UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 6, 2010
PMC COMMERCIAL TRUST
(Exact name of registrant as specified in its charter)
| TEXAS | 1-13610 | 75-6446078 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) | (IRS Employer Identification No.) |
17950 Preston Road, Suite 600, Dallas, TX |
75252 |
|
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (972) 349-3200
NONE
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
| o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
| o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
| o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. Results of Operations and Financial Condition.
On August 6, 2010, PMC Commercial Trust issued a press release describing, among other things,
its results of operations for the three and six months ended June 30, 2010. A copy of the press
release is attached as Exhibit 99.1 to this report. This information shall not be deemed “filed”
for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the
Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01. Financial Statements and Exhibits.
Exhibits:
| 99.1 | Press Release dated August 6, 2010. |
SIGNATURE
Pursuant to the requirements of Section 13 or 15 (d) 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.
Date: August 9, 2010
| PMC COMMERCIAL TRUST |
||||
| By: | /s/ Barry N. Berlin | |||
| Barry N. Berlin, Chief Financial Officer | ||||
Exhibit 99.1
FOR IMMEDIATE PRESS RELEASE
FOR:
|
PMC Commercial Trust | CONTACT: | Investor Relations | |||
| 17950 Preston Road, Suite 600 | 972-349-3235 | |||||
| Dallas, TX 75252 | www.pmctrust.com |
PMC Commercial Trust Announces Second Quarter Financial Results
PMC Commercial Trust
NYSE Amex (Symbol PCC)
www.pmctrust.com
NYSE Amex (Symbol PCC)
www.pmctrust.com
| Dallas, TX | August 6, 2010 |
PMC Commercial Trust (NYSE Amex: PCC) announced second quarter and year-to-date financial
results today.
Compared to Second Quarter 2009
The comparability of our financial statements between 2010 and 2009 was impacted by (1) the
consolidation of our previously off-balance sheet securitizations and (2) the accounting change
(effective January 1, 2010) for sale treatment on SBA 7(a) guaranteed loan sales. Interest income
and interest expense of our previously off-balance sheet securitizations are included in our
financial statements during 2010 compared to separate one-line revenue recognition during 2009 as
income from retained interests.
The impact to our net income related to the change in accounting rules was to defer sale
treatment on loans sold and recorded as secured borrowings on a temporary basis (loans sold for
premiums) for at least 90 days and to eliminate sale treatment on loans sold and recorded as
secured borrowings on a permanent basis (loans sold for excess spread) subsequent to December 31,
2009.
Income from continuing operations for the second quarter of 2010 decreased to $1,226,000
($0.12 per share) from $1,544,000 ($0.15 per share) during the second quarter of 2009. Net income
decreased to $1,223,000, or $0.12 per share, during the second quarter of 2010 compared to
$1,564,000, or $0.15 per share, for the second quarter of 2009. Our revenues continue to be
affected by the low variable interest rate environment.
The primary causes of the reduction in net income from the second quarter of 2009 to the
second quarter of 2010 were:
| • | A reduction in LIBOR from 1.21% during the second quarter of 2009 to 0.29% during the
second quarter of 2010. The impact to net income was approximately $225,000; and |
| • | An increase in expenses related to loans in the process of foreclosure of $117,000. We
did not have any loans in the process of foreclosure during the second quarter of 2009. |
Compared to First Quarter 2010
Our income from continuing operations decreased $41,000 to $1,226,000 ($0.12 per share) during
the second quarter of 2010 from $1,267,000 ($0.12 per share) during the first quarter of 2010. Net
income decreased by $55,000 to $1,223,000, or $0.12 per share, during the second quarter of 2010
compared to $1,278,000, or $0.12 per share, for the first quarter of 2010.
| PMC COMMERCIAL TRUST | Earnings Press Release | August 6, 2010 |
Management Remarks
Lance B. Rosemore, Chairman of the Board of Trust Managers, stated, “We continue to emphasize
SBA 7(a) lending as our primary loan product. The SBA program is most effective in minimizing use
of capital and maximizing company profitability through the sale of the government guaranteed
portion of these loans. We have grown this program from $11.0 million of fundings in 2008 to $28.0
million last year and anticipate $30 million to $40 million of fundings in 2010. In addition to our
reported earnings, we generated significant gains of $1.9 million as of June 30, 2010 that were
deferred for book purposes and recorded as gains for income tax purposes related to our secondary
market loan sales. The major factors affecting our company continue to be the economic environment,
lack of liquidity and the low level of interest rates.
“Our loan origination volume is limited based on many factors with the most significant being
the inability to qualify borrowers, lower collateral values, as well as capital markets. The
economy has reduced secondary repayment sources and borrowers’/guarantors’ credit. The value and
marketability of collateral has continued to decline. Our ability to borrow has also been
restricted. Through the continuity of our underwriting standards and adherence to time tested
corporate practices, we maintain a strong portfolio with watch list loans of only $15.5 million at
June 30th compared to $17.6 million at year-end and problem and special mention loans of
$2.3 million at June 30th compared to $3.5 million at December 31st.
“The loans receivable at quarter end totaled $238 million with over 70% being variable rate
based on either LIBOR or prime. The continued low level of variable interest rates continues to put
pressure on earnings with each 1% reduction in LIBOR reducing net income approximately $1.0 million
on an annual basis.
“We anticipate a slow economic recovery, at best. As a result we will continue to emphasize
7(a) lending until liquidity becomes more available. We are hopeful that our revolving line of
credit will be extended through 2011 at levels which will facilitate the continued growth of our
volume levels. While the portfolio remains solid, we will continue to rapidly dispose of foreclosed
properties to limit their drag on earnings. We have remained consistently profitable, not an easy
feat, considering the ongoing economic limitations.”
Interest Rate Sensitivity
| • | Approximately 55% of our retained loans at June 30, 2010 were based on LIBOR. |
| • | The base LIBOR charged to our borrowers during the second quarter of 2010 was 0.29%
compared to 1.21% during the second quarter of 2009. |
| • | The base LIBOR for the third quarter of 2010 has been set at 0.53%. |
Financial Position
| • | Our total assets increased to $257.4 million at June 30, 2010 compared to $228.2
million at December 31, 2009 and $225.4 million at June 30, 2009. |
| • | Our retained loan portfolio was $239.2 million at June 30, 2010 compared to $198.2
million at December 31, 2009 and $185.5 million as of June 30, 2009. |
| • | The increase in 2010 was primarily a result of the consolidation of $27.8 million of
loans receivable from our previously off-balance sheet securitizations. |
| • | Included in loans receivable and debt is $16.6 million relating to the guaranteed
portion of SBA 7(a) loans which have been sold. |
| • | Our serviced loan portfolio increased to $286.8 million at June 30, 2010 compared to
$273.7 million at December 31, 2009. |
2
| PMC COMMERCIAL TRUST | Earnings Press Release | August 6, 2010 |
Originations
| • | During the first half of 2010, we originated $22.9 million of SBA 7(a) loans compared
to $7.8 million in the first half of 2009. |
| • | Our pipeline of outstanding loan commitments was $9.5 million at June 30, 2010 compared
to $20.7 million at December 31, 2009. |
| • | We anticipate our 2010 fundings to be between $30 million and $40 million. |
Liquidity
| • | The amount available under the revolving credit facility is currently $30 million. The
facility, which matures December 31, 2010, had $18.9 million outstanding at June 30, 2010. |
| • | The amount available under the revolving credit facility declines over time and is
collateralized by the loans of PMC Commercial. |
Dividends
| • | A regular quarterly dividend on our common shares of $0.16 per share was declared in
March 2010 that was paid on April 12, 2010 to shareholders of record on March 31, 2010. |
| • | A regular quarterly dividend on our common shares of $0.16 per share was declared in
June 2010 that was paid on July 12, 2010 to shareholders of record on June 30, 2010. |
| • | Since our inception in 1993, we have paid over $167.0 million in dividends or $22.84
per common share. |
Financial Position Information
| June 30, | March 31, | December 31, | September 30, | June 30, | ||||||||||||||||
| 2010 | 2010 | 2009 | 2009 | 2009 | ||||||||||||||||
| (In thousands, except per share information) | ||||||||||||||||||||
Loans receivable, net |
$ | 237,882 | $ | 232,852 | $ | 196,642 | $ | 198,712 | $ | 184,415 | ||||||||||
Retained interests in transferred assets |
$ | 901 | $ | 910 | $ | 12,527 | $ | 12,413 | $ | 25,399 | ||||||||||
Total assets |
$ | 257,372 | $ | 251,033 | $ | 228,243 | $ | 229,367 | $ | 225,443 | ||||||||||
Debt |
$ | 97,045 | $ | 91,042 | $ | 68,509 | $ | 69,693 | $ | 66,245 | ||||||||||
Total equity |
$ | 151,897 | $ | 152,241 | $ | 152,458 | $ | 152,756 | $ | 152,649 | ||||||||||
Shares outstanding |
10,558 | 10,548 | 10,548 | 10,548 | 10,548 | |||||||||||||||
Net asset value per share |
$ | 14.39 | $ | 14.43 | $ | 14.45 | $ | 14.48 | $ | 14.47 | ||||||||||
3
| PMC COMMERCIAL TRUST | Earnings Press Release | August 6, 2010 |
PMC Commercial Trust and Subsidiaries
Comparative Results of Operations
Comparative Results of Operations
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||
| 2010 | 2009 | Inc (Dec) % | 2010 | 2009 | Inc (Dec) % | |||||||||||||||||||
| (Dollars in thousands, except per share information) | ||||||||||||||||||||||||
Income: |
||||||||||||||||||||||||
Interest income |
$ | 3,498 | $ | 2,785 | 26 | % | $ | 6,715 | $ | 5,636 | 19 | % | ||||||||||||
Income from retained interests in
transferred assets |
34 | 781 | (96 | %) | 75 | 1,697 | (96 | %) | ||||||||||||||||
Other income |
403 | 306 | 32 | % | 600 | 530 | 13 | % | ||||||||||||||||
Total revenues |
3,935 | 3,872 | 2 | % | 7,390 | 7,863 | (6 | %) | ||||||||||||||||
Expenses: |
||||||||||||||||||||||||
Interest |
1,011 | 790 | 28 | % | 2,000 | 1,596 | 25 | % | ||||||||||||||||
Salaries and related benefits |
970 | 999 | (3 | %) | 1,911 | 1,920 | (0 | %) | ||||||||||||||||
General and administrative |
644 | 534 | 21 | % | 1,212 | 977 | 24 | % | ||||||||||||||||
Impairments and provisions |
104 | 73 | 42 | % | (98 | ) | 280 | (135 | %) | |||||||||||||||
Total expenses |
2,729 | 2,396 | 14 | % | 5,025 | 4,773 | 5 | % | ||||||||||||||||
Income before income tax benefit
and discontinued operations |
1,206 | 1,476 | (18 | %) | 2,365 | 3,090 | (23 | %) | ||||||||||||||||
Income tax benefit |
20 | 68 | (71 | %) | 128 | 50 | 156 | % | ||||||||||||||||
Income from continuing operations |
1,226 | 1,544 | (21 | %) | 2,493 | 3,140 | (21 | %) | ||||||||||||||||
Discontinued operations |
(3 | ) | 20 | (115 | %) | 8 | 50 | (84 | %) | |||||||||||||||
Net income |
$ | 1,223 | $ | 1,564 | (22 | %) | $ | 2,501 | $ | 3,190 | (22 | %) | ||||||||||||
Basic weighted average shares outstanding |
10,550 | 10,548 | 10,549 | 10,599 | ||||||||||||||||||||
Basic and diluted earnings per share: |
||||||||||||||||||||||||
Income from continuing operations |
$ | 0.12 | $ | 0.15 | $ | 0.24 | $ | 0.30 | ||||||||||||||||
Discontinued operations |
— | — | — | — | ||||||||||||||||||||
Net income |
$ | 0.12 | $ | 0.15 | $ | 0.24 | $ | 0.30 | ||||||||||||||||
4
| PMC COMMERCIAL TRUST | Earnings Press Release | August 6, 2010 |
PMC Commercial Trust and Subsidiaries
Quarterly Operating Results
Quarterly Operating Results
| Three Months Ended | ||||||||||||||||||||
| June 30, | March 31, | Dec. 31, | Sept. 30, | June 30, | ||||||||||||||||
| 2010 | 2010 | 2009 | 2009 | 2009 | ||||||||||||||||
| (In thousands) | ||||||||||||||||||||
Revenues: |
||||||||||||||||||||
Interest income |
$ | 3,498 | $ | 3,217 | $ | 2,714 | $ | 2,830 | $ | 2,785 | ||||||||||
Income from retained interests in transferred
assets |
34 | 41 | 493 | 672 | 781 | |||||||||||||||
Other income |
403 | 197 | 960 | 735 | 306 | |||||||||||||||
Total revenues |
3,935 | 3,455 | 4,167 | 4,237 | 3,872 | |||||||||||||||
Expenses: |
||||||||||||||||||||
Interest |
1,011 | 989 | 629 | 644 | 790 | |||||||||||||||
Salaries and related benefits |
970 | 941 | 1,007 | 944 | 999 | |||||||||||||||
General and administrative |
644 | 568 | 716 | 403 | 534 | |||||||||||||||
Impairments and provisions |
104 | (202 | ) | 430 | 831 | 73 | ||||||||||||||
Total expenses |
2,729 | 2,296 | 2,782 | 2,822 | 2,396 | |||||||||||||||
Income before income tax benefit and
discontinued operations |
1,206 | 1,159 | 1,385 | 1,415 | 1,476 | |||||||||||||||
Income tax benefit |
20 | 108 | 63 | 54 | 68 | |||||||||||||||
Income from continuing operations |
1,226 | 1,267 | 1,448 | 1,469 | 1,544 | |||||||||||||||
Discontinued operations |
(3 | ) | 11 | 228 | 426 | 20 | ||||||||||||||
Net income |
$ | 1,223 | $ | 1,278 | $ | 1,676 | $ | 1,895 | $ | 1,564 | ||||||||||
5
| PMC COMMERCIAL TRUST | Earnings Press Release | August 6, 2010 |
Real Estate Investment Trust (“REIT”) Taxable Income
REIT taxable income is presented to assist investors in analyzing our performance and is a measure
that is presented quarterly in our consolidated financial statements and is one of the factors
utilized by our Board of Trust Managers in determining the level of dividends to be paid to our
shareholders.
The following reconciles net income to REIT taxable income (loss):
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
| (In thousands) | ||||||||||||||||
Net income |
$ | 1,223 | $ | 1,564 | $ | 2,501 | $ | 3,190 | ||||||||
Book/tax difference on depreciation |
(14 | ) | (14 | ) | (26 | ) | (28 | ) | ||||||||
Book/tax difference on gains related to real estate |
(2 | ) | (20 | ) | 387 | (50 | ) | |||||||||
Book/tax difference on Retained Interests, net |
— | (238 | ) | — | (411 | ) | ||||||||||
Severance payments |
(8 | ) | (1,407 | ) | (14 | ) | (1,429 | ) | ||||||||
Book/tax difference on amortization and accretion |
(25 | ) | (31 | ) | (51 | ) | (63 | ) | ||||||||
Loan valuation |
(361 | ) | 62 | (558 | ) | 154 | ||||||||||
Other book/tax differences, net |
(78 | ) | (74 | ) | (114 | ) | (58 | ) | ||||||||
Subtotal |
735 | (158 | ) | 2,125 | 1,305 | |||||||||||
Less: taxable REIT subsidiaries net loss (income),
net of tax |
60 | 154 | 293 | 140 | ||||||||||||
REIT taxable income (loss) |
$ | 795 | $ | (4 | ) | $ | 2,418 | $ | 1,445 | |||||||
Distributions declared |
$ | 1,689 | $ | 1,687 | $ | 3,377 | $ | 4,069 | ||||||||
Weighted average common shares outstanding |
10,550 | 10,548 | 10,549 | 10,599 | ||||||||||||
Forward Looking Statements
Certain matters discussed in this press release are “forward-looking statements” intended to
qualify for the safe harbors from liability established by the Private Securities Litigation Reform
Act of 1995. These forward-looking statements can generally be identified as such because the
context of the statement will include words such as the Company “expects,” “anticipates” or words
of similar import. Similarly, statements that describe the Company’s future plans, objectives or
goals are also forward-looking statements. Such forward-looking statements are subject to certain
risks and uncertainties, including the financial performance of the Company, real estate conditions
and market valuations of its shares, which could cause actual results to differ materially from
those currently anticipated. The Company’s ability to meet targeted financial and operating
results, including loan originations, operating income, net income and earnings per share depends
on a variety of economic, competitive, and governmental factors, including changes in real estate
market conditions, changes in interest rates and the Company’s ability to access capital under its
credit facility or otherwise, many of which are beyond the Company’s control and which are
described in the company’s filings with the Securities and Exchange Commission. Although the
Company believes the expectations reflected in any forward-looking statements are based on
reasonable assumptions, the Company can give no assurance that its expectations will be attained.
Shareholders, potential investors and other readers are urged to consider these factors carefully
in evaluating the forward-looking statements. The forward-looking statements made herein are only
made as of the date of this press release and the Company undertakes no obligation to publicly
update such forward-looking statements to reflect any changes in expectations, subsequent events or
circumstances.
6