PMC Commercial Trust Announces Third Quarter Financial Results

• Press Release
• Source: PMC Commercial Trust
• On 9:00 am EST, Monday November 9, 2009

DALLAS, Nov. 9 /PRNewswire-FirstCall/ -- PMC Commercial Trust (NYSE Amex: PCC) announced third quarter financial results today.

Compared to Third Quarter 2008

Income from continuing operations for the third quarter of 2009 increased to $1,469,000 ($0.14 per share) from $587,000 ($0.06 per share) during the third quarter of 2008. Net income increased to $1,895,000, or $0.18 per share, during the third quarter of 2009 compared to $603,000, or $0.06 per share, for the third quarter of 2008. Our income from continuing operations and net income were significantly impacted during the three months ended September 30, 2008 for a one-time charge of $1,573,000 related to cost reduction initiatives. Excluding this one-time charge, net income for the third quarter of 2008 was $2,176,000 or $0.20 per share.

Compared to Second Quarter 2009

Our income from continuing operations decreased $75,000 to $1,469,000 ($0.14 per share) during the third quarter of 2009 from $1,544,000 ($0.15 per share) during the second quarter of 2009. Net income increased by $331,000 to $1,895,000, or $0.18 per share, during the third quarter of 2009 compared to $1,564,000, or $0.15 per share, for the second quarter of 2009.

Management Remarks

Lance B. Rosemore, Chairman of the Board of Trust Managers, stated; "I continue to be proud of our employees and their commitment to maintain profitability during these challenging economic times. As a result of the lack of liquidity in the marketplace, we are increasing the utilization of our SBA 7(a) license. LIBOR continues to keep current yield levels on our loan portfolio at all-time lows with the impact during 2009 estimated to be close to $3.0 million. In a more normalized interest rate environment, our 2009 profitability would have been more comparable to that of 2008.

"While our portfolio continues to perform well, we have seen the weakened economy impact some of our borrowers and we have taken possession of two properties through foreclosure. We anticipate the weakness to continue for at least several quarters. Our loans are typically real estate secured and, in most cases, the value of the underlying collateral should cover our principal exposure. However, during 2009 we have increased our reserves for loan losses in response to the current economic conditions.

"We currently have a $45 million short-term credit facility and have had a maximum outstanding of just under $30 million during 2009. Since the facility is scheduled to mature at the end of 2009, we are negotiating with our lender to extend our facility through 2010. We anticipate that the facility will be extended with a reduction in borrowing availability during 2010 while providing liquidity for us to continue funding loans using our SBA 7(a) platform. We anticipate SBA 7(a) loan originations during 2010 will range between $30 million and $40 million."

Financial Results

Third Quarter of 2009 vs. Third Quarter of 2008

In addition to the one-time charge during the third quarter of 2008 described above, other significant changes included:

• We recorded non-cash gains on sales of real estate (included in discontinued operations) of $592,000 during the third quarter of 2009 due to income recognition on previously deferred gains;
• Our overhead (salaries and related benefits and general and administrative) decreased $485,000 due primarily to our 2008 cost reduction initiatives and a reduction in legal fees;
• Our interest income, net of interest expense, decreased $462,000 due primarily to the decline in LIBOR;
• During the third quarter of 2009 we recorded permanent impairments on our retained interests in transferred assets ("Retained Interests") of $438,000 while there were no impairments recorded in the third quarter of 2008;
• Income from Retained Interests decreased $375,000 due primarily to a reduction in our weighted average Retained Interests of 28% partially offset by an increase in unanticipated prepayment fees of $106,000;
• Other income increased $303,000 due primarily to premium income recognized on the sale of the guaranteed portion of our SBA 7(a) loans; and
• Provision for loan losses, net, increased $291,000 due to current market conditions.

Third Quarter of 2009 vs. Second Quarter of 2009

Significant changes included:

• Our other income increased $429,000 due primarily to premium income recognized on the sale of the guaranteed portion of our SBA 7(a) loans;
• During the third quarter of 2009 we recorded permanent impairments on our Retained Interests of $438,000 compared to $17,000 of impairments recorded in the second quarter of 2009; and
• Provision for loan losses, net, increased $337,000 due to increases in both our specific and general reserves due primarily to devaluations of real estate collateral underlying our limited service hospitality loans.

Nine Months Ended September 30, 2009 vs. Nine Months Ended September 30, 2008

In addition to the one-time charge during the third quarter of 2008 described above, other significant changes included:

• For the nine months ended September 30, 2009 our income from continuing operations decreased to $4,609,000 ($0.44 per share) from $6,737,000 ($0.63 per share) during the nine months ended September 30, 2008; and
• For the nine months ended September 30, 2009, net income decreased to $5,805,000, or $0.48 per share, compared to $7,515,000, or $0.70 per share, for the nine months ended September 30, 2008.

Excluding the one-time charge, our net income for the nine months ended September 30, 2008 was $9,088,000 or $0.84 per share.

Interest Rate Sensitivity

• Approximately 67% of our retained loans at September 30, 2009 were based on LIBOR.
• The base LIBOR charged to our borrowers during the third quarter of 2009 was 0.60% compared to 2.79% during the third quarter of 2008.
• The base LIBOR for the fourth quarter of 2009 has been set at 0.29%. During the fourth quarter of 2008 the base LIBOR was 3.88%.
• The average base LIBOR charged to our borrowers during the nine months ended September 30, 2009 was 1.08% compared to 3.41% during the nine months ended September 30, 2008.

Financial Position

• Our total assets were relatively unchanged at $229.4 million at September 30, 2009 compared to $227.5 million at December 31, 2008 and $228.3 million at September 30, 2008.
• Our total serviced loan portfolio was $267.9 million at September 30, 2009 down from $275.5 million at December 31, 2008 and $287.3 million as of September 30, 2008.
• Our outstanding retained loan portfolio was $200.0 million at September 30, 2009 compared to $180.6 million at December 31, 2008 and $186.7 million as of September 30, 2008.

Originations

• During the third quarter of 2009, we originated $8.4 million of SBA 7(a) loans compared to $2.5 million in the third quarter of 2008.
• During the first nine months of 2009, we originated $16.2 million of SBA 7(a) loans compared to $7.0 million during the first nine months of 2008.
• Our pipeline of outstanding loan commitments has increased to $23.2 million at September 30, 2009 from $10.0 million at December 31, 2008.
• We increased our estimate of 2009 fundings by approximately $5 million and now anticipate our 2009 fundings to be between $25 million and $35 million.
• Depending on liquidity, we expect that fundings during 2010 will be between $30 million and $40 million.

Liquidity

• Our $45 million uncollateralized revolving credit facility, which matures December 31, 2009, had $23.9 million outstanding at September 30, 2009.
• We are currently negotiating to extend the maturity of our revolving credit facility to December 31, 2010.
• We anticipate that the aggregate amount available under our revolving credit facility will decrease and the costs are expected to increase.
• There can be no assurance that we will be able to extend or replace our revolving credit facility.

Dividends

• Regular quarterly dividends on our common shares of $0.545 have been declared during 2009 which includes the regular quarterly dividend declared in September 2009 of $0.16 per share that was paid on October 13, 2009 to shareholders of record on September 30, 2009.
• It is presently anticipated that the dividend to be declared in the fourth quarter will be consistent with the $0.16 per share dividend paid in October 2009.
• There has been no guidance provided by the Board of Trust Managers for dividends to be declared in 2010.
• Since our inception in 1993, we have paid over $162.5 million in dividends or $22.36 per common share.

                        Financial Position Information

                   September 30, June 30, March 31, December 31, September 30,
                        2009       2009      2009       2008         2008
                      --------   --------   --------   --------    --------
                          (In thousands, except per share information)
    Loans receivable,
     net              $198,712   $184,415   $193,194  $179,807     $186,190
    Retained interests
     in transferred
     assets            $12,413    $25,399    $24,742   $33,248      $33,384
    Total assets      $229,367   $225,443   $233,558  $227,524     $228,314
    Debt               $69,693    $66,245    $71,574   $61,814      $60,585
    Total
     beneficiaries'
     equity           $152,756   $152,649   $153,023  $154,362     $156,793
    Shares
     outstanding        10,548     10,548     10,587    10,695       10,782
    Net asset value
     per share          $14.48     $14.47     $14.45    $14.43       $14.54

                       PMC Commercial Trust and Subsidiaries
                         Comparative Results of Operations

                               Nine Months Ended          Three Months Ended
                                 September 30,               September 30,
                           -------------------------    ----------------------
                                              Inc                       Inc
                           2009       2008   (Dec) %     2009    2008  (Dec) %
                           ----       ----  --------     ----    ---- --------
                          (Dollars in thousands, except per share information)
    Income:
    Interest income       $8,466    $10,886    (22%)   $2,830  $3,601    (21%)
    Income from retained
     interests in
     transferred assets    2,369      5,243    (55%)      672   1,047    (36%)
    Other income           1,265      1,587    (20%)      735     432     70%
                          ------     ------    ----     -----   -----    ----
       Total revenues     12,100     17,716    (32%)    4,237   5,080    (17%)
                          ------     ------    ----     -----   -----    ----

    Expenses:
    Interest               2,240      3,163    (29%)      644     953    (32%)
    Salaries and related
     benefits              2,864      3,752    (24%)      944   1,161    (19%)
    General and
     administrative        1,380      1,794    (23%)      403     671    (40%)
    Severance and related
     benefits                  -      1,573   (100%)        -   1,573   (100%)
    Impairments and
     provisions            1,111        491    126%       831     102    715%
                           -----     ------    ----     -----   -----    ----
       Total expenses      7,595     10,773    (29%)    2,822   4,460    (37%)
                           -----     ------    ----     -----   -----    ----

    Income before income
     tax benefit (provision)
     and discontinued
     operations            4,505      6,943    (35%)    1,415     620    128%

    Income tax benefit
     (provision)             104       (206)  (150%)       54     (33)  (264%)
                           -----     ------  ------      ----    ----   -----

    Income from
     continuing
     operations            4,609      6,737    (32%)    1,469     587    150%

    Discontinued
     operations              476        778    (39%)      426      16  2,563%
                          ------     ------    ----    ------    ----  ------

    Net income            $5,085     $7,515    (32%)   $1,895    $603    214%
                          ======     ======   =====    ======    ====  ======

    Basic weighted
     average shares
     outstanding          10,582     10,771            10,548  10,782
                          ======     ======            ======  ======

    Basic and diluted
     earnings per share:
      Income from
       continuing
       operations          $0.44      $0.63             $0.14   $0.06
      Discontinued
       operations           0.04       0.07              0.04       -
                           -----      -----             -----   -----
      Net income           $0.48      $0.70             $0.18   $0.06
                           =====      =====             =====   =====

                      PMC Commercial Trust and Subsidiaries
                         Quarterly Operating Results

                                          Three Months Ended
                         ---------------------------------------------------
                          Sept. 30,  June 30,  March 31, Dec. 31,  Sept. 30,
                            2009      2009       2009      2008      2008
                          --------   -------   --------  --------  ---------
                                            (In thousands)
    Revenues:
      Interest income      $2,830    $2,785    $2,851    $3,654    $3,601
      Income from retained
       interests in
       transferred assets     672       781       916     1,122     1,047
      Other income            735       306       224       625       432
                            -----     -----     -----     -----     -----
    Total revenues          4,237     3,872     3,991     5,401     5,080
                            -----     -----     -----     -----     -----
    Expenses:
      Interest                644       790       806       836       953
      Salaries and related
       benefits               944       999       921       953     1,161
      General and
       administrative         403       534       443       510       671
      Severance and related
       benefits                 -         -         -       235     1,573
      Impairments and
       provisions             831        73       207       469       102
                            -----     -----     -----     -----     -----
    Total expenses          2,822     2,396     2,377     3,003     4,460
                            -----     -----     -----     -----     -----

    Income before income
     tax benefit (provision)
     and discontinued
     operations             1,415     1,476     1,614     2,398       620

    Income tax benefit
     (provision)               54        68       (18)     (113)      (33)
                            -----     -----     -----     -----       ---
    Income from continuing
     operations             1,469     1,544     1,596     2,285       587

    Discontinued operations   426        20        30         6        16
                           ------    ------    ------    ------      ----
    Net income             $1,895    $1,564    $1,626    $2,291      $603
                           ======    ======    ======    ======      ====

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:

                                      Nine Months Ended   Three Months Ended
                                        September 30,        September 30,
                                      -----------------   ------------------
                                       2009      2008       2009      2008
                                       ----      ----       ----      ----
                                                  (In thousands)

    Net income                        $5,085    $7,515    $1,895      $603
      Book/tax difference on
       depreciation                      (42)      (45)      (14)      (15)
      Book/tax difference on
       deferred gains from
       property sales                   (642)     (778)     (592)      (16)
      Book/tax difference on
       Retained Interests, net           (66)       (3)      345      (151)
      Severance accrual (payments)    (1,429)    1,573         -     1,573
      Dividend distribution from
       taxable REIT subsidiary             -     2,000         -         -
      Book/tax difference on
       amortization and accretion       (201)     (172)     (244)      (32)
      Loan valuation                     239       106        85        90
      Other book/tax differences, net    (81)      (30)      (23)      (75)
                                       -----    ------     -----     -----
      Subtotal                         2,863    10,166     1,452     1,977

    Less:  taxable REIT subsidiaries
     net income (loss), net of tax       268      (392)      127      (114)
                                      ------    ------    ------    ------
    REIT taxable income               $3,131    $9,774    $1,579    $1,863
                                      ======    ======    ======    ======
    Distributions declared            $5,757    $7,004    $1,688    $2,425
                                      ======    ======    ======    ======
    Weighted average common shares
     outstanding                      10,582    10,771    10,548    10,782
                                      ======    ======    ======    ======

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.

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