-----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, NRZqc910r+wi+h+xFSugrGd9+fpNg3eUyg3OYz4dtOniuXwPE8ls73Ei98jJVn5Q UNd7vEX7FmsjbQxS4xFnwQ== 0000841501-98-000003.txt : 19980122 0000841501-98-000003.hdr.sgml : 19980122 ACCESSION NUMBER: 0000841501-98-000003 CONFORMED SUBMISSION TYPE: 10-QT/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19980121 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/A SEC ACT: SEC FILE NUMBER: 000-17248 FILM NUMBER: 98509634 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/A 1 AMENDED 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, 1997 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, 1997 AND DECEMBER 31, 1996 September 30 December 31 1997 1996 ---- ---- ASSETS Cash and cash equivalents (Note 2) $ 3,018,971 $ 11,386,661 Certificates of Deposit 1,000,000 850,000 Loans secured by trust deeds (Notes 2 and 3) 174,427,447 154,148,933 less: Allowance for loan losses (Note 2) (3,500,000) (3,500,000) Real estate held for sale (Note 6) 10,122,006 7,743,295 Investment in Limited Partnership (Note 2 and 5) 3,189,256 4,877,798 Unsecured Loan to General Partner (Note 4) 0 488,764 Interest receivable 1,388,381 1,321,493 Other assets 59,074 59,074 -------------- -------------- Total Assets $189,705,135 $177,376,018 =========== =========== LIABILITIES AND PARTNERS' CAPITAL LIABILITIES: Accrued distributions payable $ 529,138 $ 511,456 Accounts payable and accrued liabilities 24,632 24,458 Deferred income 132,742 0 ------------- ------------------ Total Liabilities 686,512 535,914 ------------- ------------- PARTNERS' CAPITAL: General partners (Note 7) 1,849,034 1,732,726 Limited partners (Note 7) 187,169,589 175,107,378 ----------- ----------- Total Partners' Capital 189,018,623 176,840,104 ----------- ----------- Total Liabilities and Partners' Capital $189,705,135 $177,376,018 =========== ===========
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, 1997 AND 1996 FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED -------------------------- ------------------------- September 30 September 30 September 30 September 30 1997 1996 1997 1996 ---- ---- ---- ---- REVENUES: Interest income on loans secured by trust deeds $ 4,572,435 $ 4,168,380 $ 13,251,545 $ 12,316,667 Gain from limited partnership (Note 5) 381,173 0 1,974,586 0 Rental income 76,644 94,368 240,160 282,705 Interest income from limited partnership (Note 5) 67,842 0 274,556 0 Other interest income 83,044 60,491 367,053 156,924 Other income 107,848 0 158,077 0 ----------- ----------- ----------- ----------- Total revenues $ 5,288,986 $ 4,323,239 $ 16,265,977 $ 12,756,296 ----------- ----------- ----------- ----------- OPERATING EXPENSES: Management Fees paid to General Partner (Note 9) $ 895,820 $ 121,945 $ 3,121,387 $ 338,982 Servicing Fees paid to General Partner (Note 9) 99,006 107,115 337,664 275,394 Promotional interest (Note 9) 19,203 20,414 59,856 44,580 Administrative 14,299 14,129 42,557 42,387 Legal and accounting 60 4,671 77,914 82,568 Real Estate Owned expenses 87,530 215,317 323,322 710,747 Other 0 0 8,843 10,869 ----------- ----------- ----------- ----------- Total operating expenses $ 1,115,918 $ 483,591 $ 3,971,543 $ 1,505,527 ----------- ----------- ----------- ----------- Net income $ 4,173,068 $ 3,839,648 $ 12,294,434 $11,250,769 =========== =========== =========== =========== Net income allocated to general partner $ 40,715 $ 37,880 $ 119,496 $ 110,948 =========== =========== =========== =========== Net income allocated to limited partners $ 4,132,353 $ 3,801,768 $ 12,174,938 $11,139,821 =========== =========== =========== =========== Net income per limited partnership unit (Note 8) $.022 $.022 $.065 $.065 ==== ==== ==== ====
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, 1997 and 1996 September 30 September 30 1997 1996 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 12,294,434 $ 11,250,769 Adjustments to reconcile net Income to net cash provided by operating activities (Increase) decrease in interest receivable (66,888) 22,187 Increase (decrease) in accrued distribution payable 17,682 23,635 Increase (decrease) in accounts payable/accrued liability 174 (99,884) (Increase) decrease in other assets 0 (59,074) Increase (decrease) in deferred income 132,742 96,640 Increase (decrease) in other liabilities 0 8,290 Depreciation 0 21,735 ------------ ------------ Total adjustment 83,710 13,529 ------------ ------------ Net cash provided by operating activities 12,378,144 11,264,298 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of loans secured by trust deeds (63,406,952) (41,173,774) Principal collected 1,495,912 3,855,124 Loan payoffs 41,632,527 30,831,719 Investments in real estate (2,378,711) (3,690,666) Investment in limited partnership 1,688,542 0 Unsecured loan to General Partner 488,764 239,774 Investments in Certificates of Deposit (net) (150,000) (150,000) ------------- ------------- Net cash provided by (used in) investing activities (20,629,918) (10,087,793) ------------ ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from sale of partnership Units 13,176,560 12,923,304 Cash distributions (4,587,638) (4,552,492) Capital withdrawals (8,704,838) (10,599,501) ------------- ------------ Net cash provided by (used in) financing activities (115,916) (2,228,689) ------------- ------------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (8,367,690) (1,057,014) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 11,386,661 5,056,358 ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,018,971 $ 2,717,332 ============= ============
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, 1997 (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 187,365,609 at September 30, 1997. As of September 30, 1997, 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) General The unaudited interim financial statements furnished reflect all adjustments which are normal and recurring in nature and, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. (b) 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. Effective 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. In June 1996, the Financial Accounting Standards Board issued Statement No. 125, Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities. Statement No. 125 provides accounting and reporting standards for transfers and servicing of financial assets and extinguishment of liabilities and provides consistent standards for distinguishing transfers of financial assets that are sales from transfers that are secured borrowings. The Partnership was required to implement Statement 125 effective January 1, 1997. Management believes that the implementation of Statement 125 does not have a material impact on the financial statements. 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. (c) Allowance for Loan Losses The Partnership maintains an allowance for loan losses equal to $3,500,000 as of September 30, 1997. Management of the Partnership believes that based on historical experience and a review of the loans and their respective collateral, the allowance for loans losses is adequate in amount. Through October 31, 1994, OFG purchased the Partnership's receivables for delinquent interest on loans originated prior to May 1, 1993 from the Partnership on a non-recourse basis. However, effective November 1, 1994, OFG discontinued its practice of purchasing interest receivable for certain loans. The outstanding balance of all loans delinquent greater than ninety days was $7,952,000 and $11,348,000 as of September 30, 1997 and December 31, 1996, respectively. 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 when the payment of principal or interest is ninety days past due, unless OFG purchases the interest receivable from the Partnership. As of September 30, 1997 and December 31, 1996, of the aforementioned loans, those totaling $6,465,000 and $10,012,000, respectively, were classified as non-accrual loans. OFG advances certain payments to the Partnership on behalf of borrowers, such as property taxes, mortgage interest pursuant to senior indebtedness, and development costs. Purchases of interest receivable and payments made on loans by OFG for the nine months ended September 30, 1997, but not collected as of September 30, 1997, totaled approximately $252,000. During the nine months ended September 30, 1997 OFG purchased the Partnership's interest in two loans in the amount of approximately $340,000. (d) 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. (e) Certificates of Deposit Certificates of Deposit are held with various financial institutions with original maturities of up to one year. (f) Investment in Limited Partnership The Partnership accounts for its investment in limited partnership as investment in real estate. The investment in limited partnership is carried at the lower of cost or estimated fair value, less estimated costs to sell. The Partnership increases its investment by advances made to the limited partnership. Any profit generated from the investment in limited partnership is recorded as a gain of sale of real estate. (g) 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. Effective January 1, 1996, the Partnership adopted the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 121 (FAS 121), Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of. The adoption of FAS 121 did not result in a material impact on the Partnership's financial position. (h) 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, 1997 and December 31, 1996 were as follows: September 30 December 31 1997 1996 ---- ---- Income-producing properties $167,244,189 $145,999,756 Single-family residences 2,089,320 3,935,546 Unimproved land 5,093,938 4,213,631 ----------- ----------- $174,427,447 $154,148,933 =========== =========== First mortgages $160,945,819 $139,542,698 Second mortgages 12,778,066 14,006,235 Third mortgages or all-inclusive deeds of trust 703,562 600,000 ----------- ----------- $174,427,447 $154,148,933 =========== =========== Loan maturities range from 1997 to 2015, with approximately 42% ($73,289,000) of the loan principal outstanding at September 30, 1997 maturing by December 31, 1998. These maturities include approximately $22,934,000 in loans which are past maturity as of September 30, 1997, of which approximately $3,710,000 represents loans for which interest payments are delinquent over 90 days. In addition, of the $22,934,000 in loans which were past maturity as of September 30, 1997, the Corporate General Partner has entered into forebearance agreements with the borrowers on approximately $3,200,000 of such loans thereby informally extending the maturity dates. The Partnership refinanced loans totaling approximately $15,759,000 and $5,400,000 during the nine months ended September 30, 1997 and the year ended December 31, 1996, respectively, thereby extending the maturity dates of such loans. The Partnership's total investment in loans delinquent over ninety days is approximately $7,952,000 and $11,348,000 at September 30, 1997 and December 31, 1996, respectively. As of September 30, 1997 and December 31, 1996, OFG was purchasing the delinquent interest receivable on loans totaling approximately $1,487,000 and $1,336,000, respectively. As of September 30, 1997 and December 31, 1996, the Partnership's loans secured by deeds of trust on real property collateral located in Northern California totaled approximately 63% ($110,619,000) and 73% ($113,204,000), respectively of the loan portfolio. The Northern California region (which includes the following counties and all counties north: Monterey, Fresno, Kings, Tulare and Inyo) is a large geographic area which has a diversified economic base. The amount of loans secured by deeds of trust on real property collateral in Northern California in relation to the total amount of deeds of trust held by the Partnership has decreased in recent periods due to the Corporate General Partner's increased loan activity in other areas, most notably Southern California and the Pacific Northwest. 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 carrying amount of the loan balance and to record a deed of trust on the underlying property. (4) UNSECURED LOANS DUE FROM GENERAL PARTNER OFG has historically purchased certain delinquent loans subject to foreclosure and Real estate held for sale of the Partnership using the Unsecured Loan due from General Partner to finance the purchases. OFG is under no obligation to enter into such transactions with the Partnership. The balance of the unsecured loan due from OFG has been reduced by payments and totals $0 and $488,764 as of September 30, 1997 and December 31, 1996, respectively. The note bears interest at 8% and is due on demand. (5) INVESTMENT IN LIMITED PARTNERSHIP In 1993, the Partnership foreclosed on a loan in the amount of $600,000 secured by a junior lien on 30 residential lots located in Carmel Valley, California, and, in 1994, paid off the senior loan in the amount of $500,000. The Partnership incurred additional costs of $502,768 to protect its investment, increasing the carrying value of the lots to $1,602,798. The Partnership began to develop the lots and incurred an additional $671,118 in costs during 1995. During 1996, the Partnership contributed the lots into WV-OMIF Partners, L.P. (WV-OMIF Partners), a limited partnership formed between the Partnership and Wood Valley Development, Inc. (Woodvalley). The Partnership also provides advances to WV-OMIF Partners to develop and construct single family homes on the 30 lots contributed and had made net additional advances of approximately $2,346,000 from January 1, 1996 through September 30, 1997. The Partnership is entitled to receive interest at a rate of prime plus 2% on the advances to WV-OMIF Partners. WV-OMIF Partners sold one home in 1996 and distributed approximately $479,000 to OMIF, $187,000 representing income and the balance return of capital. During the nine months ended September 30, 1997, WV-OMIF Partners sold 14 homes and distributed approximately $6,511,000 to OMIF, $2,249,000 representing income and the balance return of capital. In addition, the Partnership receives reimbursements from a limited partnership formed between the Corporate General Partner and Woodvalley to purchase 34 lots, which are contiguous and interspersed with those lots owned by WV-OMIF Partners, from an unrelated entity and construct single family homes. During the nine months ended September 30, 1997, this limited partnership reimbursed the Partnership approximately $629,000 for costs incurred by the Partership which provided benefit to all lots, not just those owned by WV-OMIF Partners. (6) REAL ESTATE HELD FOR SALE Real estate held for sale at September 30, 1997 consists of the following properties acquired through foreclosure from January 1, 1993 through September 30, 1997: Warehouse, Merced, California, net of valuation allowance of $350,000 as of September 30, 1997 $ 650,000 70% interest in undeveloped land, Vallejo, California 579,662 Commercial lot, Sacramento, California, net of valuation allowance of $250,000 as of September 30, 1997 299,828 Office building, Monterey, California 2,102,548 Undeveloped land, Los Gatos, California 578,742 Commercial building, Sacramento, California 550,000 Residential lots, Sonora, California 1,857,968 Residential lots, Ione, California 2,829,193 Self storage, Oakland, California 444,065 Undeveloped land, Reno, Nevada 230,000 ----------- Total $10,122,006 =========== Real estate held for sale has generally increased in recent years due to the Corporate General Partner's policy to not purchase properties acquired through foreclosure or loans in the process of foreclosure from the Partnership. The Partnership disposed of two properties at a slight profit and foreclosed on two additional loans in the nine months ended September 30, 1997. This activity, in addition to other capitalized items, increased the balance of Real estate held for sale as of September 30, 1997 by approximately $2,379,000 as compared to December 31, 1996. (7) 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 OFG 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, 1997 and October, 1997 on their capital balances at December 31, 1996 and September 30, 1997, 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 to purchase additional limited partnership units. Such reinvested distributions totaled $2,565,758 and $2,296,343 for the three months ended September 30, 1997 and 1996, respectively and $7,550,799 and $6,698,287 for the nine months ended September 30, 1997 and 1996, 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 may be withdrawn during any calendar year except upon dissolution of the Fund. (c) Promotional Interest of General Partners OFG contributes cash to the Partnership's capital in the amount of 0.5% of the limited partners aggregate capital contributions and, together with its promotional interest, OFG has an interest equal to 1% of the limited partners contributions. This promotional interest of up to 1/2 of 1% is expensed monthly by the Partnership and credited as a contribution to the general partners capital account as additional compensation. As of September 30, 1997, the general partners had made cash capital contributions of $944,699 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 $19,203 and $20,414 for the three months ended September 30, 1997 and 1996, respectively and $59,856 and $44,580 for the nine months ended September 30, 1997 and 1996, 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 $944,698 at September 30, 1997), 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, 1997 and December 31, 1996 were approximately $3,807,000 and $3,400,000, 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 $1,388,381 and $1,321,493 at September 30, 1997 and December 31, 1996, 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 $99,000 and $107,000 for the three months ended September 30, 1997 and 1996, respectively, and $338,000 and $275,000 for the nine months ended September 30, 1997 and 1996, respectively. Management fee income to OFG earned on loans invested in by the Fund approximated $896,000 and $122,000 for the three months ended September 30, 1997 and 1996, respectively, and $3,121,000 and $339,000 for the nine months ended September 30, 1997 and 1996, 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 $145,000 and $55,000 for the three months ended September 31, 1997 and 1996, respectively and approximately $258,000 and $147,000 for the nine months ended September 30, 1997 and 1996, respectively. OFG originates or purchases all loans the Partnership is invested in and receives an investment evaluation fee payable by borrowers. Such fees, payable by borrowers, earned by OFG amounted to approximately $706,000 and $424,000 for the three months ended September 30, 1997 and 1996, respectively, and approximately $1,983,000 and $1,340,000 for the nine months ended September 30, 1997 and 1996, respectively. Included in loans secured by trust deeds at September 30, 1997 and December 31, 1996 are notes totaling $2,121,332 and $1,942,332, respectively, which are secured by properties owned by OFG. These loans were originated when OFG purchased certain Real estate held for sale or trust deed subject to foreclosure from the Partnership. The loans bear interest at 8% per annum and are due on demand. The Partnership received interest income of approximately $42,000 and $133,000 for the three and nine months ended September 30, 1997, respectively and approximately $72,000 during the year ended December 31, 1996 from OFG under loans secured by trust deeds and the unsecured loan due from 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 nine month periods. These amounts were $188,928,000 and $173,549,000 for the three months ended September 30, 1997 and 1996, respectively and $185,346,000 and $169,302,000 for the nine months ended September 30, 1997, respectively. Item 2. Management's Discussion and Ana1ysis of Financial Condition and Results of Operations Results of Operations The net income increases of approximately $333,000 (8.7%) for the three months ended September 30, 1997 as compared to the three months ended September 30, 1996 and $1,044,000 (9.3%) for the nine months ended September 30, 1997 as compared to the nine months ended September 30, 1996 were primarily attributable to the increased income generated from the sale of residential units constructed and owned by the WV-OMIF limited partnership which generated $381,000 and $1,975,000 in net income for the three and nine months ended September 30, 1997, respectively as compared to $0 for both the three and nine months ended September 30, 1996. Other factors that contributed to additional earnings were interest income of approximately $68,000 and $275,000 from WV-OMIF for the three and nine months ended September 30, 1997, respectively, as compared to $0 for both the three and nine months ended September 30, 1996; income from the disposition of certain Real estate held for sale of approximately $108,000 and $157,000 for the three and nine months ended September 30, 1997, respectively, as compared to $0 for the three and nine months ended September 30, 1996; an increase in average trust deeds and notes receivable held by the Partnership from approximately $155,699,000 and $156,519,000 for the three and nine months ended September 30, 1996, respectively, to approximately $172,722,000 and $165,799,000 for the three and nine months ended September 30, 1997, respectively, and a decrease in non-performing loans held by the Partnership on which the Corporate General Partner was not purchasing delinquent interest from 7.29% to 3.70% of the loan portfolio as of September 30, 1996 and 1997, respectively. The average net yield of the Partnership decreased from 8.79% for the three and nine months ended September 30, 1996, respectively, to 8.69% for the three and nine months ended September 30, 1997, 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 held for sale. These variations in yield are minor and not considered significant. Although there has recently been only slight variations in the net yield of the Partnership, its total revenues increased by approximately $966,000 (22.3%) for the three months ended September 30, 1997 as compared to the three months ended September 30, 1996 and by approximately $3,510,000 (27.5%) for the nine months ended September 30, 1997 as compared to the nine months ended September 30, 1996. These increases, as above, were primarily due to the ongoing sales of residential units constucted by the WV-OMIF limited partnership, interest income from advances to WV-OMIF, income from the disposition of certain Real estate held for sale, increased balances of interest earning mortgage assets and decreases in non-performing loans. The increase in total revenues did not translate to comparable increases in net yield as the Corporate General Partner's payments for management and servicing fees increased from approximately $229,000 and $614,000 for the three and nine months ended September 30, 1996, respectively, to approximately $995,000 and $3,459,000 for the three and nine months ended September 30, 1997, respectively. The fees collected by the Corporate General Partner continue to be within the limits dictated by the Partnership agreement. Portfolio Review The number of Partnership mortgage investments decreased from 232 to 220 and the average loan balance increased from approximately $678,000 to $793,000 as of September 30, 1996 and 1997, respectively. The average mortgage investment made by the Partnership during the period of October 1, 1996 through September 30, 1997 was approximately $1,112,000 showing a trend of increasing average mortgage investments. These average loan increases reflect the Partnership's ability to invest in larger mortgage loans meeting the Partnership's objectives. The Corporate General Partner had previously purchased all interest receivable of 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 purchase delinquent interest or principal. As of September 30, 1997 anbd 1996, there were approximately $6,465,000 and $11,470,000, respectively, in loans held by the Partnership on which payments were more than 90 days delinquent and on which such delinquent interest was not being purchased by the Corporate General Partner. The Corporate General Partner purchased approximately $73,000 and $71,000 in delinquent interest receivables of the Partnership in the nine months ended September 30, 1997 and 1996, respectively. that had not been collected from the borrower by the Corporate General Partner as of September 30, 1997 or 1996. Approximately $7,952,000 (4.6%) and $11,348,000 (7.4%) of the loans invested in by the Fund were more than 90 days delinquent in payment as of September 30, 1997 and December 31, 1996, respectively. Of these amounts, approximately $6,695,000 (3.8%) and $5,046,000 (3.3%) were in the process of foreclosure as of September 30, 1997 and December 31, 1996, respectively. Although the amount and percentage of mortgage investments on which payment is delinquent 90 days or more has been decreasing, $3,286,000 of loans classified as such as of December 31, 1996 were foreclosed on by the Partnership and held as Real estate held for sale as of September 30, 1997. A loan loss reserve in the amount of $3,500,000 was maintained on the books of the Partnership as of September 30, 1997 and December 31, 1996. As of this date the General Partners have determined that this loan loss reserve is adequate. As of September 30, 1997 and December 31, 1996 approximately 63% and 73%, 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, 1997 and December 31, 1996: Principal Amount September 30 December 31 1997 1996 ---- ---- (000) (000) Single-Family Dwellings $ 2,089 $ 3,936 Income-Producing Property 167,244 146,000 Unimproved Land 5,094 4,213 -------- -------- $ 174,427 $ 154,149 ======== ======== First Mortgages $ 160,946 $ 139,543 Second Mortgages 12,778 14,006 Third Mortgages or All-inclusive Deeds of Trust 703 600 -------- -------- $ 174,427 $ 154,149 ======== ======== 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 September 30, 1997: Delinquent Year Principal Interest Foreclosed $1,025,581 $150,295 1993 58,000 4,417 1994 2,501,308 252,810 1995 2,320,000 86,981 1996 340,400 26,063 1997 The Corporate General Partner has purchased all delinquent interest receivable from the Partnership on the loans foreclosed on in 1993, 1994 and 1995. The delinquent interest on the loans foreclosed on in 1996 and 1997 was never purchased from the Partnership by the Corporate General Partner. Of these foreclosed loans, the Partnership held four mortgages totaling $2,121,332 as of September 30, 1997 on which the Corporate General Partner was making payments which were current. Real Estate Owned The Partnership currently holds title to the following ten properties which were foreclosed on from January 1, 1993 through September 30, 1997:
Fund Additional Loan Capitalized Delinquent Description Amount Costs Interest Light Industrial Warehouse Merced, CA $ 1,000,000 (1) $ 0 $ 175,333 Commercial Lot/Residential Development Vallejo, CA $ 525,000 $ 54,662 $ 83,949 Commerical Lot Sacramento, CA $ 500,000 (2) $ 49,828 $ 36,500 Office Building Monterey, CA $ 550,000 $ 1,581,165 (3) $ 30,077 Undeveloped Land Los Gatos, CA $ 571,853 $ 6,889 $ 134,878 Commercial Building Sacramento, CA $ 550,000 $ 0 $ 30,817 Residential Lots Sonora, CA $ 1,683,000 $ 174,968 $ 363,636 Undeveloped Land Reno, NV $ 230,000 $ 0 $ 0 Residential Lots Ione, CA $ 2,821,675 $ 0 $ 1,032,637 Self Storage Oakland, CA $ 464,000 $ 0 $ 209,612 (1) The book value of this asset is net of a loss allowance of $350,000. (2) The book value of this asset is net of a loss allowance of $250,000. (3) 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 in Merced, California, the office building in Monterey, California, the residential lots in Ione, California and the self storage property in Oakland, Calfornia, these properties do not currently generate revenue and, as such, contribute to the Real estate held for sale operating at a deficit. This deficit has decreased in recent periods as the loss from operations of Real estate held for sale has decreased from approximately $121,000 and $428,000 for the three and nine months ended September 30, 1996, respectively, to approximately $11,000 and $83,000 for the three and nine months ended September 30, 1997, respectively. With the possible exception of the light industrial warehouse located in Merced, California and the commercial land located in Sacramento, 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. Since 1993, the Partnership's investment in Real estate held for sale has increased due to the Corporate General Partner's policy to generally not acquire property subject to foreclosure on which the Partnership has a trust deed investment. During 1997, the Partnership disposed of two properties it held as of December 31, 1996 and acquired two properties through foreclosure. Real estate held for sale has increased by $2,379,000 from December 31, 1996 to September 30, 1997, a 31% increase. Development Limited Partnership In 1993, the Partnership foreclosed on a $600,000 loan secured by a junior lien on 30 residential lots located in Carmel Valley, California, and, in 1994, paid off the $500,000 senior loan. In 1995, the Partnership became the sole limited partner in a limited partnership ("WV-OMIF Partners"), formed with an unrelated developer/builder as the sole general partner, for the development and buildout of these lots. In exchange for its interest in this development limited partnership, the Partnership in 1996 contributed the lots to the WV-OMIF Partners and agreed to make additional advances to fund the development costs. As of September 30, 1997, the Partnership had advanced development and other capitalized costs, net of principal distributions, aggregating $2,089,000, and the total amount invested in or advanced by the Partnership equaled $3,189,000, net of distributions, through such date. Under the terms of the agreement governing the WV-OMIF Partners, the Partnership is entitled to receive certain distributions of cash before the developer receives any funds. The cash received by the development limited partnership from sales of developed lots is distributed as follows: (i) to third parties (e.g., contractors, taxing authorities, etc.) for amounts incurred by the development limited partnership and related to the lots sold; (ii) to the Partnership, in an amount equal to $70,000 per lot sold; (iii) to the Partnership, in an amount equal to a pro rata portion of the development costs advanced, plus interest at prime plus 2%; (iv) to the Partnership, in an amount equal to other out-of-pocket expenses incurred by Partnership with respect to the lots sold, plus interest at prime plus 2%; and (v) the balance, if any, 70% to the Partnership and 30% to the developer. As of September 30, 1997, construction had been completed or commenced on substantially all lots owned by WV-OMIF Partners. WV-OMIF Partners sold one home in 1996 and distributed approximately $479,000 to OMIF, $187,000 representing income and the balance return of capital. During the three months ended September 30, 1997, WV-OMIF Partners sold five homes and distributed approximately $2,389,000 to OMIF, $759,000 representing income and the balance representing return of capital. During the nine months ended September 30, 1997, WV-OMIF Partners sold 14 homes and distributed approximately $6,511,000 to OMIF, $2,233,000 representing income and the balance representing return of capital. Deposits have been received on the lots under construction, but there can be no assurances the Partnership will realize similar amounts on the sales of these lots. The Corporate General Partner has entered into a joint venture with the same unrelated developer/builder to purchase and build out up to 34 lots that are contiguous to and interspersed with the lots in Carmel Valley owned by WV-OMIF. The Partnership does not have any direct or indirect interest in these 34 lots nor do any of these lots provide any security for the original Partnership loan which was foreclosed on in 1993. As sales of these 34 lots occur, the Partnership will be reimbursed on a pro rata basis, without interest, for development, infrastructure and soft costs incurred by WV-OMIF in the initial stages of its development of the lots. As of September 30, 1997, the development limited partnership owed the Partnership $121,695 in development costs. 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 8.5-9.0 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: November 12, 1997 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-31-1997 JUL-01-1997 SEP-30-1997 1 4,018,971 0 175,815,828 (3,500,000) 0 176,334,799 13,370,336 0 189,705,135 686,512 0 0 0 0 189,018,623 189,705,135 5,288,986 5,288,986 0 0 1,115,918 0 0 4,173,068 0 4,173,068 0 0 0 4,173,068 .022 .022
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