PMC Commercial Trust Reports Operating Results (10-Q)
Pmc Commercial Trust has a market cap of $87.1 million; its shares were traded at around $8.25 with a P/E ratio of 15.9 and P/S ratio of 5.4. The dividend yield of Pmc Commercial Trust stocks is 7.8%.PCC is in the portfolios of Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations:During the first nine months of 2010, we reduced the outstanding balance under our Revolver by $9.4 million while our capital outlay to fund loans was $30.0 million. We received $25.2 million in proceeds from selling the government guaranteed portion of loans, $11.2 million in principal from payments on our loans receivable that collateralize our Revolver and $2.3 million in proceeds from selling real estate owned.
The American Recovery and Reinvestment Act (the Stimulus Bill), passed in February 2009, contained provisions that benefitted the SBA which had a positive impact on our lending operations. The Stimulus Bill provided the SBA with temporary funding to eliminate fees on SBA 7(a) Program loans and provided increased SBA guarantee percentages on SBA 7(a) Program loans of up to 90% for certain loans during periods of time all of which ended before May 31, 2010. Legislation was passed in September 2010 that contains provisions to allow the SBA to support larger loans and provide more financing options to a larger segment of small businesses including (1) permanently increasing the 7(a) loan limit from $2 million to $5 million, (2) permanently allowing the 504 loan program to refinance short-term commercial real estate debt into long-term, fixed-rate loans and (3) extending the authorization to provide 90% guarantees on 7(a) loans and fee elimination for borrowers on 7(a) and 504 loans through the earlier of December 31, 2010 or once appropriated funds have been fully utilized. We believe that we will benefit from the increase in 7(a) loan limits, extension of 90% guarantees on 7(a) loans and fee elimination for borrowers on 7(a) loans. We are not currently utilizing the 504 program due to our limited liquidity.
For the loan sales where we received cash premiums and the minimum servicing spread of 1%, sale treatment will occur after any contingencies have been satisfied which should occur 90 to 120 days after the proceeds were received. We recorded $776,000 (before cost allocations) in gains on sale during the second and third quarters of 2010 relating to these loans sales in the first and second quarters of 2010 (reflected as premium income included in other income in our consolidated income statements). We expect to record a gain from sale of $41,000 (before cost allocations) during the fourth quarter of 2010 relating to these loan sales in the third quarter of 2010. Once gains are recorded, there is no significant difference between the old and new accounting rules for these sales. In effect, the change in the accounting rules is to defer gain recognition during the contingency period of at least 90 days.
During the first nine months of 2010 we funded $27.6 million of SBA 7(a) Program loans and $2.4 million of conventional loans (a total of $30.0 million). At September 30, 2010, December 31, 2009 and September 30, 2009, our outstanding commitments to fund loans were approximately $13.9 million, $20.7 million and $23.2 million, respectively. We expect that fundings during 2010 will be between $35 million and $40 million. We expect that fundings during 2011 will be between $50 million and $60 million. These fundings will be predominantly through the SBA 7(a) Program.
In addition to our retained portfolio of $233.1 million at September 30, 2010, we service $51.0 million of aggregate principal balance of loans sold pursuant to Secondary Market Loan Sales. Prior to December 31, 2009, certain securitizations were not included in our retained portfolio but were included in our serviced portfolio. Effective January 1, 2010, due to a change in accounting rules, we now consolidate all of our securitizations. Since we retain a residual interest in the cash flows from these loans, the performance of these loans impacts our profitability and our cash available for dividend distributions. Therefore, we provide information on both our loans retained (the Retained Portfolio) and combined with sold loans that we service (the Serviced Portfolio).
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