[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
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SECURITIES EXCHANGE ACT OF 1934
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
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SECURITIES EXCHANGE ACT OF 1934
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VESTIN REALTY MORTGAGE I, INC.
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(Exact name of registrant as specified in its charter)
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MARYLAND
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20-4028839
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(State or Other Jurisdiction of
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(I.R.S. Employer
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Incorporation or Organization)
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Identification No.)
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Large accelerated filer []
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Accelerated filer []
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Non-accelerated filer []
(Do not check if a smaller reporting company)
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Smaller reporting company [X]
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Page
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3 | ||
Exhibit 31.1
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Exhibit 31.2
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Exhibit 32
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ITEM 1.
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CONSOLIDATED FINANCIAL STATEMENTS
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VESTIN REALTY MORTGAGE I, INC.
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||||||||
CONSOLIDATED BALANCE SHEETS
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||||||||
(UNAUDITED)
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||||||||
ASSETS
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||||||||
June 30, 2013
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December 31, 2012
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|||||||
Assets
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||||||||
Cash and cash equivalents
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$ | 7,250,000 | $ | 2,482,000 | ||||
Investment in marketable securities - related party
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886,000 | 784,000 | ||||||
Interest and other receivables, net of allowance of $0 at June 30, 2013 and December 31, 2012
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8,000 | 16,000 | ||||||
Notes receivable, net of allowance of $1,803,000 at June 30, 2013 and $1,894,000 at December 31, 2012
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-- | -- | ||||||
Real estate held for sale
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580,000 | 580,000 | ||||||
Investment in real estate loans, net of allowance for loan losses of $162,000 at June 30, 2013 and $183,000 at December 31, 2012
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8,555,000 | 13,858,000 | ||||||
Asset held for sale
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3,961,000 | 4,398,000 | ||||||
Other assets
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196,000 | 76,000 | ||||||
Total assets
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$ | 21,436,000 | $ | 22,194,000 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY
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||||||||
Liabilities
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||||||||
Accounts payable and accrued liabilities
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$ | 14,000 | $ | 97,000 | ||||
Due to related parties
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33,000 | 216,000 | ||||||
Notes payable
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123,000 | 19,000 | ||||||
Liabilities related to asset held for sale
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38,000 | 43,000 | ||||||
Deferred gain on sale of HFS
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-- | 10,000 | ||||||
Total liabilities
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208,000 | 385,000 | ||||||
Commitments and contingencies
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||||||||
Stockholders' equity
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||||||||
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued
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-- | -- | ||||||
Treasury stock, at cost, 437,209 shares at June 30, 2013 and 0 shares at December 31, 2012
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(785,000 | ) | -- | |||||
Common stock, $0.0001 par value; 25,000,000 shares authorized; 6,340,859 shares issued and 5,903,650 outstanding at June 30, 2013 and 6,340,859 shares issued and outstanding at December 31, 2012
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1,000 | 1,000 | ||||||
Additional paid-in capital
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61,217,000 | 61,217,000 | ||||||
Accumulated deficit
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(40,487,000 | ) | (40,702,000 | ) | ||||
Accumulated other comprehensive income
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258,000 | 156,000 | ||||||
Total stockholders’ equity before non-controlling interest – related party
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20,204,000 | 20,672,000 | ||||||
Noncontrolling interest – related party
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1,024,000 | 1,137,000 | ||||||
Total equity
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21,228,000 | 21,809,000 | ||||||
Total liabilities and stockholders' equity
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$ | 21,436,000 | $ | 22,194,000 |
VESTIN REALTY MORTGAGE I, INC.
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||||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS
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||||||||||||||||
(UNAUDITED)
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||||||||||||||||
For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Revenues
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||||||||||||||||
Interest income from investment in real estate loans
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$ | 275,000 | $ | 210,000 | $ | 559,000 | $ | 352,000 | ||||||||
Gain related to pay off of notes receivable, including recovery of allowance for notes receivable
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33,000 | 29,000 | 48,000 | 59,000 | ||||||||||||
Gain related to pay off of real estate loan, including recovery of allowance for loan loss
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21,000 | 132,000 | 21,000 | 188,000 | ||||||||||||
Total revenues
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329,000 | 371,000 | 628,000 | 599,000 | ||||||||||||
Operating expenses
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||||||||||||||||
Management fees - related party
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69,000 | 69,000 | 138,000 | 138,000 | ||||||||||||
Provision for loan loss
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-- | -- | -- | 19,000 | ||||||||||||
Interest expense
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1,000 | 1,000 | 1,000 | 1,000 | ||||||||||||
Professional fees
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164,000 | 213,000 | 205,000 | 388,000 | ||||||||||||
Insurance
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53,000 | 55,000 | 109,000 | 111,000 | ||||||||||||
Consulting
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31,000 | 20,000 | 50,000 | 38,000 | ||||||||||||
Other
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20,000 | 26,000 | 48,000 | 79,000 | ||||||||||||
Total operating expenses
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338,000 | 384,000 | 551,000 | 774,000 | ||||||||||||
Income (loss) from operations
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(9,000 | ) | (13,000 | ) | 77,000 | (175,000 | ) | |||||||||
Non-operating income (loss)
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||||||||||||||||
Reversal of settlement reserve
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16,000 | -- | 16,000 | -- | ||||||||||||
Recovery from settlement with loan guarantor
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-- | 711,000 | -- | 711,000 | ||||||||||||
Settlement expense
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-- | -- | -- | (23,000 | ) | |||||||||||
Total non-operating income
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16,000 | 711,000 | 16,000 | 688,000 | ||||||||||||
Provision for income taxes
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-- | -- | -- | -- | ||||||||||||
Income from continuing operations
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7,000 | 698,000 | 93,000 | 513,000 | ||||||||||||
Discontinued operations, net of income taxes
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||||||||||||||||
Net gain on sale of real estate held for sale
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-- | 2,000 | 26,000 | 4,000 | ||||||||||||
Expenses related to real estate held for sale
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(8,000 | ) | (56,000 | ) | (29,000 | ) | (87,000 | ) | ||||||||
Income from asset held for sale, net of income taxes
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70,000 | 39,000 | 169,000 | 39,000 | ||||||||||||
Write-downs on real estate held for sale
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-- | (316,000 | ) | -- | (316,000 | ) | ||||||||||
Total income (loss) from discontinued operations
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62,000 | (331,000 | ) | 166,000 | (360,000 | ) | ||||||||||
Net income
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69,000 | 367,000 | 259,000 | 153,000 | ||||||||||||
Net income attributable to non-controlling interest – related party
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(18,000 | ) | (10,000 | ) | (44,000 | ) | (10,000 | ) | ||||||||
Net income attributable to common stockholders
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$ | 51,000 | $ | 357,000 | $ | 215,000 | $ | 143,000 | ||||||||
Basic and diluted income per weighted average common share
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||||||||||||||||
Continuing operations | $ | 0.00 | $ | 0.11 | $ | 0.02 | $ | 0.08 | ||||||||
Discontinued operations | 0.01 | (0.05 | ) | 0.02 | (0.06 | ) | ||||||||||
Total basic and diluted income per weighted average common share | $ | 0.01 | $ | 0.06 | $ | 0.04 | $ | 0.02 | ||||||||
Dividends declared per common share
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$ | -- | $ | -- | $ | -- | $ | -- | ||||||||
Weighted average common shares outstanding
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6,155,206 | 6,340,859 | 6,247,520 | 6,340,859 |
VESTIN REALTY MORTGAGE I, INC.
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CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME (LOSS)
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(UNAUDITED)
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For The Three Months
Ended June 30,
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For The Six Months
Ended June 30,
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|||||||||||||||
2013
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2012
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2013
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2012
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|||||||||||||
Net income
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$ | 69,000 | $ | 367,000 | $ | 259,000 | $ | 153,000 | ||||||||
Unrealized holding gain (loss) on available-for-sale securities – related party
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237,000 | (181,000 | ) | 102,000 | (20,000 | ) | ||||||||||
Comprehensive income
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306,000 | 186,000 | 361,000 | 133,000 | ||||||||||||
Net income attributable to noncontrolling interest
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18,000 | 10,000 | 44,000 | 10,000 | ||||||||||||
Comprehensive income attributable to Vestin Realty Mortgage I, Inc.
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$ | 324,000 | $ | 166,000 | $ | 340,000 | $ | 143,000 | ||||||||
VESTIN REALTY MORTGAGE I, INC.
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||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS
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||||||||
(UNAUDITED)
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||||||||
For The Six Months Ended June 30,
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||||||||
2013
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2012
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|||||||
Cash flows from operating activities:
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||||||||
Net income
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$ | 259,000 | $ | 153,000 | ||||
Adjustments to reconcile net income to net cash used in operating activities:
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||||||||
Write-downs on real estate held for sale
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-- | 316,000 | ||||||
Recovery of allowance for doubtful notes receivable
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(48,000 | ) | (59,000 | ) | ||||
Provision for loan loss
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-- | 19,000 | ||||||
Gain related to recovery of allowance for loan loss
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(21,000 | ) | (188,000 | ) | ||||
Gain on sale of real estate held for sale
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-- | (4,000 | ) | |||||
Gain related to recovery from settlement with loan guarantor
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-- | (711,000 | ) | |||||
Recognized gain on sale of HFS
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(26,000 | ) | -- | |||||
Change in operating assets and liabilities:
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||||||||
Interest and other receivables
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8,000 | (5,000 | ) | |||||
Due to/from related parties
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(183,000 | ) | (85,000 | ) | ||||
Deferred gain on sale of HFS
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(7,000 | ) | (16,000 | ) | ||||
Other assets
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38,000 | 40,000 | ||||||
Asset held for sale, net of liabilities
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(169,000 | ) | (39,000 | ) | ||||
Accounts payable and accrued liabilities
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(59,000 | ) | (86,000 | ) | ||||
Net cash used in operating activities
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(208,000 | ) | (665,000 | ) | ||||
Cash flows from investing activities:
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||||||||
Investments in real estate loans
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(1,250,000 | ) | (12,163,000 | ) | ||||
Proceeds from loan payoffs
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4,664,000 | 5,576,000 | ||||||
Proceeds from notes receivable
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48,000 | 59,000 | ||||||
Sale of investments in real estate loans to:
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||||||||
VRM II
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1,200,000 | -- | ||||||
MVP REIT
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500,000 | -- | ||||||
Third parties
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210,000 | -- | ||||||
Proceeds from settlement with loan guarantor
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-- | 711,000 | ||||||
Proceeds from sale of real estate held for sale
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-- | 133,000 | ||||||
Proceeds related to nonrefundable extension fees on real estate held for sale
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-- | 2,000 | ||||||
Sale of investments in real estate loans from third parties
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-- | 1,938,000 | ||||||
Net cash provided by (used in) investing activities
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5,372,000 | (3,744,000 | ) | |||||
Cash flows from financing activities:
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||||||||
Principal payments on notes payable
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(54,000 | ) | (55,000 | ) | ||||
Purchase of treasury stock, at cost
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(785,000 | ) | -- | |||||
Proceeds from distribution from assets held for sale
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443,000 | -- | ||||||
Net cash used in financing activities
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(396,000 | ) | (55,000 | ) | ||||
NET CHANGE IN CASH
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4,768,000 | (4,464,000 | ) | |||||
Cash and cash equivalents, beginning of period
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2,482,000 | 6,758,000 | ||||||
Cash and cash equivalents, end of period
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$ | 7,250,000 | $ | 2,294,000 | ||||
Supplemental disclosures of cash flows information:
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||||||||
Interest expense
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$ | 1,000 | $ | 1,000 | ||||
Non-cash investing and financing activities:
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||||||||
Write-off of interest receivable and related allowance
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$ | -- | $ | 229,000 | ||||
Other real estate owned through deed in lieu, net of prior allowance
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$ | -- | $ | 786,000 | ||||
Note payable relating to prepaid D&O insurance
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$ | 158,000 | $ | 166,000 | ||||
Adjustment to note receivable and related allowance
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$ | 43,000 | $ | 1,057,000 | ||||
Asset held for sale acquired through foreclosure, net of prior allowance
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$ | -- | $ | (3,059,000 | ) | |||
Unrealized gain (loss) on marketable securities - related party
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$ | 102,000 | $ | (20,000 | ) |
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·
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Declines in real estate market conditions, which can cause a decrease in expected market value;
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·
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Discovery of undisclosed liens for community improvement bonds, easements and delinquent property taxes;
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·
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Lack of progress on real estate developments after we advance funds. We customarily utilize disbursement agents to monitor the progress of real estate developments and approve loan advances. After further inspection of the related property, progress on construction occasionally does not substantiate an increase in value to support the related loan advances;
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·
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Unanticipated legal or business issues that may arise subsequent to loan origination or upon the sale of foreclosed property; and
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·
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Appraisals, which are only opinions of value at the time of the appraisal, may not accurately reflect the value of the property.
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·
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Management commits to a plan to sell the properties;
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·
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The property is available for immediate sale in its present condition subject only to terms that are usual and customary;
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·
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An active program to locate a buyer and other actions required to complete a sale have been initiated;
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·
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The sale of the property is probable;
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·
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The property is being actively marketed for sale at a reasonable price; and
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·
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Withdrawal or significant modification of the sale is not likely.
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·
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The length of the time and the extent to which the market value has been less than cost;
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·
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The financial condition and near-term prospects of the issuer, including any specific events which may influence the operations of the issuer such as changes in technology that may impair the earnings potential of the investment or the discontinuance of a segment of the business that may affect the future earnings potential; or
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·
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The intent and ability of the holder to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in market value.
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Loan Type
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Number of Loans
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Balance *
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Weighted Average Interest Rate
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Portfolio Percentage
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Current Weighted Average Loan-To-Value, Net of Allowance for Loan Losses
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|||||||||||||||
Commercial
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8 | $ | 8,623,000 | 8.37 | % | 98.92 | % | 64.20 | % | |||||||||||
Land
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1 | 94,000 | 6.00 | % | 1.08 | % | 53.81 | % | ||||||||||||
Total
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9 | $ | 8,717,000 | 8.35 | % | 100.00 | % | 64.09 | % |
Loan Type
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Number of Loans
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Balance *
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Weighted Average Interest Rate
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Portfolio Percentage
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Current Weighted Average Loan-To-Value, Net of Allowance for Loan Losses
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|||||||||||||||
Commercial
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13 | $ | 13,947,000 | 8.23 | % | 99.33 | % | 64.21 | % | |||||||||||
Land
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1 | 94,000 | 6.00 | % | 0.67 | % | 53.81 | % | ||||||||||||
Total
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14 | $ | 14,041,000 | 8.21 | % | 100.00 | % | 66.79 | % |
*
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Please see Balance Sheet Reconciliation below.
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Loan Type
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Number of Loans
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June 30, 2013
Balance *
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Portfolio
Percentage
|
Number of Loans
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December 31, 2012 Balance *
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Portfolio
Percentage
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||||||||||||||||||
First deeds of trust
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8 | $ | 7,967,000 | 91.40 | % | 12 | $ | 13,058,000 | 93.00 | % | ||||||||||||||
Second deeds of trust
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1 | 750,000 | 8.60 | % | 2 | 983,000 | 7.00 | % | ||||||||||||||||
Total
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9 | $ | 8,717,000 | 100.00 | % | 14 | $ | 14,041,000 | 100.00 | % |
*
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Please see Balance Sheet Reconciliation below.
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July 2013 – September 2013
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$ | 3,068,000 | ||
October 2013 – December 2013
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2,911,000 | |||
January 2014 – March 2014
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300,000 | |||
April 2014 – June 2014
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1,238,000 | |||
July 2014 – September 2014
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-- | |||
Thereafter
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1,200,000 | |||
Total
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$ | 8,717,000 |
June 30, 2013 Balance *
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Portfolio Percentage
|
December 31, 2012 Balance *
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Portfolio Percentage
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|||||||||||||
Michigan
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$ | 1,741,000 | 19.97 | % | $ | 1,741,000 | 12.40 | % | ||||||||
Nevada
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6,492,000 | 74.48 | % | 11,157,000 | 79.46 | % | ||||||||||
Texas
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484,000 | 5.55 | % | 484,000 | 3.45 | % | ||||||||||
Utah
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-- | -- | 659,000 | 4.69 | % | |||||||||||
Total
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$ | 8,717,000 | 100.00 | % | $ | 14,041,000 | 100.00 | % |
*
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Please see Balance Sheet Reconciliation below.
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June 30, 2013
|
December 31, 2012
|
|||||||
Balance per loan portfolio
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$ | 8,717,000 | $ | 14,041,000 | ||||
Less:
|
||||||||
Allowance for loan losses (a)
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(162,000 | ) | (183,000 | ) | ||||
Balance per consolidated balance sheets
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$ | 8,555,000 | $ | 13,858,000 |
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(a)
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Please refer to Specific Reserve Allowance below.
|
|
·
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Prevailing economic conditions;
|
|
·
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Historical experience;
|
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·
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The nature and volume of the loan portfolio;
|
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·
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The borrowers’ financial condition and adverse situations that may affect the borrowers’ ability to pay;
|
|
·
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Evaluation of industry trends; and
|
|
·
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Estimated net realizable value of any underlying collateral in relation to the loan amount.
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As of June 30, 2013
|
||||||||||||
Balance
|
Allowance for loan losses *
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Balance, net of allowance
|
||||||||||
Non-performing loans – no related allowance
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$ | -- | $ | -- | $ | -- | ||||||
Non-performing loans – related allowance
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-- | -- | -- | |||||||||
Subtotal non-performing loans
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-- | -- | -- | |||||||||
Performing loans – no related allowance
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7,967,000 | -- | 7,967,000 | |||||||||
Performing loans – related allowance
|
750,000 | (162,000 | ) | 588,000 | ||||||||
Subtotal performing loans
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8,717,000 | (162,000 | ) | 8,555,000 | ||||||||
Total
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$ | 8,717,000 | $ | (162,000 | ) | $ | 8,555,000 |
As of December 31, 2012
|
||||||||||||
Balance
|
Allowance for loan losses*
|
Balance, net of allowance
|
||||||||||
Non-performing loans – no related allowance
|
$ | -- | $ | -- | $ | -- | ||||||
Non-performing loans – related allowance
|
-- | -- | -- | |||||||||
Subtotal non-performing loans
|
-- | -- | -- | |||||||||
Performing loans – no related allowance
|
12,941,000 | -- | 12,941,000 | |||||||||
Performing loans – related allowance
|
1,100,000 | (183,000 | ) | 917,000 | ||||||||
Subtotal performing loans
|
14,041,000 | (183,000 | ) | 13,858,000 | ||||||||
Total
|
$ | 14,041,000 | $ | (183,000 | ) | $ | 13,858,000 |
*
|
Please refer to Specific Reserve Allowances below.
|
Loan Type
|
Balance at
12/31/2012
|
Specific Reserve Allocation
|
Loan Pay Downs and Settlements
|
Write Off
|
Transfers to REO and Notes Receivable
|
Balance at
6/30/2013
|
||||||||||||||||||
Commercial
|
$ | 183,000 | $ | -- | $ | (21,000 | ) | $ | -- | -- | $ | 162,000 | ||||||||||||
Total
|
$ | 183,000 | $ | -- | $ | (21,000 | ) | $ | -- | -- | $ | 162,000 |
Loan Type
|
Balance at
12/31/2011
|
Specific Reserve Allocation
|
Sales
|
Loan Pay Downs and Settlements
|
Transfers to REO and Notes Receivable
|
Balance at
6/30/2012
|
||||||||||||||||||
Commercial
|
$ | 5,412,000 | $ | 19,000 | $ | -- | $ | (1,535,000 | ) | $ | (2,267,000 | ) | $ | 1,629,000 | ||||||||||
Construction
|
73,000 | -- | -- | (73,000 | ) | -- | -- | |||||||||||||||||
Total
|
$ | 5,485,000 | $ | 19,000 | $ | -- | $ | (1,608,000 | ) | $ | (2,267,000 | ) | $ | 1,629,000 |
Total
|
Performing
|
Non-Performing
|
||||||||||||||||||||||
Loan Type
|
Number of Loans
|
Fund Balance
|
Number of Loans
|
Fund Balance
|
Number of Loans
|
Fund Balance
|
||||||||||||||||||
Commercial
|
1 | $ | 750,000 | 1 | $ | 750,000 | -- | $ | -- | |||||||||||||||
Construction
|
-- | -- | -- | -- | -- | -- | ||||||||||||||||||
Total
|
1 | $ | 750,000 | 1 | $ | 750,000 | -- | $ | -- |
Beginning balance, January 1, 2013
|
$ | 580,000 | ||
Real estate held for sale acquired through foreclosure
|
-- | |||
Additional investment in REO
|
-- | |||
Proceeds on nonrefundable extension fee
|
-- | |||
Write down
|
-- | |||
Sale
|
-- | |||
Ending balance, June 30, 2013
|
$ | 580,000 |
Cash
|
$ | 308,000 | ||
Property and equipment
|
3,841,000 | |||
Current assets
|
14,000 | |||
Accounts payable and accrued liabilities
|
(23,000 | ) | ||
Net assets
|
$ | 4,140,000 |
June 30, 2013
|
||||
Assets:
|
||||
Cash
|
$ | 99,000 | ||
Current assets
|
6,000 | |||
Property and equipment
|
3,856,000 | |||
Total assets
|
$ | 3,961,000 | ||
Liabilities:
|
||||
Accounts payable and accrued liabilities
|
$ | 38,000 | ||
Total liabilities
|
38,000 | |||
Net assets held for sale
|
$ | 3,923,000 |
For The Three Months Ended
June 30, 2013
|
For The Six
Months Ended
June 30, 2013
|
|||||||
Revenue
|
$ | 172,000 | $ | 340,000 | ||||
Expenses
|
(102,000 | ) | (171,000 | ) | ||||
Net Income
|
$ | 70,000 | $ | 169,000 |
Fair Value Measurements at Reporting Date Using
|
||||||||||||||||||||
Quoted Prices in Active Markets For Identical Assets (Level 1)
|
Significant Other Observable Inputs (Level 2)
|
Significant Unobservable Inputs (Level 3)
|
Balance
at 6/30/13
|
Carrying Value on Balance Sheet at 6/30/13
|
||||||||||||||||
Assets
|
||||||||||||||||||||
Investment in marketable securities - related party
|
$ | 886,000 | $ | -- | $ | -- | $ | 886,000 | $ | 886,000 | ||||||||||
Investment in real estate loans
|
$ | -- | $ | -- | $ | 8,520,000 | $ | 8,520,000 | $ | 8,555,000 |
Fair Value Measurements at Reporting Date Using
|
||||||||||||||||||||
Quoted Prices in Active Markets For Identical Assets (Level 1)
|
Significant Other Observable Inputs (Level 2)
|
Significant Unobservable Inputs (Level 3)
|
Balance at 12/31/2012
|
Carrying Value on Balance Sheet at 12/31/2012
|
||||||||||||||||
Assets
|
||||||||||||||||||||
Investment in marketable securities - related party
|
$ | 784,000 | $ | -- | $ | -- | $ | 784,000 | $ | 784,000 | ||||||||||
Investment in real estate loans
|
$ | -- | $ | -- | $ | 13,870,000 | $ | 13,870,000 | $ | 13,858,000 |
Investment in real estate loans
|
||||
Balance on January 1, 2013
|
$ | 13,870,000 | ||
Change in temporary valuation adjustment included in net income
|
||||
Net decrease in allowance for loan losses
|
21,000 | |||
Purchase and additions of assets
|
||||
New mortgage loans and mortgage loans bought
|
1,250,000 | |||
Sales, pay downs and reduction of assets
|
||||
Collections of principal and sales of investment in real estate loans
|
(4,664,000 | ) | ||
Sale of assets to related parties
|
(500,000 | ) | ||
Sale of assets to third parties
|
(1,410,000 | ) | ||
Temporary change in estimated fair value based on future cash flows
|
(47,000 | ) | ||
Balance on June 30, 2013, net of temporary valuation adjustment
|
$ | 8,520,000 |
Investment in real estate loans
|
||||
Balance on January 1, 2012
|
$ | 10,827,000 | ||
Change in temporary valuation adjustment included in net income (loss)
|
||||
Net decrease in allowance for loan losses
|
134,000 | |||
Transfer of allowance on real estate loans converted to unsecured notes receivable
|
1,062,000 | |||
Transfer of allowance on real estate loan to real estate held for sale
|
150,000 | |||
Transfer of allowance on real estate loan to asset held for sale
|
1,375,000 | |||
Reduction of allowance on real estate loan following payment of loan
|
1,101,000 | |||
Purchase and additions of assets
|
||||
New mortgage loans and mortgage loans bought
|
12,163,000 | |||
Transfer of real estate loans to real estate held for sale
|
(937,000 | ) | ||
Transfer of real estate loan to asset held for sale
|
(4,434,000 | ) | ||
Transfer of real estate loans converted to unsecured notes receivable
|
(989,000 | ) | ||
Sales, pay downs and reduction of assets
|
||||
Collections of principal and sales of investment in real estate loans
|
(8,688,000 | ) | ||
Temporary change in estimated fair value based on future cash flows
|
(31,000 | ) | ||
Balance on June 30, 2012, net of temporary valuation adjustment
|
$ | 11,733,000 |
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
Total Revenue:
|
2013
|
2012
|
$ Change
|
% Change
|
||||||||||||
Interest income from investment in real estate loans
|
$ | 275,000 | $ | 210,000 | $ | 65,000 | 31 | % | ||||||||
Recovery of allowance for doubtful notes receivable
|
33,000 | 29,000 | 4,000 | 14 | % | |||||||||||
Gain related to pay off of real estate loan, including recovery of allowance for loan loss
|
21,000 | 132,000 | (111,000 | ) | (84 | %) | ||||||||||
Total
|
$ | 329,000 | $ | 371,000 | $ | (42,000 | ) | (2 | %) |
Operating Expenses:
|
2013
|
2012
|
$ Change
|
% Change
|
||||||||||||
Management fees – related party
|
$ | 69,000 | $ | 69,000 | $ | -- | -- | |||||||||
Interest expense
|
1,000 | 1,000 | -- | -- | ||||||||||||
Professional fees
|
164,000 | 213,000 | (49,000 | ) | (23 | %) | ||||||||||
Insurance
|
53,000 | 55,000 | (2,000 | ) | (4 | %) | ||||||||||
Consulting
|
31,000 | 20,000 | 11,000 | 55 | % | |||||||||||
Other
|
20,000 | 26,000 | (6,000 | ) | (23 | %) | ||||||||||
Total
|
$ | 338,000 | $ | 384,000 | $ | (46,000 | ) | (12 | %) |
Non-operating income (loss):
|
2013
|
2012
|
$ Change
|
% Change
|
||||||||||||
Reversal of settlement reserve
|
16,000 | -- | 16,000 | 100 | % | |||||||||||
Recovery from settlement with loan guarantor
|
-- | 711,000 | (711,000 | ) | (100 | %) | ||||||||||
Total
|
$ | 16,000 | $ | 711,000 | $ | (695,000 | ) | (98 | %) |
Discontinued operations, net of income taxes:
|
2013
|
2012
|
$ Change
|
% Change
|
||||||||||||
Net gain on sale of real estate held for sale
|
$ | -- | $ | 2,000 | $ | (2,000 | ) | (100 | %) | |||||||
Income from assets held for sale
|
70,000 | 39,000 | 31,000 | 80 | % | |||||||||||
Write downs on real estate held for sale
|
-- | (316,000 | ) | 316,000 | 100 | % | ||||||||||
Expenses related to real estate held for sale
|
(8,000 | ) | (56,000 | ) | 48,000 | 86 | % | |||||||||
Total
|
$ | 62,000 | $ | (331,000 | ) | $ | 393,000 | 119 | % |
Total Revenue:
|
2013
|
2012
|
$ Change
|
% Change
|
||||||||||||
Interest income from investment in real estate loans
|
$ | 559,000 | $ | 352,000 | $ | 207,000 | 59 | % | ||||||||
Recovery of allowance for doubtful notes receivable
|
48,000 | 59,000 | (11,000 | ) | (19 | %) | ||||||||||
Gain related to pay off of real estate loan, including recovery of allowance for loan loss
|
21,000 | 188,000 | (167,000 | ) | (89 | %) | ||||||||||
Total
|
$ | 628,000 | $ | 599,000 | $ | 29,000 | 5 | % |
Operating Expenses:
|
2013
|
2012
|
$ Change
|
% Change
|
||||||||||||
Management fees – related party
|
$ | 138,000 | $ | 138,000 | $ | -- | -- | |||||||||
Interest expense
|
1,000 | 1,000 | -- | -- | ||||||||||||
Provision for loan losses
|
-- | 19,000 | (19,000 | ) | (100 | %) | ||||||||||
Professional fees
|
205,000 | 388,000 | (183,000 | ) | (48 | %) | ||||||||||
Insurance
|
109,000 | 111,000 | (2,000 | ) | (2 | %) | ||||||||||
Consulting
|
50,000 | 38,000 | 12,000 | 32 | % | |||||||||||
Other
|
48,000 | 79,000 | (31,000 | ) | (40 | %) | ||||||||||
Total
|
$ | 551,000 | $ | 774,000 | $ | (223,000 | ) | (29 | %) |
Non-operating income (loss):
|
2013
|
2012
|
$ Change
|
% Change
|
||||||||||||
Reversal of settlement reserve
|
16,000 | -- | 16,000 | 100 | % | |||||||||||
Settlement expense
|
-- | (23,000 | ) | 23,000 | 100 | % | ||||||||||
Recovery from settlement with loan guarantor
|
-- | 711,000 | (711,000 | ) | (100 | %) | ||||||||||
Total
|
$ | 16,000 | $ | 688,000 | $ | (672,000 | ) | (98 | %) |
Discontinued operations, net of income taxes:
|
2013
|
2012
|
$ Change
|
% Change
|
||||||||||||
Net gain on sale of real estate held for sale
|
$ | 26,000 | $ | 4,000 | $ | 22,000 | 550 | % | ||||||||
Income from assets held for sale
|
169,000 | 39,000 | 130,000 | 334 | % | |||||||||||
Write downs on real estate held for sale
|
-- | (316,000 | ) | 316,000 | 100 | % | ||||||||||
Expenses related to real estate held for sale
|
(29,000 | ) | (87,000 | ) | 58,000 | 67 | % | |||||||||
Total
|
$ | 166,000 | $ | (360,000 | ) | $ | 526,000 | 146 | % |
Changed Assumption
|
Increase (Decrease) in Interest Income
|
|||
Weighted average interest rate assumption increased by 1.0% or 100 basis points
|
$ | 136,000 | ||
Weighted average interest rate assumption increased by 5.0% or 500 basis points
|
$ | 680,000 | ||
Weighted average interest rate assumption increased by 10.0% or 1,000 basis points
|
$ | 1,361,000 | ||
Weighted average interest rate assumption decreased by 1.0% or 100 basis points
|
$ | (136,000 | ) | |
Weighted average interest rate assumption decreased by 5.0% or 500 basis points
|
$ | (680,000 | ) | |
Weighted average interest rate assumption decreased by 10.0% or 1,000 basis points
|
$ | (1,361,000 | ) |
Changed Assumption
|
Increase (Decrease) in Allowance for Loan Losses
|
|||
Allowance for loan losses assumption increased by 1.0% of loan portfolio
|
$ | 87,000 | ||
Allowance for loan losses assumption increased by 5.0% of loan portfolio
|
$ | 436,000 | ||
Allowance for loan losses assumption increased by 10.0% of loan portfolio
|
$ | 872,000 | ||
Allowance for loan losses assumption decreased by 1.0% of loan portfolio
|
$ | (87,000 | ) | |
Allowance for loan losses assumption decreased by 5.0% of loan portfolio
|
$ | (436,000 | ) | |
Allowance for loan losses assumption decreased by 10.0% of loan portfolio
|
$ | (872,000 | ) |
|
·
|
Declines in real estate market conditions that can cause a decrease in expected market value;
|
|
·
|
Discovery of undisclosed liens for community improvement bonds, easements and delinquent property taxes;
|
|
·
|
Lack of progress on real estate developments after we advance funds. We customarily utilize disbursement agents to monitor the progress of real estate developments and approve loan advances. After further inspection of the related property, progress on construction occasionally does not substantiate an increase in value to support the related loan advances;
|
|
·
|
Unanticipated legal or business issues that may arise subsequent to loan origination or upon the sale of foreclosed upon property; and
|
|
·
|
Appraisals, which are only opinions of value at the time of the appraisal, may not accurately reflect the value of the property.
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
ITEM 1.
|
LEGAL PROCEEDINGS
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY AND USE OF PROCEEDS
|
Period
|
(a) Total Number of Shares Purchased
|
(b) Average Price Paid per Share
|
(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
|
(d) Maximum Number of (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
|
||||||||||||
April 1, 2013 –April 30, 2013
|
-- | $ | -- | -- | $ | 4,013,475 | ||||||||||
May 1, 2013 – May 31, 2013
|
437,209 | 1.80 | 437,209 | 3,228,475 | ||||||||||||
June 1, 2013 – June 30, 2013
|
-- | -- | -- | 3,228,475 | ||||||||||||
Total
|
437,209 | $ | 1.80 | 437,209 | $ | 3,228,475 |
ITEM 6.
|
EXHIBITS
|
Exhibit No.
|
Description of Exhibits
|
|
2.1(1)
|
Agreement and Plan of Merger between Vestin Fund II, LLC and the Registrant
|
|
2.2(5)
|
Membership Interest Purchase Agreement between VRM I, VRM II and Northstar Hawaii, LLC
|
|
3.1(1)
|
Articles of Incorporation of the Registrant
|
|
3.2(1)
|
Bylaws of the Registrant
|
|
3.3(1)
|
Form of Articles Supplementary of the Registrant
|
|
4.1(1)
|
Reference is made to Exhibits 3.1, 3.2 and 3.3
|
|
4.2(2)
|
Specimen Common Stock Certificate
|
|
4.3(1)
|
Form of Rights Certificate
|
|
10.1(1)
|
Form of Management Agreement between Vestin Mortgage and the Registrant
|
|
10.2(1)
|
Form of Rights Agreement between the Registrant and the rights agent
|
|
10.3 (4)
|
Agreement between Strategix Solutions, LLC and Vestin Realty Mortgage I, Inc. for accounting services.
|
|
10.4 (6)
|
Died in Lieu
|
|
21.1(2)
|
List of subsidiaries of the Registrant
|
|
31.1
|
Section 302 Certification of Michael V. Shustek
|
|
31.2
|
Section 302 Certification of Tracee Gress
|
|
32
|
Certification Pursuant to 18 U.S.C. Sec. 1350
|
|
99.2R(3)
|
Vestin Realty Mortgage I, Inc. Code of Business Conduct and Ethics
|
|
101
|
The following material from the Company's quarterly report on Form 10-Q for the six months ended June 30, 2013, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of June 30, 2013 and December 31, 2012 (unaudited), (ii) Consolidated Statements of Operations for the three and six months ended June 30, 2013 and 2012 (unaudited) (iii) Consolidated Statements of Other Comprehensive Income for the three and six months ended June 30, 2013 and 2012 (unaudited) (iv) Consolidated Statement of Equity for the six months ended June 30, 2013 (unaudited) (v) Consolidated Statements of Cash Flows for the six months ended June 30, 2013 and 2012 (unaudited) and (vi) Notes to the Consolidated Financial Statements (unaudited)
|
(1)
|
Incorporated herein by reference to Post-Effective Amendment No. 3 to our Form S-4 Registration Statement filed on January 4, 2006 (File No. 333-125347)
|
|
(2)
|
Incorporated herein by reference to Post-Effective Amendment No. 4 to our Form S-4 Registration Statement filed on January 31, 2006 (File No. 333-125347)
|
|
(3)
|
Incorporated herein by reference to the Transition Report on Form 10-K for the ten month transition period ended April 30, 2006 filed on June 28, 2006 (File No. 000-51964)
|
|
(4)
|
Incorporated herein by reference to the Quarterly Report on Form 10-Q filed on May 8, 2009 (File No. 000-51964)
|
|
(5)
|
Incorporated herein by reference to the Form 8-K/A filed on November 14, 2011 (File No. 000-51964)
|
|
(6)
|
Incorporated herein by reference to the Form 10-K filed on March 16, 2012 (File No. 000-51964)
|
Vestin Realty Mortgage I, Inc.
|
||
By:
|
/s/ Michael V. Shustek
|
|
Michael V. Shustek
|
||
President and Chief Executive Officer
|
||
Date:
|
August 14, 2013
|
|
By:
|
/s/ Tracee Gress
|
|
Tracee Gress
|
||
Chief Financial Officer
|
||
Date:
|
August 14, 2013
|
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
/s/ Michael V. Shustek
|
Michael V. Shustek
|
Chief Executive Officer
|
Vestin Realty Mortgage I, Inc.
|
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
/s/ Tracee Gress
|
Tracee Gress
|
Chief Financial Officer
|
Vestin Realty Mortgage I, Inc.
|
|
(1)
|
The Registrant’s Report on Form 10-Q for the six months ended June 30, 2013, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
|
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
|
/s/ Michael V. Shustek
|
Michael V. Shustek
|
Chief Executive Officer
|
Vestin Realty Mortgage I, Inc.
|
/s/ Tracee Gress
|
Tracee Gress
|
Chief Financial Officer
|
Vestin Realty Mortgage I, Inc.
|
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LEGAL MATTERS INVOLVING THE MANAGER
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Notes to Financial Statements | |
LEGAL MATTERS INVOLVING THE MANAGER |
NOTE L LEGAL MATTERS INVOLVING THE MANAGER
The United States Securities and Exchange Commission (the Commission), conducted an investigation of certain matters related to us, our manager, Vestin Capital, VRM I, and Fund III. We fully cooperated during the course of the investigation. On September 27, 2006, the investigation was resolved through the entry of an Administrative Order by the Commission (the Order). Our manager, Vestin Mortgage and its Chief Executive Officer, Michael Shustek, as well as Vestin Capital (collectively, the Respondents), consented to the entry of the Order without admitting or denying the findings therein.
In the Order, the Commission found that the Respondents violated Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933 through the use of certain slide presentations in connection with the sale of units in Fund III and in our predecessor, Vestin Fund II, LLC. The Respondents consented to the entry of a cease and desist order, the payment by Mr. Shustek of a fine of $100,000 and Mr. Shusteks suspension from association with any broker or dealer for a period of six months, which expired in March 2007. In addition, the Respondents agreed to implement certain undertakings with respect to future sales of securities. We are not a party to the Order.
In addition to the matters described above, our manager is involved in a number of other legal proceedings concerning matters arising in connection with the conduct of its business activities. Our manager believes it has meritorious defenses to each of these actions and intends to defend them vigorously. Other than the matters described in Note L Legal Matters Involving The Company below, our manager believes that it is not a party to any pending legal or arbitration proceedings that would have a material adverse effect on our managers financial condition or results of operations or cash flows, although it is possible that the outcome of any such proceedings could have a material impact on the managers net income in any particular period. |
INVESTMENT IN MARKETABLE SECURITIES – RELATED PARTY
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Notes to Financial Statements | |
INVESTMENT IN MARKETABLE SECURITIES – RELATED PARTY |
NOTE E INVESTMENT IN MARKETABLE SECURITIES RELATED PARTY
As of June 30, 2013 and December 31, 2012, we owned 537,078 shares of VRM IIs common stock, representing approximately 4.7% of the total outstanding shares. The closing price of VRM IIs common stock on June 30, 2013, was $1.65 per share, resulting in an unrealized gain for the six months ended June 30, 2013.
During the three months ended June 30, 2013, the trading price for VRM IIs common stock ranged from $1.08 to $2.65 per share. We will continue to evaluate our investment in marketable securities on a quarterly basis. |
FAIR VALUE (Tables)
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes to Financial Statements | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tables present the valuation of our financial assets |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tables present the valuation of our financial assets |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Table presents the changes in our financial assets and liabilities |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Table presents the changes in our financial assets and liabilities |
|
LEGAL MATTERS INVOLVING THE COMPANY
|
6 Months Ended |
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Jun. 30, 2013
|
|
Notes to Financial Statements | |
LEGAL MATTERS INVOLVING THE COMPANY |
NOTE M LEGAL MATTERS INVOLVING THE COMPANY
On February 7, 2012, we, VRM II and Fund III entered into a Deed in Lieu Agreement with a borrower in lieu of the foreclosure of our subordinated secured loan which had matured on December 31, 2011, with a principal balance, net of allowance for loan loss, of approximately $9.9 million, of which our portion was approximately $0.8 million. Pursuant to the Deed in Lieu Agreement, our subsidiary 1701 Commerce, LLC (1701 Commerce) received a deed to the property. The property is operated as the Sheraton Hotel and Spa Fort Worth, Texas. On March 26, 2012, 1701 Commerce filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the Northern District of Texas, Ft. Worth Division, to reorganize its financial affairs and to avoid a pending foreclosure of the property that had been scheduled by the senior mortgage lien holder and to preserve and protect 1701 Commerces equity and the interests of the other creditors of the Hotel. Due to the uncertainty and disputes involving this property, we recorded this investment as Other Real Estate Owned on our balance sheet until August 23, 2012 when the Bankruptcy Court issued an order allowing the bankruptcy to proceed despite a motion to dismiss it and required 1701 Commerce to deposit $1 million as additional collateral with the court to be funded by us, VRM II and VF III. The sum of $0.2 million was expended from this account leaving the sum of $0.8 million. Within the next 45 days 1701 Commerce will seek the return of these funds as well as an additional $0.2 million which was deposited into a Texas State court account.
The Hotel was sold on July 17, 2013 for the sum of $49,300,000. The net proceeds of the sale and the cash on hand as of the date of the sale are to be held in a debtor in possession account subject to the Hotels operating accounts payable and the balance subject to claims made through the bankruptcy court.
We hold an interest of approximately 8%, VRM II holds an interest of approximately 90% and Fund III holds an interest of approximately 2% in 1701 Commerce.
In addition to the matters described above, we are involved in a number of other legal proceedings concerning matters arising in the ordinary course of our business activities. We believe we have meritorious defenses to each of these actions and intend to defend them vigorously. Other than the matters described above, we believe that we are not a party to any pending legal or arbitration proceedings that would have a material adverse effect on our financial condition or results of operations or cash flows, although it is possible that the outcome of any such proceedings could have a material impact on our operations in any particular period. |
INVESTMENT IN MARKETABLE SECURITIES – RELATED PARTY (Details Narrative) (USD $)
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3 Months Ended | |
---|---|---|
Jun. 30, 2013
|
Dec. 31, 2012
|
|
Notes to Financial Statements | ||
Common stock shares of VRM II's | 537,078 | |
Pepresenting approximately of the total outstanding shares | 4.7% | |
Per share | $ 1.65 | |
Price for VRM II’s common stock ranged | $ 1.08 | |
Price for VRM II’s common stock ranged | $ 2.65 |
INVESTMENTS IN REAL ESTATE LOANS (Details Narrative) (USD $)
|
Jun. 30, 2013
|
Dec. 31, 2012
|
---|---|---|
Notes to Financial Statements | ||
Weighted average interest rate on performing loans | 8.35% | |
Weighted average interest rate on performing loans | 8.21% | |
Maximum loan-to-value | 100% | |
Allowance for loan loss | 22% | |
Extensions on seven outstanding loans | $ 0.8 | |
Totaling approximately | $ 24.9 | |
Terms of the original loan agreements | $ 8.0 |
NOTE RECEIVABLE (Details Narrative) (USD $)
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Jul. 26, 2013
|
Jun. 30, 2013
|
Nov. 30, 2010
|
---|---|---|---|
Notes to Financial Statements | |||
Total approximately loans | $ 19.0 | ||
Our portion approximately | $ 12.6 | ||
Total allowances | $ 7.3 | ||
Our portion approximately | $ 6.6 | ||
Aggregate sales proceeds | $ 10.4 | ||
profits and sales proceeds | $ 10.4 | ||
total loans secured by real estate | $ 9.0 | ||
Our portion | $ 0.3 | ||
Sunset Road, with a balance | $ 1.5 | ||
Our portion | $ 1.4 | ||
Sunset Property | $ 15.0 | ||
Unsecured note receivable | $ 10.2 | ||
Our portion | $ 2.2 | ||
Our portion was approximately | $ 1.9 | ||
Property is less | $ 6.0 | ||
Approximate amount | $ 3.5 | ||
Unsecured note receivable with balance | $ 1.5 | ||
Our portion | $ 1.4 | ||
Property is less | $ 6.2 | ||
Assumed approximate amount | $ 3.2 | ||
Unsecured note receivable with balance | $ 1.5 | ||
Our portion | $ 1.4 | ||
Unsecured note receivable with balance | $ 1.5 | ||
Our portion | $ 1.4 |
FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF CREDIT RISK (Details Narrative) (USD $)
|
Jun. 30, 2013
|
Dec. 31, 2012
|
---|---|---|
Fair Value Disclosures [Abstract] | ||
Funds in excess | $ 6.9 | |
Funds in excess | $ 1.9 | |
Aggregate outstanding balance | $ 5.4 | |
Three and four loans, respectively, totaling approximately | $ 3.0 | |
Three and four loans, respectively, totaling approximately | $ 5.0 | |
Two and five loans, respectively, totaling approximately | $ 2.6 | |
Two and five loans, respectively, totaling approximately | $ 5.9 |
ORGANIZATION
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6 Months Ended |
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Jun. 30, 2013
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
ORGANIZATION |
NOTE A ORGANIZATION
Vestin Realty Mortgage I, Inc. (VRM I) formerly Vestin Fund I, LLC (Fund I) invests in loans secured by real estate through deeds of trust or mortgages (hereafter referred to collectively as deeds of trust and as defined in our management agreement (Management Agreement) as (Mortgage Assets). In addition we may invest in, acquire, manage or sell real property or acquire entities involved in the ownership or management of real property. We commenced operations in December 1999. References in this report to the Company, we, us, or our refer to Fund I with respect to the period prior to April 1, 2006 and to VRM I with respect to the period commencing on May 1, 2006.
We operated as a real estate investment trust (REIT) through December 31, 2011. We are not a mutual fund or an investment company within the meaning of the Investment Company Act of 1940, nor are we subject to any regulation thereunder. As a REIT, we were required to have a December 31 fiscal year end. We announced on March 28, 2012 that we have terminated our election to be treated as a REIT under the Internal Revenue Code of 1986, as amended (the Code), effective for the tax year ending December 31, 2012. Under the Code, we will not be able to make a new election to be taxed as a REIT during the four years following December 31, 2012. Pursuant to our charter, upon the determination by the Board of Directors that we should no longer qualify as a REIT, the restrictions on transfer and ownership of shares set forth in Article VII of our charter ceased to be in effect and, accordingly, shares of the Companys stock will no longer be subject to such restrictions.
Michael Shustek owns a significant majority of Vestin Mortgage, LLC, a Nevada limited liability company, which is our manager (the manager or Vestin Mortgage). On January 7, 2011, Vestin Mortgage converted from a corporation to a limited liability company. Michael Shustek, the CEO and managing member of our manager and CEO, President and a director of us, wholly owns Vestin Group, which is engaged in asset management, real estate lending and other financial services through its subsidiaries. The business of brokerage and placement of real estate loans have been performed by affiliated or non-affiliated mortgage brokers, including Advant Mortgage, LLC (MVP Mortgage), a licensed Nevada mortgage broker, which is indirectly wholly owned by Mr. Shustek.
Pursuant to a management agreement, our manager is responsible for managing our operations and implementing our business strategies on a day-to-day basis. Consequently, our operating results are dependent to a significant extent upon our managers ability and performance in managing our operations and servicing our assets.
Vestin Mortgage is also the manager of Vestin Realty Mortgage II, Inc. (VRM II), as the successor by merger to Vestin Fund II, LLC (Fund II) and Vestin Fund III, LLC (Fund III). VRM II has investment objectives similar to ours, and Fund III is in the process of an orderly liquidation of its assets.
During April 2009, we entered into an accounting services agreement with Strategix Solutions, LLC (Strategix Solutions), a Nevada limited liability company, for the provision of accounting and financial reporting services. Strategix Solutions also provides accounting and financial reporting services to VRM II and Fund III. Our CFO and other members of our accounting staff are employees of Strategix Solutions. Strategix Solutions is managed by LL Bradford and Company, LLC ("LL Bradford"), a certified public accounting firm that has provided non-audit accounting services to us. The principal manager of LL Bradford was a former officer of our manager from April 1999 through January 1, 2005. Strategix Solutions is owned by certain partners of LL Bradford, none of whom are currently or were previously officers of our manager. On January 14, 2013, Eric Bullinger resigned from his position as Chief Financial Officer of VRM I and VRM II and the equivalent of Chief Financial Officer of Fund III (hereafter referred to collectively as the Vestin Entities). On January 14, 2013, the Board of Directors appointed Tracee Gress as the Chief Financial Officer of the Vestin Entities (or the equivalent thereof in the case of Fund III). As used herein, management means our manager, its executive officers and the individuals at Strategix Solutions who perform accounting and financial reporting services on our behalf.
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FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF CREDIT RISK
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6 Months Ended |
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Jun. 30, 2013
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|
Fair Value Disclosures [Abstract] | |
FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF CREDIT RISK |
NOTE C FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF CREDIT RISK
Financial instruments consist of cash, interest and other receivables, notes receivable, accounts payable and accrued liabilities, due to/from related parties and notes payable. The carrying values of these instruments approximate their fair values due to their short-term nature. Marketable securities related party and investment in real estate loans are further described in Note I Fair Value.
Financial instruments with concentration of credit and market risk include cash, interest and other receivables, marketable securities - related party, notes receivable, accounts payable and accrued liabilities, due to/from related parties, notes payable, and loans secured by deeds of trust.
We maintain cash deposit accounts and certificates of deposit which, at times, may exceed federally-insured limits. To date, we have not experienced any losses. As of June 30, 2013 we had approximately $6.9 million in funds in excess, and as of December 31, 2012, we had approximately $1.9 million in funds in excess of the federally-insured limits.
As of June 30, 2013, 74% and 20% of our loans were in Nevada and Michigan, respectively, compared to 79%, and 12% at December 31, 2012, respectively. As a result of this geographical concentration of our real estate loans, the downturn in the local real estate markets in these states has had a material adverse effect on us.
As of June 30, 2013, the aggregate amount of loans to our three largest borrowers represented approximately 62% of our total investment in real estate loans. These real estate loans consisted of commercial loans, two of which are secured by property located in Nevada, and one of which is secured by property located in Michigan. All are first lien position with interest rates between 7.75% and 9.00%, and an aggregate outstanding balance of approximately $5.4 million. As of June 30, 2013, all three of our largest loans were considered performing.
The success of a borrowers ability to repay its real estate loan obligation in a large lump-sum payment may be dependent upon the borrowers ability to refinance the obligation or otherwise raise a substantial amount of cash. With the weakened economy, credit continues to be difficult to obtain and as such, many of our borrowers who develop and sell commercial real estate projects have been unable to complete their projects, obtain takeout financing or have been otherwise adversely impacted. In addition, an increase in interest rates over the loan rate applicable at origination of the loan may have an adverse effect on our borrowers ability to refinance.
Common Guarantors
As of June 30, 2013 and December 31, 2012, three and four loans, respectively, totaling approximately $3.0 million and $5.0 million, respectively, representing approximately 35.0% and 35.5%, respectively, of our portfolios total value, had a common guarantor. As of June 30, 2013, all of these loans are considered performing.
Additionally, As of June 30, 2013 and December 31, 2012 two and five loans, respectively, totaling approximately $2.6 million and $5.9 million, respectively, representing approximately 30.2% and 42.0%, respectively, of our portfolios total value had a common guarantor. As of June 30, 2013 both of these loans were considered performing.
For additional information regarding the above loans, see Note D Investments In Real Estate Loans. |
REAL ESTATE HELD FOR SALE
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Jun. 30, 2013
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Notes to Financial Statements | ||||||||||||||||||||||||||||||||||||
REAL ESTATE HELD FOR SALE |
NOTE F REAL ESTATE HELD FOR SALE
At June 30, 2013 we held five properties with a total carrying value of approximately $0.6 million, which were acquired through foreclosure and recorded as investments in REO. Our REO are accounted for at the lower of cost or fair value less costs to sell with fair value based on appraisals and knowledge of local market conditions. We seek to sell properties acquired through foreclosure as quickly as circumstances permit taking into account current economic conditions.
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INVESTMENTS IN REAL ESTATE LOANS
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Jun. 30, 2013
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Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INVESTMENTS IN REAL ESTATE LOANS |
NOTE D INVESTMENTS IN REAL ESTATE LOANS
As of June 30, 2013 and December 31, 2012, most of our loans provided for interest only payments with a balloon payment of principal payable and any accrued interest payable in full at the end of the term.
In addition, we may invest in real estate loans that require borrowers to maintain interest reserves funded from the principal amount of the loan for a period of time. At June 30, 2013 and December 31, 2012, we had no investments in real estate loans that had interest reserves.
Loan Portfolio
As of June 30, 2013, we had five available real estate loan products consisting of commercial, construction, acquisition and development, land and residential. The effective interest rates on all product categories range from 6% to 10% which includes performing loans that are being fully or partially accrued and will be payable at maturity. Revenue by product will fluctuate based upon relative balances during the period.
Investments in real estate loans as of June 30, 2013, were as follows:
Investments in real estate loans as of December 31, 2012, were as follows:
The Weighted Average Interest Rate as shown above is based on the contractual terms of the loans for the entire portfolio including non-performing loans. The weighted average interest rate on performing loans only, as of June 30, 2013 and December 31, 2012, was 8.35% and 8.21%, respectively. Please see Asset Quality and Loan Reserves below for further information regarding performing and non-performing loans.
Loan-to-value ratios are generally based on the most recent appraisals and may not reflect subsequent changes in value and include allowances for loan losses. Recognition of allowance for loan losses will result in a maximum loan-to-value ratio of 100% per loan.
The following is a schedule of priority of real estate loans as of June 30, 2013 and December 31, 2012:
The following is a schedule of contractual maturities of investments in real estate loans as of June 30, 2013:
The following is a schedule by geographic location of investments in real estate loans as of June 30, 2013 and December 31, 2012:
Balance Sheet Reconciliation
The following table reconciles the balance of the loan portfolio to the amount shown on the accompanying Consolidated Balance Sheets.
Non-Performing Loans
As of June 30, 2013, we had no loans considered non-performing (i.e., based on current information and events, it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement or when the payment of interest is 90 days past due).
Asset Quality and Loan Reserves
Losses may occur from investing in real estate loans. The amount of losses will vary as the loan portfolio is affected by changing economic conditions and the financial condition of borrowers.
The conclusion that a real estate loan is uncollectible or that collectability is doubtful is a matter of judgment. On a quarterly basis, our manager evaluates our real estate loan portfolio for impairment. The fact that a loan is temporarily past due does not necessarily mean that the loan is non-performing. Rather, all relevant circumstances are considered by our manager to determine impairment and the need for specific reserves. Such evaluation, which includes a review of all loans on which full collectability may not be reasonably assured, considers among other matters:
Based upon this evaluation, a determination is made as to whether the allowance for loan losses is adequate to cover any potential losses on an individual loan basis; we do not have a general allowance for loan losses. Additions to the allowance for loan losses are made by charges to the provision for loan loss.
As of June 30, 2013, our ratio of total allowance for loan losses to total loans with an allowance for loan loss is 22%. The following is a breakdown of allowance for loan losses related to performing and non-performing loans as of June 30, 2013 and December 31, 2012.
Our manager evaluated our loans and, based on current estimates with respect to the value of the underlying collateral, believes that such collateral is sufficient to protect us against further losses of principal. However, such estimates could change or the value of the underlying real estate could decline. Our manager will continue to evaluate our loans in order to determine if any other allowance for loan losses should be recorded.
Specific Reserve Allowances
As of June 30, 2013, we have provided a specific reserve allowance for one performing loan based on updated appraisals of the underlying collateral and/or our evaluation of the borrower. The following table is a roll-forward of the allowance for loan losses for the six months ended June 30, 2013 and 2012 by loan type.
Troubled Debt Restructuring
As of June 30, 2013 and December 31, 2012 we had one loan totaling approximately $0.8 that met the definition of a Troubled Debt Restructuring or TDR. When the Company modifies the terms of an existing loan that is considered TDR, it is considered performing as long as it is in compliance with the modified terms of the loan agreement. If the modification calls for deferred interest, it is recorded as interest income as cash is collected. Impairment on these loans is generally determined by the lesser of the value of the underlying collateral or the present value of expected future cash flows. During the previous 12 months there have been no loans that became TDR loans.
The following is a breakdown of our TDR loans that were considered performing and non-performing as of June 30, 2013 and December 31, 2012:
Extensions
As of June 30, 2013, our manager had granted extensions on seven outstanding loans, totaling approximately $24.9 million, of which our portion was approximately $8.0 million, pursuant to the terms of the original loan agreements, which permit extensions by mutual consent, or as part of a TDR. Such extensions are generally provided on loans where the original term was 12 months or less and where a borrower requires additional time to complete a construction project or negotiate take-out financing. Our manager generally grants extensions when a borrower is in compliance with the material terms of the loan, including, but not limited to the borrowers obligation to make interest payments on the loan. In addition, if circumstances warrant, our manager may extend a loan that is in default as part of a work out plan to collect interest and/or principal. |
REAL ESTATE HELD FOR SALE (Details Narrative) (USD $)
|
Jun. 30, 2013
|
---|---|
Notes to Financial Statements | |
We held five properties with a total carrying value | $ 0.6 |
LEGAL MATTERS INVOLVING THE COMPANY (Details Narrative) (USD $)
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Jul. 17, 2013
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Dec. 31, 2011
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---|---|---|
Notes to Financial Statements | ||
Allowance for loan loss | $9.9 | |
Our portion | $ 0.8 | |
Collateral with the court | $ 0.2 | |
Expended from this account | $ 0.8 | |
Deposited into a Texas State court account | $ 0.2 | |
Proceeds of the sale | $ 49,300,000 | |
Hold an interest of approximately | 8% | |
Hold an interest of approximately | 90% | |
Hold an interest of approximately | 2% |