-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Wj4ms98GcBxb+9nqU/Lz9P40CAApBygEvojF2f+jPrLSIW6Mcmxkygr7OHXldCx1 nGqdL9inxSNHrxoGnv9O6g== 0000841501-95-000014.txt : 19951120 0000841501-95-000014.hdr.sgml : 19951120 ACCESSION NUMBER: 0000841501-95-000014 CONFORMED SUBMISSION TYPE: 10-QT PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951115 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: OWENS MORTGAGE INVESTMENT FUND CENTRAL INDEX KEY: 0000841501 STANDARD INDUSTRIAL CLASSIFICATION: MORTGAGE BANKERS & LOAN CORRESPONDENTS [6162] IRS NUMBER: 680023931 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-QT SEC ACT: 1934 Act SEC FILE NUMBER: 000-17248 FILM NUMBER: 95593490 BUSINESS ADDRESS: STREET 1: 2221 OLYMPIC BLVD STREET 2: P O BOX 2308 CITY: WALNUT CREEK STATE: CA ZIP: 94595 BUSINESS PHONE: 5109353840 MAIL ADDRESS: STREET 1: 2221 OLYMPIC BLVD STREET 2: P O BOX 2308 CITY: WALNUT CREEK STATE: CA ZIP: 94595 FORMER COMPANY: FORMER CONFORMED NAME: OWENS MORTGAGE INVESTMENT FUND II DATE OF NAME CHANGE: 19920703 10-QT 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM l0-Q Quarterly Report Under Section 13 or 15(d) of The Securities Exchange Act of 1934 For Quarter Ended September 30, 1995 Commission file number O-17248 OWENS MORTGAGE INVESTMENT FUND, a California Limited Partnership (Exact Name of Registrant as specified In Its charter) California 68-0023931 (State or other jurisdiction I.R.S. Employer of incorporation or organization) Identification No.) 2221 Olympic Boulevard Walnut Creek, California 94595 (Address of principal executive office) (Zip Code) Registrant's Telephone number, including area code (510) 935-3840 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_________ PART I. FINANCIAL INFORMATION Item 1. Financial Statements
OWENS MORTGAGE INVESTMENT FUND (A California Limited Partnership) BALANCE SHEETS -- SEPTEMBER 30, 1995 AND DECEMBER 31, 1994 September 30 December 31 1995 1994 ASSETS Cash and cash equivalents (Note 2) $ 7,632,247 $ 2,153,706 Certificates of Deposit 1,100,000 1,100,000 Loans secured by trust deeds (Notes 2 and 3) 146,622,445 145,050,213 less: Allowance for loan losses (Note 2) (2,750,000) (2,750,000) Real estate held for sale (Note 5) 7,034,583 4,628,325 Unsecured Loan to General Partner (Note 4) 1,452,533 1,249,989 Interest receivable 1,434,736 1,193,764 Total Assets $ 162,526,544 $ 152,625,997 LIABILITIES AND PARTNERS' CAPITAL LIABILITIES: Accrued distributions payable $ 483,863 $ 446,625 Accounts payable 241,747 332,644 Total Liabilities 725,610 779,269 PARTNERS' CAPITAL: General partners (Note 6) 1,597,112 1,488,360 Limited partners (Note 6) 160,203,822 150,358,368 Total Partners' Capital 161,800,934 151,846,728 Total Liabilities and Partners' Capital $ 162,526,544 $ 152,625,997
The accompanying notes are an integral part of these financial statements.
OWENS MORTGAGE INVESTMENT FUND (A California Limited Partnership) STATEMENTS OF INCOME FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED September 30 September 30 September 30 September 30 1995 1994 1995 1994 REVENUES: Interest income on loans secured by trust deeds $ 3,862,766 $ 3,685,049 $11,447,010 $11,291,392 Other interest income 117,711 104,007 197,224 182,102 Income from Real Estate 64,896 0 146,526 0 Total revenues $ 4,045,373 $ 3,789,056 $11,790,760 $11,473,494 OPERATING EXPENSES: Management Fees (Note 6) $ 361,832 $ 201,211 $ 846,600 $ 1,269,750 Promotional interest (Note 3) 12,553 22,695 48,853 55,386 Administrative 14,129 14,129 42,387 42,387 Legal and accounting 18,430 75,195 54,690 142,915 Real Estate Owned expenses 57,718 190,651 199,586 209,546 Other 10,996 21,392 10,996 26,362 Total operating expenses $ 475,658 $ 525,273 $ 1,203,112 $ 1,746,346 Net income $ 3,569,715 $ 3,263,783 $10,587,648 $ 9,727,148 Net income allocated to general partner $ 35,275 $ 31,933 $ 104,158 $ 94,495 Net income allocated to limited partners $ 3,534,440 $ 3,231,850 $10,483,490 $ 9,632,653 Net income per limited partnership unit (Note 8) $.022 $.022 $.067 $.067
The accompanying notes are an integral part of these financial statements.
OWENS MORTGAGE INVESTMENT FUND (A California Limited Partnersbip) STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30, 1995 and 1994 September 30 September 30 1995 1994 CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $10,587,648 $ 9,727,148 Adjustments to reconcile net Income to net cash provided by operating activities (Increase) in interest receivable (240,972) (264,617) Increase (decrease) in accrued distribution payable 37,238 10,583 Increase (decrease) in accounts payable (90,897) 152,394 Increase (decrease) in deferred interest 0 (4,731) Total adjustment (294,631) (101,640) Net cash provided by operating activities 10,293,017 9,625,508 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of loans secured by trust deeds (42,683,144) (41,470,529) Principal collected 1,066,547 1,633,253 Loan payoffs 39,841,821 39,690,012 Investments in real estate (2,405,258) (1,950,000) Investments in Certificates of Deposit (net) 0 400,000 Net cash provided by (used in) investing activities (4,180,034) (1,697,264) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from sale of partnership Units 11,213,731 14,369,752 Cash distributions (4,295,801) (3,917,862) Capital withdrawals (7,551,372) (8,273,517) Net cash provided by (used in) financing activities (634,442) 1,678,373 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5,478,541 8,991,201 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,153,706 1,640,818 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 7,632,247 $10,632,019
The accompanying notes are an integral part of these financial statements. OWENS MORTGAGE INVESTMENT FUND (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1995 (1) ORGANIZATION AND OPERATIONS Owens Mortgage Investment Fund (the Partnership), a California limited partnership, was formed on June 14, 1984 to invest in loans secured by first, second and third trust deeds and wraparound mortgage loans. The Partnership commenced operations on the date of formation and will continue until December 31, 2034 unless dissolved prior thereto under the provisions of the partnership agreement. The general partners include Owens Financial Group, Inc. (OFG), a California Corporation, and certain individuals who are OFG's shareholders/officers and/or employees. The individual partners have assigned to OFG their interest in any present or future promotional allowance from the Partnership. OFG is a California corporation engaged in the origination of real estate mortgage loans and the subsequent servicing of these mortgages for the Partnership and for other third-party investors. The general partners are authorized to offer and sell and have outstanding up to an aggregate of 250,000,000 units outstanding at $1.00 per unit, representing $250,000,000 of limited partnership interest in the Partnership. Limited Partnership Units outstanding were 163,269,755 at September 30, 1995. As of September 30, 1995, the Partnership had registered $321,570,324 of limited partnership interests with the Securities and Exchange Commission. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The following items comprise the significant accounting policies that the Partnership follows in preparing and presenting its financial statements. (a) Loans Secured by Trust Deeds Loans secured by trust deeds are acquired from OFG and are recorded at cost, which includes fees paid to OFG for origination, evaluation, and acquisition services. The cost to the Partnership approximates the principal amount outstanding. Interest income on loans is accrued by the simple interest method. In May 1993, the Financial Accounting Standards Board issued Statement No. 114, Accounting by Creditors for Impairment of a Loan. Statement No. 114 requires that impaired loans be measured on the present value of expected future cash flows discounted at the loan's effective interest rate or, as a practical expedient, at the loan's observable market price or the fair value of the collateral if the loan is collateral dependent. The Partnership will be required to implement this new standard by 1995. Management of the Partnership has not yet evaluated the impact that implementation of this standard will have on the financial statements of the Partnership. (b) Allowance for Loan Losses The Partnership maintains an allowance for loan losses equal to $2,750,000 as of September 30, 1995. Management of the Partnership believes that based on historical experience and a review of the loans and their respective collateral, the allowance for loan losses is adequate in amount. Through October 31, 1994, OFG made all delinquent interest payments on Partnership loans originated prior to May 1, 1993 on a non-recourse basis. However, effective November 1, 1994, OFG discontinued its practice of making such payments for certain loans totaling $2,533,000 as of September 30, 1995 which were originated prior to May 1, 1993 and which were more than 90 days delinquent. The Partnership discontinues the accrual of interest on loans when, in the opinion of management, there is a significant doubt as to the collectibility of interest or principal from either the borrower or OFG or when the payment of principal or interest is ninety days past due, unless OFG continues to advance interest payments to the Partnership. As of September 30, 1995 and December 31, 1994, the Partnership had loans totaling $3,924,000 and $4,923,000, respectively, classified as non-accrual loans. The Partnership's investment in loans for which OFG has provided advances for delinquent interest payments over 90 days was $5,849,000 and $8,781,000 at September 30, 1995 and December 31, 1994, respectively. Advances for delinquent interest payments and other payments, such as property taxes and mortgage interest pursuant to senior indebtedness, made to or on behalf of the Partnership by OFG for the nine months ended September 30, 1995 and for the twelve months ended December 31, 1994 which had not been reimbursed by the borrower as of the same date, totaled approximately $897,000 and $1,149,000, respectively. The Partnership has no obligation to repay these advances to OFG. During 1994, OFG assumed through foreclosure one Partnership loan totaling $58,000. In addition, the Partnership was foreclosed out of a loan by a senior lienholder in the amount of $591,000. OFG assumed one Partnership loans through foreclosure in the amount of $14,463 for the three and nine month periods ended September 30, 1995. c) Cash and Cash Equivalents For purposes of the statements of cash flows, cash and cash equivalents include interest-bearing or non interest-bearing bank deposits and short-term certificates of deposit with original maturities of three months or less. (d) Certificates of Deposit Certificates of Deposit are held with various financial institutions with original maturities of up to one year. (e) Real Estate Held for Sale Real estate held for sale includes real estate acquired through foreclosure and is carried at the lower of the recorded investment in the loan plus ,any additional capitalized costs, inclusive of any senior indebtedness, or the property's estimated fair market value, less estimated cost to sell. (f) Income Taxes No provision is made for income taxes since the Partnership is not a taxable entity. Accordingly, any income or loss is included in the tax returns of the partners. (3) LOANS SECURED BY TRUST DEEDS Loans secured by trust deeds as of September 30, 1995 and December 31, 1994 were as follows: September 30 December 31 1995 1994 Income-producing properties $137,513,110 $135,128,661 Single-family residences 2,599,383 3,179,945 Unimproved land 6,509,952 6,741,607 $146,622,455 $145,050,213 First mortgages $132,399,433 $131,139,007 Second mortgages 13,625,618 13,228,818 Third mortgages or all-inclusive deeds of trust 597,394 682,388 $146,622,445 $145,050,213 Loan maturities range from 1995 to 2011, with approximately 28% ($40,359,000) of the loan principal outstanding at September 30, 1995 maturing in 1995 and 1996. These maturities include $14,141,000 in loans which are past maturity as of September 30, 1995, of which $5,946,000 represents loans for which interest payments are delinquent over 90 days. The Partnership refinanced loans totaling $11,465,000 and $11,266,000 during the nine months ended September 30, 1995 and the year ended December 31, 1994, respectively, thereby extending the maturity dates of such loans. The Partnership's total investment in loans delinquent over ninety days is $9,774,000 and $13,704,000 at September 30, 1995 and December 31, 1994, respectively. As of September 30, 1995 and December 31, 1994, OFG is providing non-recourse advances for the delinquent interest payments on $5,849,000 and $8,781,000, respectively, of such loans. As of September 30, 1995 and December 31, 1994, the Partnership's loans secured by deeds of trust on real property collateral located in Northern California totaled approximately 79% ($116,238,000) and 82% ($118,462,000), respectively of the loan portfolio. The Northern California region is a large geographic area which has a diversified economic base. The ability of the borrowers to repay loans is influenced by the strength of the region and the impact of prevailing forces on the value of real estate. Such loans are secured by deeds of trust in real estate properties and are expected to be repaid from the cash flow of the properties or proceeds from the sale or refinancing of the properties. The policy of the Partnership is to require real property collateral with a value, net of senior indebtedness, that exceeds the carrying amount of the loan balance and to record a deed of trust on the underlying property. (4) UNSECURED LOANS DUE FROM GENERAL PARTNER During 1993, OFG sold various properties that it had acquired from the Partnership through foreclosure proceedings on Partnership loans assumed in 1992 and 1993. The sales proceeds were insufficient to repay the Partnership's investment in the related mortgage notes; accordingly, OFG executed an unsecured note payable to the Partnership in the aggregate amount of $1,411,111 to satisfy OFG's obligation pursuant to an expired Limited Indemnification Agreement. During 1994, OFG sold one property acquired through foreclosure proceedings on a Partnership loan assumed in 1993 incurring a loss of $369,512. In addition, the Partnership was foreclosed out of the second position of another loan by the holder of the first deed of trust at a loss of $591,000. During 1995, the Partnership sold a loan with a principal balance of $1,425,085 at a discounted price of $900,000. In addition, the Partnership was foreclosed out of the second position of a loan by the holder of the first deed of trust. The property securing this junion loan made up part of the security for the Partnership's entire loan, and $377,272 of the entire loan amount was allocated to this property Although not obligated to do so, OFG assumed the losses associated with these transactions and added the losses to the outstanding balance of the unsecured note payable. As of September 30, 1995, OFG has repaid $1,821,447 in principal on this unsecured loan leaving a balance due of $1,452,533. The note carries an interest rate of 8% and is current. (5) REAL ESTATE HELD FOR SALE AND MORTGAGE PAYABLE Real estate held for sale at September 30, 1995 consists of the following properties acquired through foreclosure in 1993, 1994 and 1995: Warehouse, Merced, California, net of valuation allowance of $200,000 as of September 30, 1995 $ 800,000 Residential lots, Carmel, California 1,639,851 Light industrial, Emeryville, California 925,000 70% interest in undeveloped land, Vallejo, California 568,569 Commercial lot, Sacramento, California, net of valuation allowance of $200,000 as of September 30, 1995 349,828 Office building, Monterey, California 2,094,247 Undeveloped land, Los Gatos, California 571,853 Residential lot, Grass Valley, California 55,380 Apartments/Commercial Use, Oakland, California 29,855 Total $7,034,583 Real estate held for sale has increased in recent years due to the Corporate General Partner's policy to not acquire such properties through foreclosure. (6) PARTNER'S CAPITAL (a) Contributions The limited partners contribute $1.00 for each unit subscribed. Registration costs incurred by the Fund have been offset against contributed capital. Such costs, which were incurred in 1989, amounted to approximately $198,000. Prior to September 1, 1986, the general partners contributed cash in an amount equal to 1% of the aggregate capital contribtions of the limited partners. After such date, the general partners are required to make cash capital contributions in the amount of 1/2 of 1% of the limited partners' aggregate capital contributions. (b) Allocations, Distributions and Withdrawals In accordance with the partnership agreement, the Partnership's profits, gains and losses are allocated to each limited partner and the corporate general partner in proportion to their respective capital contributions. Distributions are made monthly to the partners in proportion to the respective units owned during the preceding calendar month. Accrued distributions payable represent amounts to be paid to the partners in October, 1995 and January, 1995 on their capital balances at September 30, 1995 and December 31, 1994, respectively. The Partnership makes cash distributions to those limited partners who elect to receive such distributions. Those limited partners who elect not to receive cash distributions have their distributions reinvested in additional limited partnership units. Such reinvested distributions totaled $6,296,933 and $5,750,359 for the nine months ended September 30, 1995 and 1994, respectively. The limited partners may withdraw, or partially withdraw, from the Fund and obtain the return of their outstanding capital accounts within 91 days after written notices are delivered to the corporate general partner, subject to the following limitations: Any such payments are required to be made only from cash available for distribution, net proceeds and capital contributions (as defined) during said 91-day period. A maximum of $75,000 may be withdrawn during any calendar quarter (or $100,000 in the case of an estate of a deceased limited partner). The general partners are not required to establish a reserve fund for the purpose of funding such payments. No more than 10% of the outstanding limited partnership interests nay be withdrawn during any calendar year except upon dissolution of the Fund. (c) Promotional Interest of General Partners The general partners contributed cash to the Partnership's capital in the amount of 0.5% of the limited partners aggregate capital contributions and, together with their promotional interest, the general partners have an interest equal to 1% of the limited partners contributions. This promotional interest of the general partners of up to 1/2 of 1% is expensed monthly to the Partnership and credited as a contribution to the general partners capital account as additional compensation. As of September 30, 1995, the general partners had made cash capital contributions of $818,320 to the Partnership. The general partners have agreed not to withdraw any portion of this capital from the Partnership, even though it exceeds the 1/2 of 1% requirement, but they are not required to make any further cash capital contributions to the Partnership until the amount falls below the 1/2 of 1% requirement. The promotional interest expense charged to the Partnership was $12,553 and $22,695 for the three months ended September 30, 1995 and 1994, respectively and $48,853 and $55,386 for the nine months ended September 30, 1995, respectively. (7) CONTINGENCY RESERVES In accordance with the partnership agreement and to satisfy the Partnership's liquidity requirements, the Partnership is required to maintain contingency reserves (as defined) in an aggregate amount of at least 1.5% of the gross proceeds of the sale of limited partnership units. The cash capital contribution of the general partners (amounting to $818,320 at September 30, 1995), up to a maximum of .5% of the limited partners' capital contributions, will be available as additional contingency reserve, if necessary. The contingency reserves required at September 30, 1995 and December 31, 1994 were $3,261,830 and $3,055,784, respectively. Cash and cash equivalents as of the same dates were restricted accordingly. (8) TRANSACTIONS WITH AFFILIATES OFG is entitled to receive from the Partnership a management fee of up to 2.75% per annum of the average unpaid balance of the Partnership's mortgage loans at the end of each of the preceding twelve months for services redered as manager of the Partnership. The maximum management fee is reduced to 1.75% per annum if OFG has not provided during the preceeding calendar year any of the certain services defined in the limited partnership agreement. All of the Partnership's loans are serviced by OFG, in consideration for which OFG receives fees up to .25% per annum of the unpaid principal balance of the loans. Such servicing fees are paid from the interest income of the loans collected from the borrowers. In consideration for management services provided, OFG receives fees up to 2.75% per annum of the average unpaid balance of the Partnership's mortgage loans at the end of each of the 12 months in the then current calendar year. Interest income on loans secured by trust deeds is collected by OFG and, along with advances on delinquent loans, is remitted to the Partnership. Interest receivable amounted to $1,434,736 and $1,193,764 at September 30, 1995 and December 31, 1994, respectively. OFG may, at its sole discretion and on a monthly basis, adjust the servicing and management fees as long as such fees do not exceed the allowable .25% and 2.75% annual limits, respectively. In determining the servicing and management fees, and hence the yield to the Partnership, OFG may consider a number of factors, including the then-current market yields. Service fee payments to OFG approximated $102,000 and $81,000 for the three months ended September 30, 1995 and 1994, respectively and $301,000 and $261,000 for the nine months ended September 30, 1995 and 1994, respectively. Management fee income to OFG earned on loans invested in by the Fund approximated $362,000 and $201,000 for the three months ended September 30, 1995 and 1994, respectively, and $847,000 and $1,270,000 for the nine months ended September 30, 1995 and 1994, respectively. OFG is the obligor on a note payable to the Partnership in the amount of $490,322 which is secured by a property owned by OFG as of September 30, 1995. This note is interest only, due on demand and is current. Although the terms of the loan between the Partnership and OFG may or may not be at market rate, they are considered adequate and reasonable. OFG originates all loans the Partnership is invested in and receives an investment evaluation fee payable by borrowers or the Partnership. Such fees, payable by borrowers, earned by OFG amounted to approximately $500,000 and $550,000 for the three months ended September 30, 1995 and 1994, respectively and $1,397,000 and $1,075,000 for the nine months ended September 30, 1995 and 1994, respectively. OFG receives late payment charges from borrowers who make delinquent payments. Such charges are in addition to the normal monthly loan payments and totaled approximately $78,000 and $37,000 for the three months ended September 30, 1995 and 1994, respectively and $147,000 and $153,000 for the nine months ended September 30, 1995 and 1994, respectively. (9) NET INCOME PER LIMITED PARTNERSHIP UNIT Net income per limited partnership unit is computed using the weighted average of limited partnership units outstanding during the three month periods. These amounts were $163,073,491 and $149,161,161 for the three months ended September 30, 1995 and 1994, respectively and $157,356,326 and $143,138,629 for the nine months ended September 30, 1995 and 1994, respectively. Item 2. Management's Discussion and Ana1ysis of Financial Condition and Results of Operations Results of Operations The net income increases of $306,000 (9.37%) for the three months ended September 30, 1995 as compared to the three months ended September 30, 1994 and of $861,000 (8.85%) for the nine months ended September 30, 1995 and compared to the nine months ended September 30, 1994 were primarily attributable to increases in the average mortgage investments and other notes receivable from $135,247,000 to $145,176,000 for the three months ended September 30, 1994 and 1995, respectively and from $134,503,000 to $146,747,000 for the nine months ended September 30, 1995 and 1994, respectively. The Partnership experienced a decrease in its average net yield from 8.80% to 8.77% for the three months ended September 30, 1994 and 1995, respectively and a decrease in its average net yield from 8.87% to 8.83% for the nine months ended September 30, 1994 and 1995, respectively. The net yield represents the net income of the Partnership after all expenses with the exception of the provision for losses on loans or Real Estate Owned. These variations in yield are minor; however, the gross income of the Partnership has been reduced due to the fact that, as of November 1, 1994, the Corporate General Partner discontinued its previous practice of making payments on certain delinquent loans held by the Partnership which were originated prior to May 1, 1993. As of September 30, 1994 the Partnership held no non-performing loans which were not being advanced on by the Corporate General Partner. However, the Partnership had $3,924,000 of non-performing loans as of September 30, 1995 on which the Corporate General Partner was not advancing payments. These decreases in income have been offset by decreases in expenses. The Corporate General Partner has significantly reduced the management fees it collects to offset the loss of revenue to the Partnership. Management fees paid to the Corporate General Partner decreased from $1,270,000 to $847,000 for the nine months ended September 30, 1994 and 1995, respectively. Portfolio Review The number of Partnership mortgage investments decreased from 256 to 237 as of Sepatember 30, 1994 and 1995, respectively. The average loan balance in this period increased from $520,562 to $618,660 as of September 30, 1994 and 1995, respectively. This average loan increase reflects the Partnership's ability to invest in larger mortgage loans meeting the Partnership's objectives. In addition, it appears that the Corporate General Partner's market for placing larger loans has grown while the market for smaller loans has diminished. The Corporate General Partner does not know why this has happened, but it appears that other lenders are increasingly competing for commercial loans of less than $1,000,000. The Corporate General Partner had previously made all periodic interest payments to the Partnership on all delinquent loans made or invested in by the Partnership. However, on loans originated by the Corporate General Partner on or after May 1, 1993, and effective November 1, 1994, for certain other loans originated prior to May 1, 1993, the Corporate General Partner has adopted the policy to not advance delinquent interest or principal. As of September 30, 1995, there were $3,924,000 in loans held by the Partnership on which payments were more than 90 days delinquent and on which payments were not being advanced by the Corporate General Partner. The Corporate General Partner has advanced approximately $386,000 in delinquent interest payments to the Partnership from January 1, 1995 to September 30, 1995 that had not been collected from the borrower by the Corporate General Partner as of September 30, 1995. Approximately $9,774,000 (6.7%) and $13,704,000 (9.4%) of the loans invested in by the Fund were more than 90 days delinquent in payment as of September 30, 1995 and December 31, 1994, respectively. Of these amounts, approximately $3,794,000 (2.6%) and $7,963,000 (5.5%) were in the process of foreclosure as of September 30, 1995 and and December 31, 1994, respectively. A loan loss reserve in the amount of $2,750,000 was maintained on the books of the Partnership as of September 30, 1995 and 1994. As of this date the General Partners have determined that this loan loss reserve is adequate. As of September 30, 1995 and December 31, 1994 approximately 79% and 82%, respectively of the mortgage loans made or invested in by the Partnership are secured by real property located in Northern California. The following table sets forth the principal amount of mortgage investments, by classification of property securing each loan, held by the Partnership on September 30, 1995 and December 31, 1994: Principal Amount September 30 December 31 1995 1994 (000) (000) Single-Family Dwellings $ 2,599 $ 3,180 Income-Producing Property 137,513 135,129 Unimproved Land 6,510 6,741 $146,622 $145,050 First Mortgages $132,399 $131,139 Second Mortgages 13,626 13,229 Third Mortgages or All-inclusive Deeds of Trust 597 682 $146,622 $145,050 The following amount of delinquent loans held by the Partnership have been acquired and foreclosed upon by the Corporate General Partner from January 1, 1991 through September 30, 1995: Delinquent Year Principal Interest Foreclosed $2,890,000 $258,602 1991 5,220,925 787,591 1992 1,025,581 150,295 1993 58,000 8,417 1994 14,463 0 1995 The Corporate General Partner has advanced all delinquent interest to the Partnership on these foreclosed loans. Of these foreclosed loans the Partnership held one mortgage in the amount of $490,322 as of September 30, 1995. Real Estate Owned The Partnership currently holds title to the following nine properties which were foreclosed on during 1993, 1994 and 1995:
Fund Additional Loan Capitalized Delinquent Senior Description Amount Costs Interest (1) Loans 60,000 S.F. Light Industrial Warehouse Merced, CA $ 800,000 (2)$ $ 0 $175,333 $ 0 Residential Lots Carmel Valley, CA $ 600,000 $1,039,851 (3) $141,750 $ 0 Light Industrial Warehouse Emeryville, CA $ 925,000 $ 0 $235,721 $ 0 Commercial Lot/Residential Development Vallejo, CA $ 525,000 $ 43,569 $ 83,949 $ 0 Commerical Lot Sacramento, CA $ 300,000 (2) $ 49,828 $ 36,500 $ 0 Office Building Monterey, CA $ 550,000 $1,544,247 (4) $ 30,077 $ 0 Residential Lot Grass Valley, CA $ 55,000 $ 380 $ 6,302 $ 0 Commercial Space Oakland, CA $ 29,855 $ 0 $ 31,708 $ 0 Undeveloped Land Los Gatos, CA $ 571,853 $ 0 $134,878 $ 0 (1) The delinquent interest was advanced by OFG to the Partnership. The $83,949 of delinquent interest advanced by OFG on the Vallejo, California property has been reimbursed by the Partnership. (2) This amount is net of a loss allowance of $200,000. (3) Included in this balance is the payoff of a senior loan in the amount of $500,000. (4) Included in this balance is the payoff of a senior loan in the amount of $1,425,000. This senior loan was originally $2,102,646 including late charges and fees. The Corporate General Partner arranged for this loan to be discounted at payoff.
With the exception of the light industrial warehouse located in Emeryville, California, these properties do not currently generate revenue and, as such, are operating at a deficit. The General Partners believe that due to the values of these properties, the Partnership should not sustain any losses of principal on their ultimate disposition. The Partnership has entered into partnership, as a limited partner, with a licensed general contractor on the the residential lots located in Carmel Valley, California to build and sell detached, single family residences. It is anticipated that all infrastructure woek including roads and utilities will be completed by the end of 1995. The joint venture owns 30 residential lots with an opttion to purchase 34 additonal lots at $90,000 per lot. Sales of residential units is anticipated to begin in 1996. The Partnership has fully leased out the office building located in Monterey, California with the most recent lease beginning on October 1, 1995. The Partnership's investment in Real Estate Owned has increased during 1993, 1994 and 1995 due to the Corporate General Partner's policy to not acquire property subject to foreclosure on which the Partnership has a trust deed investment. Liquidity and Capital Resources The Partnership relies upon purchases of limited partnership interests and loan payoffs for the creation of capital for mortgage investments. The Partnership has not and does not intend to borrow money for investment purposes. Continency Reserves The Partnership maintains cash and certificates of deposit as contingency reserves in an aggregate amount of at least 2% of the gross proceeds of the sale of Limited Partners' Units. To the extent that such funds are not sufficient to pay expenses in excess of revenues or to meet any obligation of the Partnership, it may be necessary for the Partnership to sell or otherwise liquidate certain of its investments on terms which may not be favorable to the Partnership. Current Economic Conditions The Partnership has been affected by regional declines in commercial property values and general economic conditions; however, the Partnership has not sustained any principal losses to date. Due to the conservative loan-to-value criteria established by the Corporate General Partner, the mortgage loans held by the Partnership appear in general to be, in the opinion of the General Partners, adequately secured. The Partnership generally invests in relatively short-term commercial loans (1-7 years) which large financial institutions typically do not invest in. Due to this, the net income of the Partnership has in recent years remained in the range of 9-10 percent per year. If there were a reduction in the demand for loans originated by the Corporate General Partner and, thus, fewer loans for the Partnership to invest in, the Partnership would have to invest excess cash in shorter term investments yielding considerably less than the current investment portfolio. The Partnership continues to receive substantial additional investments from new and existing Limited Partners which provide capital for loans, purchases of existing notes and redemption of existing Limited Partnership Units. PART II. OTHER INFORMATION Item 1. Legal Proceedings The Partnership is not presently involved in any material legal proceedings. Item 6(b). Reports on Form 8-K No reports on Form 8-K have been filed during the quarter for which this report is filed. SIGNATURES 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. Dated: November 15, 1995 OWENS MORTGAGE INVESTMENT FUND a California Limited Partnership (Registrant) By: Owens Financial Group, Inc. a General Partner By: \s\ David Adler David Adler President By: \s\ Bryan H. Draper Bryan H. Draper Controller Principal Financial and Accounting Officer EX-27 2 FDS --
5 (Replace this text with the legend) 841501 OWENS MORTGAGE INVESTMENT FUND 1 U.S. DOLLARS 3-MOS DEC-31-1995 JUL-01-1995 SEP-30-1995 1 8,732,247 0 149,509,714 2,750,000 0 155,491,961 7,034,583 0 162,526,544 725,610 0 0 0 0 161,800,934 162,526,544 4,045,373 4,045,373 0 0 475,658 0 0 3,569,715 0 3,569,715 0 0 0 3,569,715 .022 .022
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