-----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, SS7lea1hipAHqYNL6gl49Dj+EfzpnoGVSCPpbxLgKPaKtdKqBsmMzTMGUWwL1Tl5 gtBD0kAQmGOUOMaSM6uOgA== 0000841501-96-000008.txt : 19960816 0000841501-96-000008.hdr.sgml : 19960816 ACCESSION NUMBER: 0000841501-96-000008 CONFORMED SUBMISSION TYPE: 10-QT PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 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: 96611766 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 June 30, 1996 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 -- JUNE 30, 1996 AND DECEMBER 31, 1995 June 30 December 31 1996 1995 ASSETS Cash and cash equivalents (Note 2) $ 2,717,332 $ 5,056,358 Certificates of Deposit 1,000,000 850,000 Loans secured by trust deeds (Notes 2 and 3) 155,033,997 151,350,591 less: Allowance for loan losses (Note 2) (3,250,000) (3,250,000) Real estate held for sale (Note 5) 11,936,638 9,012,359 Unsecured Loan to General Partner (Note 4) 1,477,283 1,023,232 Interest receivable 1,348,350 1,359,228 Other assets 59,074 0 ----------- ----------- Total Assets $170,322,674 $165,401,768 =========== =========== LIABILITIES AND PARTNERS' CAPITAL LIABILITIES: Accrued distributions payable $ 506,139 $ 489,157 Payable to General Partner 90,411 152,000 Deferred income 56,179 0 Other liabilities 21,168 16,168 ---------- ---------- Total Liabilities 673,897 657,325 ---------- ---------- PARTNERS' CAPITAL: General partners (Note 6) 1,666,295 1,623,526 Limited partners (Note 6) 167,982,482 163,120,917 ----------- ----------- Total Partners' Capital 169,648,777 164,744,443 ----------- ----------- Total Liabilities and Partners' Capital $170,322,674 $165,401,768 =========== ===========
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 MONTHS AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995 FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED June 30 June 30 June 30 June 30 1996 1995 1996 1995 ---- ---- ---- ---- REVENUES: Interest income on loans secured by trust deeds $ 3,928,424 $ 3,835,233 $ 7,980,008 $ 7,665,874 Other interest income 62,166 46,455 96,432 79,513 ---------- ---------- ---------- ---------- Total revenues $ 3,990,590 $ 3,881,688 $ 8,076,440 $ 7,745,387 ---------- --------- ---------- ---------- OPERATING EXPENSES: Management Fees (Note 8) $ 12,689 $ 216,531 $ 217,037 $ 484,768 Promotional interest (Note 8) 7,768 14,152 24,166 36,300 Administrative 14,129 14,129 28,258 28,258 Legal and accounting 28,749 13,510 77,897 36,260 Net Real Estate Owned operations 162,199 87,011 299,847 141,868 Other 10,372 0 10,869 0 ---------- ---------- ---------- ---------- Total operating expenses $ 235,906 $ 345,333 $ 658,074 $ 727,454 ---------- ---------- ---------- ---------- Net income $ 3,754,684 $ 3,536,355 $ 7,418,366 $ 7,017,933 ========== ========== ========== ========== Net income allocated to general partner $ 37,159 $ 34,085 $ 73,068 $ 68,883 ========== ========== ========== ========== Net income allocated to limited partners $ 3,717,525 $ 3,502,270 $ 7,345,298 $ 6,949,050 ========== ========== ========== ========== Net income per limited partnership unit (Note 8) $.022 $.022 $.043 $.045 ==== ==== ==== ====
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 Six Months Ended June 30, 1996 and 1995 June 30 June 30 1996 1995 CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 7,418,366 $ 7,017,933 Adjustments to reconcile net Income to net cash provided by operating activities (Increase) in interest receivable 10,878 (85,569) Increase (decrease) in accrued distribution payable 16,982 35,370 Increase (decrease) in accounts payable/ payable to General Partner (56,589) (230,039) (Increase) in other assets (59,074) 0 Increase (decrease) in deferred income 56,179 101,739 Other (3,215) 0 ---------- ---------- Total adjustment (34,839) (178,499) ---------- ---------- Net cash provided by operating activities 7,383,527 6,839,434 ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of loans secured by trust deeds (27,985,653) (24,489,252) Principal collected 1,721,381 3,918,878 Loan payoffs 22,126,815 20,866,929 Investments in real estate (2,924,279) (2,922,120) Investments in Certificates of Deposit (net) (150,000) 0 ---------- ---------- Net cash provided by (used in) investing activities (7,211,736) (2,625,565) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from sale of partnership Units 7,584,952 8,220,569 Cash distributions (2,992,194) (1,846,038) Capital withdrawals (7,103,575) (5,056,753) ---------- ---------- Net cash provided by (used in) financing activities (2,510,817) 317,778 ---------- ---------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,339,026) 4,531,647 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 5,056,358 2,153,706 ---------- ---------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,717,332 $ 6,685,353 ========== ========== The accompanying notes are an integral part of these financial statements.
OWENS MORTGAGE INVESTMENT FUND (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS JUNE 30, 1996 (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 interests in the Partnership. Limited Partnership Units outstanding were 171,797,951 at June 30, 1996. As of June 30, 1996, 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. Interest income on loans is accrued by the simple interest method. Effecitve January 1, 1995, the Partnership adopted the Financial Accounting Standards Board issued Statement No. 114, Accounting by Creditors for Impairment of a Loan, and No. 118, Accounting by Creditors for Impairment of a Loan-Income Recognition and Disclosures. Under Statement No. 114, a loan is impaired when, based on current information or events, it is probable that a creditor will be unable to collect the contractual interest and principal payments of a loan according to the contractual terms of the loan agreement. 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. Statement No. 118 clarifies interest income recogntion and disclosure provisions of Statement No. 114. The adoption of these statements do not have a material effect on the financial statements of the Partnership. The Partnership recognizes interest income on impaired loans using the cash-basis method of accounting. Cash receipts are allocated to interest income, except when such payments are specifically designated as principal reduction or when management does not believe the Partnership's investment in the loan is fully recoverable. (b) Allowance for Loan Losses The Partnership maintains an allowance for loan losses equal to $3,250,000 as of June 30, 1996. 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. 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 June 30, 1996 and December 31, 1995, the Partnership had loans totaling $11,031,000 and $12,037,000, respectively, that were more than ninety days delinquent of which $10,224,000 and $8,309,000, respectively, were 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 $807,000 and $3,728,000 at June 30, 1996 and December 31, 1995, respectively. Advances for delinquent interest payments and other payments, such as property taxes and mortgage interest pursuant to senior indebtedness, and development costs made to or on behalf of the Partnership by OFG for the six months ended June 30, 1996 and for the twelve months ended December 31, 1995 which had not been reimbursed by the borrower as of the same date, totaled approximately $237,000 and $1,218,000, respectively. The Partnership has no obligation to repay these advances to OFG. In addition, OFG purchased a note from the Partnership at its face value of $870,000 and foreclosed on and obtained title to the underlying real estate in the first quarter of 1996. During 1995, OFG assumed the Partnership's interest in a loan at the face amount of $591,000 and was foreclosed out of such loan by the senior lienholder. Furthermore, during 1995, OFG assumed the obligation to the Partnership for a shortfall of $525,000 on the payoff of a Partnership loan (see Note 4). (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 June 30, 1996 and December 31, 1995 were as follows:
June 30 December 31 1996 1995 Income-producing properties $145,657,689 $142,597,751 Single-family residences 3,540,316 2,249,616 Unimproved land 5,835,992 6,503,224 ----------- ----------- $155,033,997 $151,350,591 =========== =========== First mortgages $140,110,701 $136,110,802 Second mortgages 14,346,080 14,660,759 Third mortgages or all-inclusive deeds of trust 577,216 579,030 ----------- ----------- $155,033,997 $151,350,591 =========== ===========
Loan maturities range from 1996 to 2011, with approximately 43% ($67,063,000) of the loan principal outstanding at June 30, 1996 maturing in 1996 and 1997. These maturities include $16,787,000 in loans which are past maturity as of June 30, 1996, of which $5,627,000 represents loans for which interest payments are delinquent over 90 days. The Partnership refinanced loans totaling $1,562,000 and $16,350,000 during the six months ended June 30, 1996 and the year ended December 31, 1995, respectively, thereby extending the maturity dates of such loans. The Partnership's total investment in loans delinquent over ninety days is $11,031,000 and $12,037,000 at June 30, 1996 and December 31, 1995, respectively. As of June 30, 1996 and December 31, 1995, OFG is providing non-recourse advances for the delinquent interest payments on $807,000 and $3,728,000, respectively, of such loans. As of June 30, 1996 and December 31, 1995, the Partnership's loans secured by deeds of trust on real property collateral located in Northern California totaled approximately 73% ($112,600,000) and 79% ($120,744,000), 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 on 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 basis in 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 $1,411,112 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 and was foreclosed out of the second position by the holder of the first deed of trust on a Partnership loan assumed in 1994. The proceeds from these transactions were insufficient to repay the Partnership's investment in the related mortgage notes. Though under no obligation to do so, OFG assumed the losses of $960,512 and added this amount to the outstanding balance of the unsecured note payable. During 1995, OFG assumed the obligation to the Partnership for a shortfall on the discounted payoff of a mortgage and was foreclosed out of the second position of a loan by the holder of the first deed of trust on a Partnership loan assumed in 1995. Though under no obligation to do so, OFG assumed the losses on these transactions of $902,357 and added this amount to the outstanding balance of the unsecured note payable. During the first quarter of 1996, OFG assumed the obligation to the Partnership on a loan in the amount of $870,000 and foreclosed on the property securing such loan. This amount was added to the outstanding balance of the unsecured note payable. As of June 30, 1996, OFG has repaid $2,666,698 in principal on this unsecured loan leaving a balance due of $1,477,283. 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 June 30, 1996 consists of the following properties acquired through foreclosure in 1993, 1994, 1995 and 1996: Warehouse, Merced, California, net of valuation allowance of $350,000 as of June 30, 1996 $ 650,000 Residential lots and residential units in construction, Carmel, California 3,625,944 Light industrial, Emeryville, California 922,032 70% interest in undeveloped land, Vallejo, California 568,569 Commercial lot, Sacramento, California, net of valuation allowance of $250,000 as of June 30, 1996 299,828 Office building, Monterey, California 2,110,076 Undeveloped land, Los Gatos, California 571,853 Residential lot, Grass Valley, California 55,380 Retail lot, Milpitas, California and Residence, Campbell, California 661,531 Commercial building, Sacramento, California 550,000 Residential lots, Sonora, California 1,691,425 Undeveloped land, Reno, Nevada 230,000 ---------- Total $11,936,638 ==========
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. In addition, the Partnership has invested substantial amounts of capital ($2,525,944) in excess of the mortgage balances in the residential lots located in Carmel Valley, California during the development process. (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 January, 1996 and July, 1996 on their capital balances at December 31, 1995 and June 30, 1996, 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 $4,401,944 and $4,171,893 for the six months ended June 30, 1996 and 1995, 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 June 30, 1996, the general partners had made cash capital contributions of $850,537 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 $7,768 and $14,152 for the three months ended June 30, 1996 and 1995, respectively, and $24,166 and $36,300 for the six months ended June 30, 1996 and 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 $850,537 at June 30, 1996), 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 June 30, 1996 and December 31, 1995 were approximately $3,436,000 and $3,324,000, 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 rendered 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. Servicing fees are paid from the interest income of the loans collected from the borrowers. Interest income on loans secured by trust deeds is collected by OFG and, along with advances on certain delinquent loans, is remitted to the Partnership. Interest receivable from OFG amounted to $1,348,350 and $1,359,228 at June 30, 1996 and December 31, 1995, 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 $77,000 and $100,000 for the three months ended June 30, 1996 and 1995, respectively and $168,000 and $199,000 for the six months ended June 30, 1996 and 1995, respectively.. Management fee income to OFG earned on loans invested in by the Fund approximated $13,000 and $217,000 for the three months ended June 30, 1996 and 1995, respectively and $217,000 and $485,000 for the six months ended June 30, 1996 and 1995, respectively. OFG is the obligor on two notes payable to the Partnership totaling $492,322 which are secured by properties owned by OFG as of June 30, 1996. These notes are interest only, due on demand and are current. Although the terms of the loans 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 $469,000 and $539,000 for the three months ended June 30, 1996 and 1995, respectively and $916,000 and $861,000 for the six months ended June 30, 1996 and 1995, 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 $60,000 and $34,000 for the three months ended June 30, 1996 and 1995, respectively and $92,000 and $71,000 for the six months ended June 30, 1996 and 1995, respectively. Due to General Partner at June 30, 1996 and December 31, 1995 consists of unreimbursed costs and expenses payable to OFG. (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 and six month periods. These amounts were $170,271,917 and $156,455,920 for the three months ended June 30, 1996 and 1995, respectively and $169,302,059 and $154,497,743 for the six months ended June 30, 1996 and 1995, respectively. Item 2. Management's Discussion and Ana1ysis of Financial Condition and Results of Operations Results of Operations The net income increases of $218,000 (6.17%) for the three months ended June 30, 1996 as compared to the three months ended June 30, 1995 and of $400,000 (5.71%) for the six months ended June 30, 1996 as compared to the six months ended June 30, 1995 were primarily attributable to the increases in the average mortgage investments and other notes receivable held by the Partnership from $148,136,000 to $156,531,000 for the three months ended June 30, 1995 and 1996, respectively and from $148,661,000 to $156,929,000 for the six months ended June 30, 1996 and 1995, respectively. The Partnership experienced decreases in its average net yield from 8.85% to 8.72% for the three months ended June 30, 1995 and 1996, respectively and from 8.86% to 8.65% for the six months ended June 30, 1995 and 1996, 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 partially 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. Non-performing loans held by the Partnership on which the Corporate General Partner was not advancing payments increased from approximately $8,681,000 (6.0% of the loan portfolio) to approximately $10,224,000 (6.6% of the loan portfolio) as of June 30, 1995 and 1996, respectively. In addition to the increase in non-performing loans, there has been an increase in the Partnership's real estate held for sale which operates at an overall loss. Although real estate held for sale is expected to generate profits in subsequent periods, it currently has a negative effect on earnings. Real estate held for sale increased from $7,135,000 to $11,937,000 as of June 30, 1995 and 1996, respectively. Approximately $2,230,000 of the increase has been due to additional capitalized costs associated with the development of the Carmel Valley Ranch property. (See "Real Estate Owned"). 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 approximately $217,000 to $13,000 for the three months ended June 30, 1995 and 1996, respectively and from $485,000 to $217,000 for the six months ended June 30, 1995 and 1996, respectively.. Portfolio Review The number of Partnership mortgage investments decreased from 239 to 232 as of June 30, 1995 and 1996, respectively. The average loan balance increased from $607,570 to $668,250 as of June 30, 1995 and 1996, respectively. This average loan increase reflects the Partnership's ability to invest in larger mortgage loans meeting the Partnership's objectives. 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 June 30, 1996, there were $10,224,000 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 $50,000 in delinquent interest payments to the Partnership from January 1, 1996 to June 30, 1996 that had not been collected from the borrower by the Corporate General Partner as of June 30, 1996. Approximately $11,031,000 (7.1%) and $12,037,000 (8.0%) of the loans invested in by the Fund were more than 90 days delinquent in payment as of June 30, 1996 and December 31, 1995, respectively. Of these amounts, approximately $5,545,000 (3.6%) and $8,484,000 (5.8%) were in the process of foreclosure as of June 30, 1996 and and December 31, 1995, respectively. A loan loss reserve in the amount of $3,250,000 was maintained on the books of the Partnership as of June 30, 1996 and December 31, 1995. As of this date the General Partners have determined that this loan loss reserve is adequate. As of June 30, 1996 and December 31, 1995 approximately 73% and 79%, 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 June 30, 1996 and December 31, 1995: Principal Amount June 30 December 31 1996 1995 ---- ---- (000) (000) Single-Family Dwellings $ 3,540 $ 2,250 Income-Producing Property 145,658 142,598 Unimproved Land 5,836 6,503 ------- ------- $155,034 $151,351 ======= ======= First Mortgages $140,111 $136,111 Second Mortgages 14,346 14,661 Third Mortgages or All-inclusive Deeds of Trust 577 579 ------- ------- $155,034 $151,351 ======= ======= The following amount of delinquent loans held by the Partnership have been acquired and foreclosed upon by the Corporate General Partner from January 1, 1993 through June 30, 1996: Delinquent Year Principal Interest Foreclosed $1,025,581 $150,295 1993 58,000 4,417 1994 2,501,308 252,810 1995 870,000 58,000 1996 The Corporate General Partner has advanced all delinquent interest to the Partnership on the loans foreclosed on in 1993, 1994 and 1995. The delinquent interest on the loan foreclosed on in 1996 was never advanced to the Partnership by the Corporate General Partner. Of these foreclosed loans the Partnership held two mortgages totaling $492,322 as of June 30, 1996 on which the Corporate General Partner was making payments which were current. Real Estate Owned The Partnership currently holds title to the following nine properties which were foreclosed on during 1993, 1994, 1995 and 1996:
Fund Additional Loan Capitalized Delinquent Senior Description Amount Costs Interest (1) Loans - ----------- ------ ----- ------------ ----- Light Industrial Warehouse Merced, CA $1,000,000 (2) $ 0 $175,333 $ 0 Residential Lots and Homes in Construction Carmel Valley, CA $ 600,000 $3,025,944 (4) $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 $ 500,000 (3) $ 49,828 $ 36,500 $ 0 Office Building Monterey, CA $ 550,000 $ 1,576,426 (5) $ 30,077 $ 0 Residential Lot Grass Valley, CA $ 55,000 $ 380 $ 6,302 $ 0 Undeveloped Land Los Gatos, CA $ 571,853 $ 0 $ 134,878 $ 0 Retail Lot/Residence Milpitas, CA/Campbell, CA $ 661,531 $ 0 $ 17,500 $159,971 (6) Commercial Building Sacramento, CA $ 550,000 $ 0 $ 30,817 $ 0 Residential Lots Sonora, CA $ 1,691,425 $ 0 $ 363,636 $ 0 Undeveloped Land Reno, NV $ 230,000 $ 0 $ 0 $ 0 (1) Substantially all of 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) The book value of this asset is net of a loss allowance of $350,000. (3) The book value of this asset is net of a loss allowance of $250,000. (4) Included in this balance is the payoff of a senior loan in the amount of $500,000. (5) 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. (6) The senior loan is secured by the residence.
With the exception of the light industrial warehouse located in Emeryville, California and the office building located in Monterey, California, these properties do not currently generate revenue and, as such, are operating at a deficit. With the possible exception of the light industrial warehouse located in Merced, California, the commercial land located in Sacramento, California, and the residential lots located in Sonora, California, 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 General Partner has not yet determined a loss allowance on the Sonora property. The Partnership has entered into a joint venture agreement with an unrelated developer/builder for the development and buildout of 30 residential lots located in Carmel Valley, California which lots are to be contributed by the Partnership to the joint venture at a future time. The joint venture agreeement provides for the Partnership to receive a priority return of principal and interest on any development capital contributed to the venture in addition to a priority return of $70,000 per lot. The Partnership is entitled to an allocation of 70% of any profits from the venture. The infrastructure work, including roads, drainage and utility tie-ins, has been completed in the development for which the Partnership has advanced approximately $761,000. In addition, the Partnership has advanced approximately $1,765,000 for unit construction costs, taxes, fees and other costs. Construction of residential units began in February, 1996 and sales of residential units is anticipated to begin in late 1996. The Partnership leased out the majority of the office building located in Monterey, California to a publicly-traded company at the end of 1995, and lease payments began in January, 1996. The Corporate General Partner expects to be able to operate the property profitably, lease up the remaining space and place the property on the market for sale. The Partnership's investment in Real Estate Owned has increased during 1993, 1994, 1995 and 1996 due to the Corporate General Partner's policy to not acquire property subject to foreclosure on which the Partnership has a trust deed investment. In addition, the Partnership has invested substantial amounts in the development of the Carmel Valley project on which sales should begin in late, 1996. 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). In addition, the Corporate General Partner is generally able to fund loans in a shorter time frame than institutional lenders which allows it to collect a higher rate of interest from those borrowers that consider time to be an essential factor. Due to this, the net income of the Partnership has, in recent years, remained in the range of 8.5-10 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 or reduce the interest rate charged on mortgage loans which would yield 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: August 13, 1996 OWENS MORTGAGE INVESTMENT FUND a California Limited Partnership (Registrant) By: Owens Financial Group, Inc. a General Partner By: \s\ William C. Owens William C. Owens President By: \s\ Bryan H. Draper Bryan H. Draper Chief Financial Officer 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-31-1996 APR-01-1996 JUN-30-1996 1 3,717,332 0 154,668,704 0 0 158,386,036 11,936,638 0 170,322,674 673,897 0 0 0 0 169,648,777 170,322,674 3,990,590 3,990,590 0 0 235,906 0 0 3,754,684 0 3,754,684 0 0 0 3,754,684 .022 .022
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