For Immediate Release
Contact: Investor Relations
Owens Realty Mortgage, Inc.
www.owensmortgage.com
(925) 239-7001
Owens Realty Mortgage, Inc.
Reports Fourth Quarter and Full Year 2014 Financial Results
WALNUT CREEK, CA. – March 16, 2015 – Owens Realty Mortgage, Inc. (the “Company”) (NYSE MKT: ORM) today reported financial results for the fourth quarter and year ended December 31, 2014.
Fourth Quarter 2014 Highlights
| · | Net income attributable to common stockholders of $3,574,359, or $0.33 per diluted common share |
| · | Book value attributable to common stockholders of $17.14 per common share at December 31, 2014 as compared to $16.93 per common share at September 30, 2014 |
| · | FFO of $1,496,364, or $0.14 per diluted common share (see Non-GAAP Financial Measures) |
| · | Originated five new loans and rewrote one loan in the quarter totaling $20,214,000 (note amount) and received full or partial payoffs on four loans totaling $6,830,000 |
| · | Recorded $2,011,000 in reversals of allowance for loan losses |
| · | Recorded gain on sale of real estate of $503,000, including $178,000 from the sale of undeveloped land located in Half Moon Bay, California and $325,000 from the recognition of a portion of previously deferred gain under the installment method due to partial repayment received on a carryback loan related to a property that had been sold in 2012 |
| · | Declared quarterly dividends of $0.12 per share of common stock, composed of a special distribution of $0.07 per share and a regular quarterly dividend of $0.05 per share |
Year 2014 Highlights
| · | Declared 2014 common dividends of $0.27 per share |
| · | Net income attributable to common stockholders of $7,929,629, or $0.74 per diluted common share |
| · | FFO of $4,671,198, or $0.43 per diluted common share (see Non-GAAP Financial Measures) |
| · | Originated twenty-three new loans and rewrote three loans during 2014 totaling $50,440,000 (note commitment amount) and received full or partial payoffs on eleven loans totaling $27,719,000 |
| · | Net increase in loan investments from 22 as of December 31, 2013 to 34 with an average loan balance of $2,001,000 as of December 31, 2014 |
| · | Completed the sale of two real estate properties and an easement for net proceeds of $1,821,000 and gain on sale of $292,000 and recognized an additional $2,951,000 in deferred gain under the installment method due to full and partial repayments received on carryback loans related to three real estate properties that had been sold in 2012 and 2013 (total gains of $3,243,000) |
| · | Recorded $1,882,000 in reversals of allowance for loan losses and $12,000 provision for loan losses ($1,870,000 net reversal) |
| · | Recorded $179,000 in impairment losses on real estate properties |
"2014 was a successful year for Owens Realty Mortgage. We continued to make significant progress in growing our loan investment portfolio, increasing operating income, and positioning some of our real estate assets for potential sale beginning in the second quarter of this year. Continued improvements in the commercial real estate market favors the disposition of our real estate held for sale as well providing new lending opportunities in the small balance commercial lending space. In 2014 we originated more than $50 million in loans which was a significant increase over 2013" said William Owens, Chairman and Chief Executive Officer of the Company.
Fourth Quarter and 2014 Financial Results
The Company reported net income attributable to common stockholders of $3,574,359 or $0.33 per basic and diluted common share for the three months ended December 31, 2014 as compared to net income of $170,874 or $0.02 per basic and diluted common share for the corresponding quarter of 2013. The fourth quarter 2014 net income attributable to common stockholders includes recognition of gain on the sale of undeveloped land located in Half Moon Bay, California of approximately $178,000 and previously deferred gain of approximately $325,000 from the sale of the condominium units in Santa Barbara, California in 2012 due to partial repayment of the carryback loan in the amount of $1,836,000 during the quarter. The fourth quarter net income also included approximately $2,011,000 of income from the reversal of the provision for loan losses primarily related to a decrease in the specific loan loss allowance on one loan due to a new appraisal obtained that indicated a higher fair value of the securing collateral and due to a decrease in the general loan loss allowance as a result of an increase in performing commercial loans during 2014 and due to refinements in the loss and delinquency factors applied to performing loans reflecting the positive trends in the economy from increasing property values over the year.
For the year ended December 31, 2014, the Company reported net income attributable to common stockholders of $7,929,629 or $0.74 per basic and diluted common share as compared to net income of $8,732,897 or $0.78 per basic and diluted common share for the year ended December 31, 2013. Operating income for the year ended December 31, 2014 was $3,161,022 as compared to $718,871 for the year ended December 31, 2013 for an increase of $2,442,151 or 340%.
Quarter End Loan Portfolio
The following tables set forth certain information regarding the Company’s loan portfolio at December 31, 2014 and December 31, 2013.
| | | December 31, 2014 | | December 31, 2013 | |
| By Property Type: | | | | | | | |
| Commercial | | $ | 52,531,537 | | $ | 26,158,878 | |
| Residential | | | 13,491,906 | | | 27,461,913 | |
| Land | | | 2,010,068 | | | 5,175,502 | |
| | | $ | 68,033,511 | | $ | 58,796,293 | |
| By Position: | | | | | | | |
| Senior loans | | $ | 65,533,511 | | $ | 52,876,293 | |
| Junior loans | | | 2,500,000 | | | 5,920,000 | |
| | | $ | 68,033,511 | | $ | 58,796,293 | |
The types of property securing the Company’s commercial real estate loans are as follows:
| | | December 31, 2014 | | December 31, 2013 | |
| Commercial Real Estate Loans: | | | | | | | |
| Retail | | $ | 7,591,592 | | $ | 4,140,000 | |
| Assisted care | | | — | | | 4,021,946 | |
| Office | | | 25,742,246 | | | 15,484,932 | |
| Apartment | | | 9,622,580 | | | — | |
| Industrial | | | 3,080,000 | | | 1,245,000 | |
| Marina | | | 3,200,000 | | | — | |
| Church | | | 1,175,000 | | | — | |
| Restaurant | | | 1,058,567 | | | — | |
| Golf course | | | 1,061,552 | | | 1,267,000 | |
| | | $ | 52,531,537 | | $ | 26,158,878 | |
Loans by geographic location:
| | | December 31, 2014 | | Portfolio | | December 31, 2013 | | Portfolio | |
| | | Balance | | Percentage | | Balance | | Percentage | |
| Arizona | | $ | 8,788,098 | | 12.92% | | $ | 7,535,000 | | 12.81% | |
| California | | | 54,685,345 | | 80.38% | | | 39,862,058 | | 67.80% | |
| Hawaii | | | 1,450,000 | | 2.13% | | | 1,450,000 | | 2.47% | |
| Louisiana | | | — | | 0.00% | | | 1,520,000 | | 2.58% | |
| Oregon | | | 1,250,000 | | 1.84% | | | — | | 0.00% | |
| Pennsylvania | | | — | | 0.00% | | | 4,021,946 | | 6.84% | |
| Utah | | | — | | 0.00% | | | 2,391,286 | | 4.07% | |
| Washington | | | 1,860,068 | | 2.73% | | | 2,016,003 | | 3.43% | |
| | | $ | 68,033,511 | | 100.00% | | $ | 58,796,293 | | 100.00% | |
Quarter End Real Estate Property Portfolio
The following tables set forth certain information regarding the Company’s real estate portfolio at December 31, 2014 and December 31, 2013.
Real Estate Held for Investment:
| | | December 31, 2014 | | December 31, 2013 | |
| Land | | $ | 10,797,656 | | $ | 46,873,135 | |
| Residential | | | 48,154,258 | | | 47,037,370 | |
| Retail | | | 23,211,896 | | | 15,588,452 | |
| Office | | | 4,416,108 | | | 9,348,331 | |
| Industrial | | | 4,486,797 | | | 4,605,910 | |
| Storage | | | 3,847,884 | | | 3,943,780 | |
| Marina | | | 3,602,867 | | | 2,028,855 | |
| Assisted care | | | 5,005,000 | | | — | |
| | | $ | 103,522,466 | | $ | 129,425,833 | |
Real Estate Held for Sale:
| | | December 31, 2014 | | December 31, 2013 | |
| Residential | | $ | — | | $ | 93,647 | |
| Land | | | 36,263,330 | | | 3,427,200 | |
| Retail | | | 16,494,440 | | | — | |
| Golf course | | | 2,020,410 | | | 1,961,284 | |
| Office | | | 4,716,159 | | | — | |
| Marina | | | — | | | 408,000 | |
| | | $ | 59,494,339 | | $ | 5,890,131 | |
Non-GAAP Financial Measures
Funds from Operations
The Company utilizes supplemental non-GAAP measures of operating performance, including funds from operations (“FFO”), an industry-wide standard measure of REIT operating performance. We believe FFO provides investors with additional information concerning our operating performance and a basis to compare our performance with those of other REITs. We determine FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts ("NAREIT"), as net income (loss) attributable to common stockholders (computed in accordance with GAAP), plus depreciation and amortization of real estate and other assets, amortization of deferred financing costs, impairments of real estate assets, provisions for loan losses and losses from sales of real estate, reduced by gains from sales of real estate and foreclosure of loans, accretion of discounts on loans and extraordinary items, and after adjustments for unconsolidated ventures.
Our calculation of FFO may not be comparable to similar measures reported by other REITs. This non-GAAP financial measure should not be considered as an alternative to net income as a measure of our operating performance or to cash flows computed in accordance with GAAP as a measure of liquidity, nor is it indicative of cash flows from operating and financial activities.
We urge investors to carefully review the GAAP financial information included as part of the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and quarterly earnings releases.
The following table reconciles FFO to comparable GAAP financial measures:
Funds from Operations:
| | For the Three Months Ended | | For the Twelve Months Ended | |
| | December 31, 2014 | | December 31, 2013 | | December 31, 2014 | | December 31, 2013 | |
| Funds from Operations | | | | | | | | |
| Net income attributable to common stockholders | $ 3,574,359 | | $ 170,874 | | $ 7,929,629 | | $ 8,732,897 | |
| Adjustments: | | | | | | | | |
| Depreciation and amortization of real estate and other assets | 612,655 | | 543,699 | | 2,255,577 | | 2,485,587 | |
| Depreciation allocated to non-controlling interests | (29,115 | ) | (30,724 | ) | (125,921 | ) | (180,771 | ) |
| Amortization of deferred financing costs to interest expense | 54,462 | | — | | 132,723 | | — | |
| Accretion of discount on loan to interest income | (36,601 | ) | — | | (122,004 | ) | — | |
| Impairment losses on real estate properties | — | | 666,240 | | 179,040 | | 666,240 | |
| Reversal of provision for loan losses | (2,010,765 | ) | (445,768 | ) | (1,869,733 | ) | (7,822,112 | ) |
| Gain on sales of real estate assets | (503,254 | ) | (230,765 | ) | (3,243,359 | ) | (2,942,861 | ) |
| Gain on foreclosure of loans | (207,734 | ) | — | | (464,754 | ) | (952,357 | ) |
| Adjustments for unconsolidated ventures | 42,357 | | 37,767 | | — | | (1,000 | ) |
| FFO attributable to common stockholders | $ 1,496,364 | | $ 711,323 | | $ 4,671,198 | | $ (14,377 | ) |
| Basic and diluted FFO per common share | $ 0.14 | | $ 0.07 | | $ 0.43 | | $ 0.00 | |
Subsequent Events
In November 2014, 720 University, LLC (“720 University”) entered into a Real Estate Sale Agreement pursuant to which 720 University agreed to sell the property held within 720 University for $21,000,000 (subsequently reduced to $20,750,000). The buyer deposited $500,000 upon execution and deposited an additional $500,000 once the due diligence period expired in January 2015, and these deposits are non-refundable. On January 30, 2015, an initial closing was held for the purpose of refinancing the 720 University note payable and the buyer extended a new loan to 720 University to repay the existing note payable to a bank. The principal amount of the new loan is $9,771,263 and will accrue interest at 6.0% per annum until paid off with the closing of the sale of the property to the buyer which is expected to occur on or about May 28, 2015.
About Owens Realty Mortgage, Inc.
Owens Realty Mortgage, Inc., a Maryland corporation, is a specialty finance company that invests in commercial real estate mortgage loans primarily in the Western U.S. The Company provides customized, short-term capital to small and middle-market investors and developers who require speed and flexibility. We are organized and conduct our operations to qualify as a real estate investment trust, or REIT, for U.S. federal income tax purposes. 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. Actual results may differ from expectations, estimates and projections and, consequently, readers should not rely on these forward-looking statements as predictions of future events. These forward-looking statements include information about possible or assumed future results of the Company’s business, financial condition, liquidity, results of operations, plans, goals, and objectives. 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
December 31,
| Assets | 2014 | | 2013 | |
| Cash and cash equivalents | $ | 1,413,545 | | $ | 8,158,734 | |
| Restricted cash | | 6,248,746 | | | 4,095,435 | |
| Loans, net of allowance for losses of $2,869,355 in 2014 and $4,739,088 in 2013 | | 65,164,156 | | | 54,057,205 | |
| Interest and other receivables | | 1,482,380 | | | 1,673,978 | |
| Other assets, net of accumulated depreciation and amortization of $1,065,172 in 2014 and $976,090 in 2013 | | 1,138,123 | | | 1,102,683 | |
| Deferred financing costs, net of accumulated amortization of $253,675 in 2014 | | 1,317,585 | | | 95,000 | |
| Investment in limited liability company | | 2,142,581 | | | 2,142,582 | |
| Real estate held for sale | | 59,494,339 | | | 5,890,131 | |
| Real estate held for investment, net of accumulated depreciation of $6,075,287 in 2014 and $9,599,719 in 2013 | | 103,522,466 | | | 129,425,833 | |
| | | | | | | |
| Total assets | $ | 241,923,921 | | $ | 206,641,581 | |
| Liabilities and Equity | | | | | | |
| Liabilities: | | | | | | |
| Dividends payable | $ | 1,292,160 | | $ | 180,000 | |
| Due to Manager | | 283,644 | | | 293,776 | |
| Accounts payable and accrued liabilities | | 2,219,674 | | | 2,710,745 | |
| Deferred gains | | 362,283 | | | 3,313,169 | |
| Lines of credit payable | | 11,450,000 | | | — | |
| Notes and loans payable on real estate | | 37,569,549 | | | 13,917,585 | |
| Total liabilities | | 53,177,310 | | | 20,415,275 | |
| Commitments and Contingencies (Note 14) | | | | | | |
| Equity: | | | | | | |
| Stockholders’ equity: | | | | | | |
| Preferred stock, $.01 par value per share, 5,000,000 shares authorized, no shares issued and outstanding at December 31, 2014 and 2013 | | — | | | — | |
| Common stock, $.01 par value per share, 50,000,000 shares authorized, 11,198,119 shares issued, 10,768,001 and 10,794,209 shares outstanding at December 31, 2014 and 2013 | | 111,981 | | | 111,981 | |
| Additional paid-in capital | | 182,437,522 | | | 182,437,522 | |
| Treasury stock, at cost – 430,118 and 403,910 shares at December 31, 2014 and 2013 | | (5,349,156 | ) | | (5,023,668 | ) |
| Retained earnings | | 7,371,511 | | | 2,348,575 | |
| Total stockholders’ equity | | 184,571,858 | | | 179,874,410 | |
| Noncontrolling interests | | 4,174,753 | | | 6,351,896 | |
| Total equity | | 188,746,611 | | | 186,226,306 | |
| | | | | | | |
| Total liabilities and equity | $ | 241,923,921 | | $ | 206,641,581 | |
OWENS REALTY MORTGAGE, INC.
Consolidated Statements of Income
Years Ended December 31,
| | 2014 | | 2013 |
| | | | | | | |
| Revenues: | | | | | | |
| Interest income on loans secured by trust deeds | $ | 5,382,019 | | $ | 3,020,884 | |
| Gain on foreclosures of loans | | 464,754 | | | 952,357 | |
| Rental and other income from real estate properties | | 12,268,214 | | | 11,223,260 | |
| Income from investment in limited liability company | | 169,999 | | | 160,805 | |
| Other income | | 19 | | | 4,406 | |
| Total revenues | | 18,285,005 | | | 15,361,712 | |
| | | | | | | |
| Expenses: | | | | | | |
| Management fees to Manager | | 1,726,945 | | | 1,664,076 | |
| Servicing fees to Manager | | 156,995 | | | 151,643 | |
| General and administrative expense | | 1,661,210 | | | 1,657,467 | |
| Rental and other expenses on real estate properties | | 8,161,434 | | | 8,170,318 | |
| Depreciation and amortization | | 2,255,577 | | | 2,485,587 | |
| Interest expense | | 1,161,822 | | | 513,750 | |
| Total expenses | | 15,123,983 | | | 14,642,841 | |
| | | | | | | |
| Operating income | | 3,161,022 | | | 718,871 | |
| | | | | | | |
| Gain on sales of real estate, net | | 3,243,359 | | | 2,942,861 | |
| Reversal of provision for loan losses | | 1,869,733 | | | 7,822,112 | |
| Impairment losses on real estate properties | | (179,040 | ) | | (666,240 | ) |
| | | | | | | |
| Net income | | 8,095,074 | | | 10,817,604 | |
| Less: Net income attributable to noncontrolling interests | | (165,445 | ) | | (2,084,707 | ) |
| | | | | | | |
| Net income attributable to common stockholders | $ | 7,929,629 | | $ | 8,732,897 | |
| | | | | | | |
| Per common share data: | | | | | | |
| Basic and diluted earnings per common share | $ | 0.74 | | $ | 0.78 | |
| Basic and diluted weighted average number of common shares outstanding | | 10,768,370 | | | 11,127,820 | |
| Dividends declared per share of common stock | $ | 0.27 | | $ | 0.25 | |
| | | | | | | |
OWENS REALTY MORTGAGE, INC.
Consolidated Statements of Income
Three Months Ended December 31,
(Unaudited)
| | 2014 | | 2013 |
| | | | | | | |
| Revenues: | | | | | | |
| Interest income on loans secured by trust deeds | $ | 1,817,177 | | $ | 659,992 | |
| Gain on foreclosures of loans | | 207,734 | | | — | |
| Rental and other income from real estate properties | | 3,331,291 | | | 2,814,910 | |
| Income from investment in limited liability company | | 43,642 | | | 42,233 | |
| Other income | | — | | | 2,787 | |
| Total revenues | | 5,399,844 | | | 3,519,922 | |
| | | | | | | |
| Expenses: | | | | | | |
| Management fees to Manager | | 451,044 | | | 399,408 | |
| Servicing fees to Manager | | 41,004 | | | 36,310 | |
| General and administrative expense | | 570,334 | | | 463,514 | |
| Rental and other expenses on real estate properties | | 2,207,659 | | | 1,766,562 | |
| Depreciation and amortization | | 612,655 | | | 543,699 | |
| Interest expense | | 443,115 | | | 128,686 | |
| Total expenses | | 4,325,811 | | | 3,338,179 | |
| | | | | | | |
| Operating income | | 1,074,033 | | | 181,743 | |
| | | | | | | |
| Gain on sales of real estate, net | | 503,254 | | | 230,765 | |
| Reversal of provision for loan losses | | 2,010,765 | | | 445,768 | |
| Impairment losses on real estate properties | | — | | | (666,240 | ) |
| | | | | | | |
| Net income | | 3,588,052 | | | 192,036 | |
| Less: Net income attributable to noncontrolling interests | | (13,693 | ) | | (21,162 | ) |
| | | | | | | |
| Net income attributable to common stockholders | $ | 3,574,359 | | $ | 170,874 | |
| | | | | | | |
| Per common share data: | | | | | | |
| Basic and diluted earnings per common share | $ | 0.33 | | $ | 0.02 | |
| Basic and diluted weighted average number of common shares outstanding | | 10,768,001 | | | 10,920,690 | |
| Dividends declared per share of common stock | $ | 0.12 | | $ | 0.05 | |
| | | | | | | |
