NEWTON, Mass.--(BUSINESS WIRE)--Tremont Mortgage Trust (Nasdaq: TRMT) today announced financial results for the quarter and six months ended June 30, 2020.

David Blackman, President and Chief Executive Officer of TRMT, made the following statement:

“During the second quarter, our focus continued to be on managing our portfolio of loans. Though the challenging economic environment has impacted borrowers to varying degrees, all of our borrowers are current on debt service obligations and our lender continues to advance future funding obligations in the ordinary course. At the end of the quarter, our manager extended its waiver of the fees due under our management agreement through December 31, 2020, demonstrating continued alignment with our shareholders who are currently receiving reduced quarterly distributions as part of our proactive measures to preserve our capital.”

Results for the Quarter Ended June 30, 2020:

For the quarter ended June 30, 2020, net income was $2.4 million, or $0.29 per diluted share, compared to net income of $0.9 million, or $0.16 per diluted share, for the same quarter last year. Core Earnings for the quarter ended June 30, 2020 were $2.4 million, or $0.30 per diluted share, compared to Core Earnings of $1.1 million, or $0.20 per diluted share, for the same quarter last year.

For the quarter ended June 30, 2020, TRMT generated interest income from investments of $4.5 million and incurred interest and related expenses of $1.4 million, which resulted in $3.1 million of income from investments, net. For the same quarter last year, TRMT generated interest income from investments of $3.9 million and incurred interest and related expenses of $2.0 million, which resulted in $1.9 million of income from investments, net.

Results for the Six Months Ended June 30, 2020:

For the six months ended June 30, 2020, net income was $4.0 million, or $0.49 per diluted share, compared to net income of $1.5 million, or $0.34 per diluted share, for the same period last year. Core Earnings for the six months ended June 30, 2020 were $4.1 million, or $0.51 per diluted share, compared to Core Earnings of $1.7 million, or $0.40 per diluted share, for the same period last year.

For the six months ended June 30, 2020, TRMT generated interest income from investments of $8.8 million and incurred interest and related expenses of $3.1 million, which resulted in $5.7 million of income from investments, net. For the same period last year, TRMT generated interest income from investments of $6.9 million and incurred interest and related expenses of $3.6 million, which resulted in $3.3 million of income from investments, net.

Additional information and a reconciliation of net income determined in accordance with U.S. generally accepted accounting principles, or GAAP, to Core Earnings, a non-GAAP financial measure, for the quarters and six months ended June 30, 2020 and 2019, appear later in this press release.

On June 30, 2020, TRMT's manager, Tremont Realty Advisors LLC, or TRA, extended its waiver of the management and incentive fees under TRMT's management agreement, which waiver was set to expire June 30, 2020, for and through the periods ending December 31, 2020. For further information regarding the calculations of TRMT's management and incentive fees, see TRMT's Annual Report on Form 10-K for the year ended December 31, 2019, and TRMT's other filings with the Securities and Exchange Commission, or SEC, which are accessible at the SEC's website www.sec.gov.

Recent Investment Activities:

As of June 30, 2020, TRMT had approximately $296.0 million in aggregate loan commitments, consisting of a diverse portfolio, geographically and by property type, of 14 first mortgage whole loans. The impacts from the COVID-19 pandemic have negatively impacted some of TRMT's borrowers’ business operations or tenants, particularly in the cases of TRMT's retail and hospitality collateral, which are the types of properties that have been significantly negatively impacted by the pandemic. TRMT expects those negative impacts may continue and may apply to other borrowers and/or their tenants. Therefore, certain of TRMT’s borrowers’ business plans will likely take longer to execute than initially expected and certain of TRMT’s borrowers may be unable to pay their debt service obligations owed to TRMT as currently scheduled or at all. All of the loans in TRMT’s portfolio are structured with risk mitigation mechanisms, such as cash flow sweeps or interest reserves, to help protect TRMT against investment losses. In addition, TRMT continues to actively engage with its borrowers regarding their execution of the business plan for the underlying collateral, among other things. As of August 3, 2020, all of TRMT's borrowers had paid their debt service obligations owed and due to TRMT and none of the loans included in TRMT's investment portfolio were in default.

In July 2020, the borrower under TRMT's loan related to a property located in Coppell, TX sold a parcel of land that was a part of the property securing the loan. The borrower used $2.1 million of the sale proceeds to repay part of the outstanding balance under the loan and TRMT allowed the borrower to use the remaining $0.1 million of sale proceeds to increase the reserve for future debt service obligation payments owed to TRMT under the loan.

Recent Financing Activities:

During the quarter ended June 30, 2020, Citibank, N.A., or Citibank, advanced approximately $4.8 million to TRMT under its master repurchase facility to fund advances made by TRMT to borrowers on its loan commitments. In July 2020, TRMT repaid $1.4 million of outstanding principal under its master repurchase facility using proceeds from the partial repayment TRMT received from the borrower under TRMT's loan related to the property located in Coppell, TX.

As of June 30, 2020, TRMT had a $201.1 million aggregate outstanding principal balance under its master repurchase facility. In light of the impacts of the COVID-19 pandemic, TRMT continues to actively engage with Citibank regarding its liquidity position and the status of the loans in its portfolio that are financed under its master repurchase facility. The agreement that governs TRMT's master repurchase facility includes risk mitigation mechanisms, including a cash flow sweep, which would allow Citibank to control interest payments from TRMT's borrowers under its loans that are financed under its master repurchase facility, and the ability to accelerate dates of repurchase and institute margin calls which may require TRMT to pay down balances associated with one or more of its loans that are financed under its master repurchase facility. Citibank has not utilized any such risk mitigation mechanisms to date under the master repurchase agreement.

Distributions:

Beginning with the first quarter of 2020, TRMT reduced its quarterly distribution rate on its common shares to $0.01 per share in order to preserve its near term capital due to the economic downturn and uncertainty as to future economic conditions from the COVID-19 pandemic and its resulting impact on the U.S. economy.

On May 21, 2020, TRMT paid a quarterly distribution to common shareholders of record as of April 10, 2020 of $0.01 per common share, or $0.1 million.

On July 16, 2020, TRMT declared a quarterly distribution for the second quarter of 2020 payable to its common shareholders of record on July 27, 2020 of $0.01 per common share, or approximately $0.1 million.

TRMT’s Board of Trustees will continue to monitor TRMT’s financial performance and economic outlook as the year progresses to determine a prudent level for any subsequent quarterly distributions for 2020 or to declare and pay a distribution required to maintain TRMT’s qualification for taxation as a real estate investment trust, or REIT. TRMT currently expects that it will need to make an increased distribution in the future to maintain its qualification for taxation as a REIT for 2020.