50,000,000 shares authorized, 11,198,119 shares issued, 8,482,880 and 9,095,454 shares outstanding at September 30, 2018 and December 31, 2017

111,981

111,981

Additional paid-in capital

182,437,522

182,437,522

Treasury stock, at cost – 2,715,239 and 2,102,665 shares at September 30, 2018 and December 31, 2017

(41,753,190)

(31,655,119)

Retained earnings

50,430,907

50,095,343

Total stockholders’ equity

191,227,220

200,989,727

   Total liabilities and equity

$

231,260,577

$

239,011,273

OWENS REALTY MORTGAGE, INC.

Consolidated Statements of Income

 (UNAUDITED)

For the Three Months Ended

For the Nine Months Ended

September 30, 2018

September 30, 2017

September 30, 2018

September 30, 2017

Revenues:

Interest and related income from loans

$

3,438,441

$

2,963,394

$

9,414,838

$

8,151,798

Rental and other income from real estate properties

1,140,429

1,265,961

3,420,818

3,392,168

Other income

144,635

48,138

225,815

138,222

Total revenues

4,723,505

4,277,493

13,061,471

11,682,188

Expenses:

Management fees to Manager

718,284

827,281

2,185,999

2,781,474

Servicing fees to Manager

93,179

95,143

270,834

General and administrative expense

650,825

510,574

1,570,759

1,540,260

Rental and other expenses on real estate properties

939,337

1,251,217

3,348,088

3,890,536

Depreciation and amortization

173,640

302,925

596,840

916,668

Interest expense

710,569

471,942

1,833,275

1,120,917

Reversal of provision for loan losses

(242,022)

(396,980)

(207,654)

(221,700)

Impairment losses on real estate properties

745,648

367,831

745,648

649,457

Total expenses

3,696,281

3,427,969

10,168,098

10,948,446

Operating income

1,027,224

849,524

2,893,373

733,742

Gain on sales of real estate, net

1,372,925

582,496

2,484,740

14,460,030

Income before income taxes

2,400,149

1,432,020

5,378,113

15,193,772

Income tax expense

(150,910)

(1,275,700)

(316,720)

(2,089,827)

Net income

$

2,249,239

$

156,320

$

5,061,393

$

13,103,945

Per common share data:

Basic and diluted earnings per common share

$

0.26

$

0.02

$

0.57

$

1.28

Basic and diluted weighted average number of common shares outstanding

8,572,614

10,173,448

8,859,495

10,222,529

Dividends declared per share of common stock

$

0.20

$

0.10

$

0.56

$

0.28

SOURCE Owens Realty Mortgage, Inc.

Related Links

http://www.owensmortgage.com

Related posts:

Heard from https://newspalace.se/owens-realty-mortgage-inc-reports-third-quarter-2018-financial-results/

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