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DESERT CAPITAL REIT, INC.
ANNOUNCES THIRD QUARTER 2008 RESULTS
HENDERSON, Nev., (November 17, 2008) --- Desert Capital REIT, Inc. today announced that its net income for the third quarter of 2008 totaled negative $8.9 million or a loss of $.53 per share, as compared to net income of $740,000 or $.04 per share gain reported for the third quarter of 2007. For the nine months ended September 30, 2008, net income totaled negative $16 million or a loss of $.95 per share, as compared to positive net income of $9 million or $.56 per share gain for the same period in 2007.
Total revenues for the quarter ended September 30, 2008, totaled $2 million, as compared to $6.4 million for the same period in 2007. Total revenues were $1.8 million of interest income for the third quarter, as compared to $4.6 million reported for the same period in 2007. Also included in total revenues was non-interest income, primarily from fees on loans brokered to third parties, of $221,000 for the quarter ended September 30, 2008, as compared to $1.8 million for the same period in 2007.
As of September 30, 2008, the net balance in the mortgage investment portfolio was $84.7 million, as compared to $151 million on September 30, 2007. The average balance of the mortgage portfolio during the third quarter was $102 million and the average yield on these assets for the quarter was 5.86% compared to an average yield of 9.08% for the third quarter of 2007.
“We intend to minimize potential losses of our impaired loans and achieve the greatest capital realization,” commented Todd B. Parriott, CEO and Chairman of the Board of Directors of Desert Capital REIT, Inc. “In doing so, we will continue to execute a number of strategies that we believe will lead to the best possible resolution for our stockholders.”
Portfolio Activity
During the third quarter of 2008, DCR funded 9 loans totaling $2.3 million. Of the new loans, 6 were acquisition and development loans totaling $1.9 million, and 3 were construction loans totaling $405,100.
As of September 30, 2008, DCR's loan portfolio contained 48 loans with a net outstanding principal balance of $84.7 million, and a weighted average yield of 12.5%.
Dividend
Desert Capital REIT declared dividends of $.075 per share for the third quarter of 2008.
About Desert Capital REIT, Inc.
Desert Capital REIT, Inc., is a Henderson, NV-based real estate investment trust that invests in loans to owners and developers of real estate properties. Formed in December 2003, Desert Capital’s portfolio of mortgage loans consists of acquisition and development, construction, commercial property and residential loans. For more information, please call (800) 419-2855 or visit www.desertcapitalreit.com.
Safe Harbor Statement
Statements included herein that state the company’s or management’s intentions, hopes, beliefs, expectations or predictions of the future are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995 which by their nature, involve known and unknown risks and uncertainties. The company’s actual results, performance or achievements could differ materially from those expressed or implied by such statements.
DESERT CAPITAL REIT, INC. |
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Consolidated Balance Sheets |
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Sept 30 , |
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Dec 31, |
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2008 |
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2007 |
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(Unaudited) |
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ASSETS |
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Mortgage investments - net of allowance for loan losses of $17,161,528 at September 30, 2008 and $25,444,130 at December 31, 2007 |
$ |
84,683,584 |
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$ |
118,017,926 |
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Loans held-for-sale |
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0 |
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2,139,200 |
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Real estate owned |
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29,835,588 |
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15,652,282 |
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Equity investments in real estate |
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2,463,247 |
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0 |
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Note receivable from related party - net allowance for loan losses of $2,124,731 at September 30, 2008 and $0 at December 31, 2007 |
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12,600,269 |
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15,500,000 |
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Building and equipment - net |
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6,936,870 |
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7,235,939 |
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Land |
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1,820,000 |
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1,820,000 |
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Cash and cash equivalents |
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154,253 |
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162,753 |
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Restricted cash |
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1,180,789 |
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0 |
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Interest receivable |
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635,943 |
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1,464,261 |
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Deferred financing costs |
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949,350 |
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975,043 |
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Other investments |
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1,928,000 |
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1,928,000 |
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Other assets |
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1,166,503 |
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818,715 |
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Total assets |
$ |
144,354,396 |
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$ |
165,714,119 |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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Credit facility |
$ |
1,836,900 |
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$ |
2,139,200 |
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Mortgage payable |
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7,961,804 |
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8,132,769 |
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Junior subordinated notes payable |
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30,928,000 |
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30,928,000 |
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Dividends payable |
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430,052 |
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1,675,814 |
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Deferred income taxes |
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423,914 |
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738,423 |
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Accounts payable and accrued expenses |
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1,381,941 |
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1,052,637 |
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Total liabilities |
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42,962,611 |
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44,666,843 |
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Preferred stock, $0.01 par value: 15,000,000 shares authorized, none outstanding |
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0 |
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0 |
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Common stock, $0.01 par value: 100,000,000 shares authorized; 16,807,867, and 16,724,549 shares issued and outstanding on March 31, 2008, and December 31, 2007, respectfully |
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168,359 |
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167,246 |
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Additional paid-in capital |
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165,723,370 |
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164,370,179 |
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Accumulated deficit |
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(64,499,944) |
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(43,490,149) |
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Total stockholders' equity |
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101,391,785 |
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121,047,276 |
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Total liabilities and stockholders' equity |
$ |
144,354,396 |
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$ |
165,714,119 |
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Consolidated Statement of Operations
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Three Months |
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Nine Months |
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Ended September 30, |
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Ended September 30, |
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2008 |
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2007 |
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2008 |
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2007 |
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INTEREST INCOME: |
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Mortgage investments |
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$ |
1,493,342 |
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$ |
4,410,062 |
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$ |
5,495,202 |
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$ |
15,488,818 |
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Other interest |
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311,112 |
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170,633 |
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1,351,161 |
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478,800 |
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Total interest income |
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1,804,454 |
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4,580,695 |
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6,846,363 |
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15,967,618 |
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Interest expense |
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693,251 |
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1,032,804 |
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2,388,555 |
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3,043,706 |
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Net interest income |
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1,111,203 |
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3,547,891 |
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4,457,808 |
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12,923,912 |
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Provision for loan losses |
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7,228,360 |
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1,585,080 |
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12,895,456 |
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1,798,431 |
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Net interest income after provision for loan loss |
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(6,117,157) |
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1,962,811 |
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(8,437,648) |
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11,125,481 |
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NON-INTEREST INCOME: |
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Loan brokerage fees |
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0 |
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1,223,177 |
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0 |
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5,696,746 |
Service and other loan fees |
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0 |
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231,893 |
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0 |
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1,017,923 |
Other |
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221,229 |
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342,198 |
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843,696 |
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794,441 |
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Total non-interest income |
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221,229 |
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1,797,268 |
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843,696 |
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7,509,110 |
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NON-INTEREST EXPENSE: |
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Impairment of real estate owned |
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1,931,132 |
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0 |
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4,737,938 |
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0 |
Compensation |
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0 |
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546,610 |
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0 |
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1,563,377 |
Management fees |
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421,728 |
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505,986 |
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1,267,601 |
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3,286,149 |
Professional fees |
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202,736 |
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502,819 |
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992,471 |
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1,380,165 |
Insurance |
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197,529 |
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116,039 |
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482,550 |
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323,328 |
Depreciation |
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121,716 |
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195,641 |
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364,025 |
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586,923 |
Advertising |
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0 |
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350,453 |
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148 |
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691,313 |
Other |
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325,283 |
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432,048 |
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883,717 |
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1,199,127 |
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Total non-interest expense |
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3,200,124 |
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2,649,596 |
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8,728,450 |
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9,030,382 |
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Net income before taxes |
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(9,096,052) |
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1,110,483 |
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(16,322,402) |
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9,604,209 |
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Income tax expense (benefit) |
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(219,462) |
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369,915 |
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(350,026) |
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567,103 |
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Net income |
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$ |
(8,876,590) |
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$ |
740,568 |
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$ |
(15,972,376) |
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$ |
9,037,106 |
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Earnings per share - basic |
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(0.53) |
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0.04 |
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(0.95) |
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0.56 |
Earnings per share - diluted |
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(0.53) |
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0.04 |
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(0.95) |
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0.56 |
Weighted average outstanding shares - basic |
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16,825,212 |
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16,707,393 |
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16,805,341 |
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16,053,992 |
Weighted average outstanding shares - diluted |
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16,825,212 |
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16,747,103 |
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16,805,341 |
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16,087,252 |
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