Vestin Realty Mortgage I, Inc. - FORM 10-Q

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EXCEL - IDEA: XBRL DOCUMENT - Vestin Realty Mortgage I, Inc.	Financial_Report.xls

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark one)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2013

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission File Number: 000-51964

VESTIN REALTY MORTGAGE I, INC.

(Exact name of registrant as specified in its charter)

MARYLAND		20-4028839
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification No.)

8880 W. SUNSET ROAD, SUITE 200, LAS VEGAS, NEVADA 89148

(Address of Principal Executive Offices)(Zip Code)

Registrant’s Telephone Number: 702.227.0965

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No []

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [ X ] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer []	Accelerated filer []
Non-accelerated filer [] (Do not check if a smaller reporting company)	Smaller reporting company [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [] No [X]

As of November 14, 2013, there were 5,781,935 shares of the Company’s Common Stock outstanding.

Table of Contents

TABLE OF CONTENTS

		Page

Part I	FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements (Unaudited)	1

	Consolidated Balance Sheets as of September 30, 2013 and December 31, 2012	1

	Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2013 and 2012	2

	Consolidated Statements of Other Comprehensive Income for the Three and Nine Months Ended September 30, 2013 and 2012	3

	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2013 and 2012	4

	Notes to Consolidated Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

Item 4.	Controls and Procedures	34

Part II	OTHER INFORMATION

Item 1.	Legal Proceedings	35

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35

Item 6.	Exhibits	36

	SIGNATURES	37

	Exhibit 31.1

	Exhibit 31.2

	Exhibit 32

Table of Contents

PART I - FINANCIAL INFORMATION

ITEM 1.

CONSOLIDATED FINANCIAL STATEMENTS

VESTIN REALTY MORTGAGE I, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
	September 30, 2013			December 31, 2012
Assets
Cash and cash equivalents	$	3,962,000		$	2,482,000
Investment in marketable securities - related party		929,000			784,000
Investment in marketable securities		1,239,000			--
Investment in MVP REIT		470,000			--
Investment in equity method investee		3,082,000			--
Investment in equity method investee held for sale		1,367,000			--
Interest and other receivables, net of allowance of $0 at September 30, 2013 and December 31, 2012		7,000			16,000
Notes receivable, net of allowance of $1,355,000 at September 30, 2013 and $1,894,000 at December 31, 2012		--			--
Real estate held for sale		568,000			580,000
Investment in real estate loans, net of allowance for loan losses of $750,000 at September 30, 2013 and $183,000 at December 31, 2012		5,463,000			13,858,000
Assets held for sale		4,042,000			4,398,000
Other assets		138,000			76,000

Total assets	$	21,267,000		$	22,194,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable and accrued liabilities	$	14,000		$	97,000
Due to related parties		5,000			216,000
Notes payable		71,000			19,000
Liabilities related to asset held for sale		39,000			43,000
Deferred gain on sale of HFS		--			10,000

Total liabilities		129,000			385,000

Commitments and contingencies

Stockholders' equity
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued		--			--
Treasury stock, at cost, no shares at September 30, 2013 and December 31, 2012		--			--
Common stock, $0.0001 par value; 25,000,000 shares authorized; 5,781,935 issued and outstanding at September 30, 2013 and 6,340,859 shares issued and outstanding at December 31, 2012		1,000			1,000
Additional paid-in capital		60,296,000			61,217,000
Accumulated deficit		(40,551,000	)		(40,702,000	)
Accumulated other comprehensive income		347,000			156,000
Total stockholders’ equity before non-controlling interest – related party		20,093,000			20,672,000
Noncontrolling interest – related party		1,045,000			1,137,000
Total equity		21,138,000			21,809,000

Total liabilities and stockholders' equity	$	21,267,000		$	22,194,000

The accompanying notes are an integral part of these consolidated statements.

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VESTIN REALTY MORTGAGE I, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

	For The Three Months Ended September 30,						For The Nine Months Ended September 30,
	2013			2012			2013			2012
Revenues
Interest income from investment in real estate loans	$	173,000		$	291,000		$	732,000		$	643,000
Gain related to pay off of notes receivable, including recovery of allowance for notes receivable		491,000			30,000			539,000			89,000
Gain related to pay off of real estate loan, including recovery of allowance for loan loss		--			22,000			21,000			210,000
Total revenues		664,000			343,000			1,292,000			942,000
Operating expenses
Management fees - related party		69,000			61,000			207,000			199,000
Provision for loan loss		588,000			21,000			588,000			40,000
Acquisition expense		7,000			--			7,000			--
Interest expense		2,000			2,000			3,000			3,000
Professional fees		94,000			135,000			299,000			523,000
Insurance		53,000			55,000			162,000			166,000
Consulting		19,000			20,000			69,000			58,000
Other		15,000			41,000			63,000			121,000
Total operating expenses		847,000			335,000			1,398,000			1,110,000
Income (loss) from operations		(183,000	)		8,000			(106,000	)		(168,000	)
Non-operating income (loss)
Gain on sale of marketable securities		79,000			3,000			79,000			3,000
Dividend income		3,000			--			3,000			--
Reversal of settlement reserve		--			--			16,000			--
Recovery from settlement with loan guarantor		--			267,000			--			978,000
Loss from investment in equity method investee		(25,000	)		--			(25,000	)		--
Settlement income		--			55,000			--			55,000
Settlement expense		--			--			--			(23,000	)
Total non-operating income		57,000			325,000			73,000			1,013,000
Provision for income taxes		--			--			--			--
Income from continuing operations		(126,000	)		333,000			(33,000	)		845,000
Discontinued operations, net of income taxes
Net gain (loss) on sale of real estate held for sale		(1,000	)		--			25,000			4,000
Recovery from 1701 Commerce		19,000			--			19,000			--
Loss from investment in equity method investee		(9,000	)		--			(9,000	)		--
Expenses related to real estate held for sale		(4,000	)		(29,000	)		(33,000	)		(116,000	)
Income from asset held for sale, net of income taxes		79,000			79,000			248,000			118,000
Write-downs on real estate held for sale		--			--			--			(316,000	)
Total income (loss) from discontinued operations		84,000			50,000			250,000			(310,000	)
Income (loss) before provision for income taxes		(42,000	)		383,000			217,000			535,000

Net income		(42,000	)		383,000			217,000			535,000
Net income attributable to non-controlling interest – related parties		21,000			21,000			65,000			31,000
Net income (loss) attributable to common stockholders	$	(63,000	)	$	362,000		$	152,000		$	504,000

Basic and diluted income (loss) per weighted average common share
Continuing operations		( 0.02	)		0.05			(0.01	)		0.14
Discontinued operations		0.01			0.01			0.03			(0.05	)
Total basic and diluted income (loss) per weighted average common share	$	(0.01	)	$	0.06		$	0.02		$	0.09
Dividends declared per common share		--			--			--			--
Weighted average common shares outstanding		5,874,818			6,340,859			6,121,921			6,340,859

The accompanying notes are an integral part of these consolidated statements.

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VESTIN REALTY MORTGAGE I, INC.

CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

	For The Three Months Ended September 30,					For The Nine Months Ended September 30,
	2013			2012		2013		2012

Net income (loss)	$	(42,000	)	$	383,000	$	217,000	$	535,000

Unrealized holding gain on available-for-sale securities		46,000			--		46,000		--
Unrealized holding gain on available-for-sale securities – related party		43,000			219,000		145,000		199,000

Comprehensive income		47,000			602,000		408,000		734,000
Net income attributable to noncontrolling interest		21,000			21,000		65,000		31,000

Comprehensive income attributable to Vestin Realty Mortgage I, Inc.	$	26,000		$	581,000	$	343,000	$	703,000

The accompanying notes are an integral part of these consolidated statements.

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VESTIN REALTY MORTGAGE I, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
	For The Nine Months Ended September 30,
	2013			2012
Cash flows from operating activities:
Net income	$	217,000		$	535,000
Adjustments to reconcile net income to net cash used in operating activities:
Write-downs on real estate held for sale		--			316,000
Recovery of allowance for doubtful notes receivable		(539,000	)		(89,000	)
Provision for loan loss		588,000			40,000
Gain related to recovery of allowance for loan loss		(21,000	)		(210,000	)
Gain on sale of real estate held for sale		(25,000	)		(4,000	)
Gain on sale of marketable securities		(79,000	)		--
Gain on sale of marketable securities- related party		--			(3,000	)
Loss from equity method investee		25,000			--
Loss from equity method investee held for sale		9,000			--
Recovery from 1701 Commerce		(19,000	)		--
Settlement income		--			(55,000	)
Gain related to recovery from settlement with loan guarantor		--			(978,000	)
Change in operating assets and liabilities:
Interest and other receivables		9,000			(5,000	)
Due to/from related parties		(211,000	)		--
Deferred gain on sale of HFS		(10,000	)		21,000
Other assets		96,000			103,000
Asset held for sale, net of liabilities		(248,000	)		(118,000	)
Recovery of settlement reserve		(16,000	)		--
Accounts payable and accrued liabilities		(43,000	)		(44,000	)
Net cash used in operating activities		(267,000	)		(533,000	)
Cash flows from investing activities:
Investments in real estate loans		(2,317,000	)		(14,169,000	)
Proceeds from loan payoffs		8,235,000			6,689,000
Sale of investments in real estate loans to:
VRM II		1,200,000			(1,000,000	)
MVP REIT		500,000			--
Other related parties		210,000			(300,000	)
Proceeds from settlement with loan guarantor		--			978,000
Proceeds from sale of real estate held for sale		--			133,000
Proceeds related to nonrefundable earnest money deposit on real estate held for sale		12,000			5,000
Proceeds from recovery from 1701 Commerce		19,000			--
Purchase of marketable securities		(1,829,000	)		--
Proceeds from sale of marketable security		715,000			--
Proceeds from sale of marketable security- related party		--			26,000
Proceeds from settlement income		--			55,000
Investment in equity method investee		(3,107,000	)		--
Investment in equity method investee held for sale		(1,376,000	)		--
Investment in asset held for sale		--			(80,000	)
Proceeds from notes receivable		70,000			89,000
Sale of investments in real estate loans from third parties		--			2,012,000
Net cash provided by (used in) investing activities		2,332,000			(5,562,000	)
Cash flows from financing activities:
Principal payments on notes payable		(106,000	)		(129,000	)
Purchase of treasury stock, at cost		(922,000	)		--
Proceeds from distribution from assets held for sale		443,000			--
Net cash used in financing activities		(585,000	)		(129,000	)
NET CHANGE IN CASH		1,480,000			(6,224,000	)
Cash and cash equivalents, beginning of period		2,482,000			6,758,000
Cash and cash equivalents, end of period	$	3,962,000		$	534,000
Supplemental disclosures of cash flows information:
Interest expense	$	3,000		$	3,000
Non-cash investing and financing activities:
Write-off of interest receivable and related allowance	$	--		$	228,000
Other real estate owned through deed in lieu, net of prior allowance	$	--		$	787,000
Note payable relating to prepaid D&O insurance	$	158,000		$	166,000
Adjustment to note receivable and related allowance	$	469,000		$	1,087,000
Asset held for sale acquired through foreclosure, net of prior allowance	$	--		$	(3,059,000	)
Unrealized gain on marketable securities	$	46,000		$	--
Unrealized gain on marketable securities - related party	$	43,000		$	199,000

The accompanying notes are an integral part of these consolidated statements.

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VESTIN REALTY MORTGAGE I, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(UNAUDITED)

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 Company’s 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. 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 manager’s 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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NOTE B — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The consolidated financial statements of the Company have been prepared in accordance with the accounting principles generally accepted in the United States of America (“GAAP”). In the opinion of management, all normal recurring adjustments considered necessary to give a fair presentation of operating results for the periods presented have been included. Interim results are not necessarily indicative of results for a full year. The information included in this Form 10-Q should be read in conjunction with information included in the 2012 annual report filed on Form 10-K.

Management Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents include interest-bearing and non-interest-bearing bank deposits, money market accounts, short-term certificates of deposit with original maturities of three months or less, and short-term instruments with a liquidation provision of one month or less.

Revenue Recognition

Interest is recognized as revenue on performing loans when earned according to the terms of the loans, using the effective interest method. We do not accrue interest income on loans once they are determined to be non-performing. A loan is non-performing when, 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. Cash receipts will be allocated to interest income, except when such payments are specifically designated by the terms of the loan as principal reduction. Interest is fully allowed for on impaired loans and is recognized on a cash basis method.

All leases are accounted for as non-cancelable operating leases. We recognize rental revenue on a straight-line basis over the term of the lease. Rental income related to the leases is recognized on an accrual basis in accordance with the terms of the leases. Advanced receipts of rental income are deferred and classified as liabilities until earned.

Investments in Real Estate Loans

We may, from time to time, acquire or sell investments in real estate loans from or to our manager or other related parties pursuant to the terms of our Management Agreement without a premium. The primary purpose is to either free up capital to provide liquidity for various reasons, such as loan diversification, or place excess capital in investments to maximize the use of our capital. Selling or buying loans allows us to diversify our loan portfolio within these parameters. Due to the short-term nature of the loans we make and the similarity of interest rates in loans we normally would invest in, the fair value of a loan typically approximates its carrying value. Accordingly, discounts or premiums typically do not apply upon sales of loans and therefore, generally no gain or loss is recorded on these transactions, regardless of whether to a related or unrelated party.

Investments in real estate loans are secured by deeds of trust or mortgages. Generally, our real estate loans require interest only payments with a balloon payment of the principal at maturity. We have both the intent and ability to hold real estate loans until maturity and therefore, real estate loans are classified and accounted for as held for investment and are carried at amortized cost. Loans sold to or purchased from affiliates are accounted for at the principal balance and no gain or loss is recognized by us or any affiliate. Loan-to-value ratios are initially based on appraisals obtained at the time of loan origination and are updated when new appraisals are received or when management’s assessment of the value has changed, to reflect subsequent changes in value estimates. Original appraisals are generally dated within 12 months of the date of loan origination and may be commissioned by the borrower.

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The Company considers a loan to be impaired when, based upon current information and events, it believes it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. The Company’s impaired loans include troubled debt restructuring, and performing and non-performing loans in which full payment of principal or interest is not expected. The Company calculates an allowance required for impaired loans based on the present value of expected future cash flows discounted at the loan’s effective interest rate, or at the loan’s observable market price or the fair value of its collateral.

Loans that have been modified from their original terms are evaluated to determine if the loan meets the definition of a Troubled Debt Restructuring (“TDR”) as defined by Accounting Standards Codification (“ASC”) 310-40. When the Company modifies the terms of an existing loan that is considered a 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.

Allowance for Loan Losses

We maintain an allowance for loan losses on our investments in real estate loans for estimated credit impairment. Our manager’s estimate of losses is based on a number of factors including the types and dollar amounts of loans in the portfolio, adverse situations that may affect the borrower’s ability to repay, prevailing economic conditions and the underlying collateral securing the loan. Additions to the allowance are provided through a charge to earnings and are based on an assessment of certain factors, which may indicate estimated losses on the loans. Actual losses on loans are recorded as a charge-off or a reduction to the allowance for loan losses. Generally, subsequent recoveries of amounts previously charged off are added back to the allowance and included as income.

Estimating allowances for loan losses requires significant judgment about the underlying collateral, including liquidation value, condition of the collateral, competency and cooperation of the related borrower and specific legal issues that affect loan collections or taking possession of the property. As a commercial real estate lender willing to invest in loans to borrowers who may not meet the credit standards of other financial institutional lenders, the default rate on our loans could be higher than those generally experienced in the real estate lending industry. We and our manager generally approve loans more quickly than other real estate lenders and, due to our expedited underwriting process; there is a risk that the credit inquiry we perform will not reveal all material facts pertaining to a borrower and the security.

Additional facts and circumstances may be discovered as we continue our efforts in the collection and foreclosure processes. This additional information often causes management to reassess its estimates. In recent years, we have revised estimates of our allowance for loan losses. Circumstances that have and may continue to cause significant changes in our estimated allowance include, but are not limited to:

Declines in real estate market conditions, which 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 property; and

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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Discontinued Operations

We have reclassified for all periods presented in the accompanying consolidated statements of operations, the amounts related to discontinued operations and real estate held for sale, in accordance with the applicable accounting criteria. In addition, the assets and liabilities related to the discontinued operations are reported separately in the accompanying consolidated balance sheets as real estate held for sale, assets held for sale, and liabilities related to assets held for sale.

Real Estate Held for Sale

Real estate held for sale (“REO”) includes real estate acquired through foreclosure and will be carried at the lower of the recorded amount, inclusive of any senior indebtedness, or the property's estimated fair value, less estimated costs to sell, with fair value based on appraisals and knowledge of local market conditions. While pursuing foreclosure actions, we seek to identify potential purchasers of such property. We seek to sell properties acquired through foreclosure as quickly as circumstances permit, taking into account current economic conditions. The carrying values of REO are assessed on a regular basis from updated appraisals, comparable sales values or purchase offers.

Management classifies REO when the following criteria are met:

Management commits to a plan to sell the properties;

The property is available for immediate sale in its present condition subject only to terms that are usual and customary;

An active program to locate a buyer and other actions required to complete a sale have been initiated;

The sale of the property is probable;

The property is being actively marketed for sale at a reasonable price; and

Withdrawal or significant modification of the sale is not likely.

Classification of Operating Results from Real Estate Held for Sale

Generally, operating results and cash flows from long-lived assets held for sale are to be classified as discontinued operations as a separately stated component of net income. Our operations related to REO are separately identified in the accompanying consolidated statements of operations.

Secured Borrowings

Secured borrowings provide an additional source of capital for our lending activity. Secured borrowings allow us to increase the diversification of our loan portfolio and to invest in loans that we might not otherwise invest in. We do not receive any fees for entering into secured borrowing arrangements; however, we may receive revenue for any differential of the interest spread, if applicable. Loans in which unaffiliated investors have participated through inter-creditor agreements (“Inter-creditor Agreements”) are accounted for as secured borrowings.

The Inter-creditor Agreements provide us additional funding sources for real estate loans whereby an unaffiliated investor (the “Investor”) may participate on a non-pari-passu basis in certain real estate loans with us and/or VRM II (collectively, the “Lead Lenders”). In the event of borrower non-performance, the Inter-creditor Agreements generally provide that the Lead Lenders must repay the Investor’s loan amount either by (i) continuing to remit to the Investor the interest due on the participated loan amount; (ii) substituting an alternative loan acceptable to the Investor; or (iii) repurchasing the participation from the Investor for the outstanding balance plus accrued interest.

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Additionally, an Investor may participate in certain loans with the Lead Lenders through Participation Agreements. In the event of borrower non-performance, the Participation Agreement may allow the Investor to be repaid up to the amount of the Investor’s investment prior to the Lead Lender being repaid. Real estate loan financing under the Participation Agreements are also accounted for as a secured borrowing. We do not receive any revenues for entering into secured borrowing arrangements.

Investment in Marketable Securities and Investment in Marketable Securities – Related Party

Investment in marketable securities and investment in marketable securities– related party consists of stock in VRM II and shares a publicly traded company that invests in loans collateralized by real estate. The securities are stated at fair value as determined by the closing market price as of September 30, 2013 and December 31, 2012. All securities are classified as available-for-sale.

We are required to evaluate our available-for-sale investment for other-than-temporary impairment charges. We will determine when an investment is considered impaired (i.e., decline in fair value below its amortized cost), and evaluate whether the impairment is other-than-temporary (i.e., investment value will not be recovered over its remaining life). If the impairment is considered other-than-temporary, we will recognize an impairment loss equal to the difference between the investment’s basis and its fair value.

According to the SEC Staff Accounting Bulletin, Topic 5: Miscellaneous Accounting, M - Other Than Temporary Impairment of Certain Investments in Debt and Equity Securities, there are numerous factors to be considered in such an evaluation and their relative significance will vary from case to case. The following are a few examples of the factors that, individually or in combination, indicate that a decline is other than temporary and that a write-down of the carrying value is required:

The length of the time and the extent to which the market value has been less than cost;

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

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.

Basic and Diluted Earnings Per Common Share

Basic earnings per share (“EPS”) is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding. Diluted EPS is similar to basic EPS except that the weighted average number of common shares outstanding is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been exercised. We had no outstanding common share equivalents during the nine months ended September 30, 2013 and 2012.

Common Stock Dividends

During June 2008, our Board of Directors decided to suspend the payment of dividends. Our Board of Directors will closely monitor our operating results in order to determine when dividends should be reinstated; however, we do not expect them to be reinstating dividends in the foreseeable future.

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Treasury Stock

On February 21, 2008, our Board of Directors authorized the repurchase of up to $5 million worth of our common stock. Depending upon market conditions, shares may be repurchased from time to time at prevailing market prices through open market or privately negotiated transactions. We are not obligated to purchase any shares. Subject to applicable securities laws, including SEC Rule 10b-18, repurchases may be made at such times and in such amounts, as our management deems appropriate. The repurchases will be funded from our available cash. During the nine months ended September 2013, we purchased 558,924 shares of treasury stock for approximately $0.9 million. Under the Maryland General Corporation Law, shares of its own stock acquired by a corporation constitute authorized but unissued shares.

Segments

We are currently authorized to operate two reportable segments, investments in real estate loans and investments in real property. As of September 30, 2013, we had not commenced investing in real property.

Our objective is to invest approximately 97% of our assets in real estate loans and real estate investments, while maintaining approximately 3% as a working capital cash reserve. Current market conditions have impaired our ability to be fully invested in real estate loans and real estate investments. As of September 30, 2013, approximately 26% of our assets, net of allowance for loan losses, are classified as investments in real estate loans.

Principles of Consolidation

Our consolidated financial statements include the accounts of VRM I, TRS I, our wholly owned subsidiary, and VREO XXV, LLC, in which we have a controlling interest. All significant intercompany balances and transactions have been eliminated in consolidation.

Business Combinations

In December 2007, the Financial Accounting Standards Board (FASB) revised the authoritative guidance for business combinations, establishing principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired (including goodwill), the liabilities assumed, and any noncontrolling interest in the acquiree. Subsequently, on April 1, 2009, the FASB amended and clarified certain aspects of its authoritative guidance on initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets and liabilities arising from contingencies in a business combination. We apply the FASB authoritative guidance to all business combinations for which the acquisition date is on or after January 1, 2009, and to certain future income tax effects related to our prior business combinations, should they arise.

Non-controlling Interests

The FASB issued authoritative guidance for non-controlling interests in December 2007, which establishes accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. The guidance clarifies that a non-controlling interest in a subsidiary, which is sometimes referred to as an unconsolidated investment, is an ownership interest in the consolidated entity that should be reported as a component of equity in the consolidated financial statements. Among other requirements, the guidance requires consolidated net income to be reported at amounts attributable to both the parent and the non-controlling interest. It also requires disclosure, on the face of the consolidated income statement, of the amounts of consolidated net income attributable to the parent and to the non-controlling interest.

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Income Taxes

The Company accounts for its income taxes under the assets and liabilities method, which requires recognition of deferred tax assets and liabilities for future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

The Company records net deferred tax assets to the extent the Company believes these assets will more likely than not be realized. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. A valuation allowance is established against deferred tax assets that do not meet the criteria for recognition. In the event the Company were to determine that it would be able to realize deferred income tax assets in the future in excess of their net recorded amount, they would make an adjustment to the valuation allowance which would reduce the provision for income taxes.

The Company follows the accounting guidance which provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. Income tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized initially and in subsequent periods. Also included is guidance on measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

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 K – Fair Value.

Financial instruments with concentration of credit and market risk include cash, interest and other receivables, marketable securities and 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 September 30, 2013, we had approximately $2.9 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 September 30, 2013, 50% and 28% 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 September 30, 2013, the aggregate amount of loans to our three largest borrowers represented approximately 63% of our total investment in real estate loans. These real estate loans consisted of commercial loans, secured by property located in Nevada, Michigan, Texas and Arizona. All are first lien positions with interest rates between 7.75% and 9.00%, and an aggregate outstanding balance of approximately $3.9 million. As of September 30, 2013, all three of our largest loans were considered performing.

The success of a borrower’s ability to repay its real estate loan obligation in a large lump-sum payment may be dependent upon the borrower’s 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 borrower’s ability to refinance.

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Common Guarantors

As of September 30, 2013 and December 31, 2012, there were four loans totaling approximately $2.9 million and $5.0 million, respectively, representing approximately 46.3% and 35.5%, respectively, of our portfolio’s total value, which had a common guarantor. As of September 30, 2013, all of these loans are considered performing.

For additional information regarding the above loans, see Note D – Investments In Real Estate Loans.

NOTE D — INVESTMENTS IN REAL ESTATE LOANS

As of September 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 September 30, 2013 and December 31, 2012, we had no investments in real estate loans that had interest reserves.

Loan Portfolio

As of September 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 6.0% 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 September 30, 2013, were as follows:

Loan Type	Number of Loans		Balance *		Weighted Average Interest Rate			Portfolio Percentage			Current Weighted Average Loan-To-Value, Net of Allowance for Loan Losses

Commercial		8	$	6,119,000		8.52	%		98.49	%		65.19	%
Land		1		94,000		6.00	%		1.51	%		49.67	%
Total		9	$	6,213,000		8.49	%		100.00	%		64.92	%

Investments in real estate loans as of December 31, 2012, were as follows:

Loan Type	Number of Loans		Balance *		Weighted Average Interest Rate			Portfolio Percentage			Current Weighted Average Loan-To-Value, Net of Allowance for Loan Losses

Commercial		13	$	13,947,000		8.23	%		99.33	%		64.21	%
Land		1		94,000		6.00	%		0.67	%		53.81	%
Total		14	$	14,041,000		8.21	%		100.00	%		66.79	%

*	Please see Balance Sheet Reconciliation below.

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 September 30, 2013 and December 31, 2012, was 8.49% and 8.21%, respectively. Please see “Asset Quality and Loan Reserves” below for further information regarding performing and non-performing loans.

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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 September 30, 2013 and December 31, 2012:

Loan Type	Number of Loans		September 30, 2013 Balance *		Portfolio Percentage			Number of Loans		December 31, 2012 Balance *		Portfolio Percentage

First deeds of trust		8	$	5,463,000		87.93	%		12	$	13,058,000		93.00	%
Second deeds of trust		1		750,000		12.07	%		2		983,000		7.00	%
Total		9	$	6,213,000		100.00	%		14	$	14,041,000		100.00	%

*	Please see Balance Sheet Reconciliation below.

The following is a schedule of contractual maturities of investments in real estate loans as of September 30, 2013:

October 2013 – December 2013	$	2,318,000
January 2014 – March 2014		1,627,000
April 2014 – June 2014		193,000
July 2014 – September 2014		875,000
October 2014 – December 2014		450,000
Thereafter		750,000

Total	$	6,213,000

The following is a schedule by geographic location of investments in real estate loans as of September 30, 2013 and December 31, 2012:

	September 30, 2013 Balance *		Portfolio Percentage			December 31, 2012 Balance *		Portfolio Percentage

Arizona	$	875,000		14.08	%	$	--		--
Michigan		1,741,000		28.02	%		1,741,000		12.40	%
Nevada		3,113,000		50.10	%		11,157,000		79.46	%
Texas		484,000		7.80	%		484,000		3.45	%
Utah		--		--			659,000		4.69	%
Total	$	6,213,000		100.00	%	$	14,041,000		100.00	%

*	Please see Balance Sheet Reconciliation below.

Balance Sheet Reconciliation

The following table reconciles the balance of the loan portfolio to the amount shown on the accompanying Consolidated Balance Sheets.

	September 30, 2013			December 31, 2012
Balance per loan portfolio	$	6,213,000		$	14,041,000
Less:
Allowance for loan losses (a)		(750,000	)		(183,000	)
Balance per consolidated balance sheets	$	5,463,000		$	13,858,000

(a)

Please refer to Specific Reserve Allowance below.

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Non-Performing Loans

As of September 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:

Prevailing economic conditions;

Historical experience;

The nature and volume of the loan portfolio;

The borrowers’ financial condition and adverse situations that may affect the borrowers’ ability to pay;

Evaluation of industry trends; and

Estimated net realizable value of any underlying collateral in relation to the loan amount.

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 September 30, 2013, our ratio of total allowance for loan losses to total loans with an allowance for loan loss is 100%. The following is a breakdown of allowance for loan losses related to performing and non-performing loans as of September 30, 2013 and December 31, 2012.

	As of September 30, 2013
	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		5,463,000		--			5,463,000
Performing loans – related allowance		750,000		(750,000	)		--
Subtotal performing loans		6,213,000		(750,000	)		5,463,000

Total	$	6,213,000	$	(750,000	)	$	5,463,000

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	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.

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 September 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 nine months ended September 30, 2013 and 2012 by loan type.

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 9/30/2013

Commercial	$	183,000	$	--	$	567,000	$	--		--	$	750,000
Total	$	183,000	$	--	$	567,000	$	--		--	$	750,000

Loan Type	Balance at 12/31/2011		Specific Reserve Allocation		Write Off			Loan Pay Downs and Settlements			Transfers to REO and Notes Receivable			Balance at 9/30/2012

Commercial	$	5,412,000	$	40,000	$	(1,000,000	)	$	(1,312,000	)	$	(2,512,000	)	$	628,000
Construction		73,000		--		--			(73,000	)		--			--
Total	$	5,485,000	$	40,000	$	(1,000,000	)	$	(1,385,000	)	$	(2,512,000	)	$	628,000

Troubled Debt Restructuring

As of September 30, 2013 and December 31, 2012 we had one loan totaling approximately $0.8 million 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.

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The following is a breakdown of our TDR loans that were considered performing and non-performing as of September 30, 2013 and December 31, 2012:


	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		--	$	--

Extensions

As of September 30, 2013, our manager had granted extensions on five outstanding loans, totaling approximately $12.4 million, of which our portion was approximately $4.4 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 borrower’s 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.

NOTE E — INVESTMENT IN MARKETABLE SECURITIES – RELATED PARTY

As of September 30, 2013 and December 31, 2012, we owned 537,078 shares of VRM II’s common stock, representing approximately 4.7% of the total outstanding shares. The closing price of VRM II’s common stock on September 30, 2013, was $1.73 per share, resulting in an unrealized gain for the nine months ended September 30, 2013.

During the three months ended September 30, 2013, the trading price for VRM II’s common stock ranged from $1.47 to $2.04 per share. We will continue to evaluate our investment in marketable securities on a quarterly basis.

NOTE F — INVESTMENT IN MARKETABLE SECURITIES

As of September 30, 2013, we owned 99,919 shares of a publicly traded company that invests in loans collateralized by real estate. The closing price of the common stock on September 30, 2013 resulted in an unrealized gain of approximately $46,000. Additionally, for the nine months ended September 30, 2013, we sold 51,066 shares for a realized gain of approximately $79,000.

NOTE G — REAL ESTATE HELD FOR SALE

At September 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.

Beginning balance, January 1, 2013	$	580,000
Real estate held for sale acquired through foreclosure		--
Additional investment in REO		--
Proceeds on nonrefundable earnest money deposit		(12,000	)
Write down		--
Sale		--
Ending balance, September 30, 2013	$	568,000

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NOTE H — ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS

During May 2012, we, VRM II and Fund III foreclosed on a loan with a balance of approximately $6.0 million, of which our portion was approximately $4.4 million. The property includes 23 cottage units in a retirement community located in Eugene, Oregon. The property includes operations, which will be reported as an asset held for sale from the date of this foreclosure. During May 2013 we, VRM II and VF III received a distribution in the amount of $600,000 of which our portion was $443,000.

Effective January 1, 2009, we adopted FASB's accounting standard related to business combination which required the acquisition method of accounting to be used for all business combinations and for an acquirer to be identified for each business combination. This accounting standard requires an acquirer to recognize the assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree at the acquisition date, measured at their fair values as of that date, with limited exceptions. It also requires the acquirer in a business combination achieved in stages (sometimes referred to as a step acquisition) to recognize the identifiable assets and liabilities, as well as the non-controlling interest in the acquiree, at the full amounts of their fair values (or other amounts determined in accordance with the standard).

Our acquisition of VREO XXV was accounted for in accordance with this standard and the Company has allocated the purchase price of VREO XXV based upon the estimated fair value of the net assets acquired and liabilities assumed and the fair value of the non-controlling interest measured at the acquisition date. The estimated fair value of VREO XXV at the time of the acquisition totaled $4.1 million.

We performed an allocation as of the foreclosure date as follows:

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

In addition, we estimated the fair value of the non-controlling interest at $1.1 million, which is 25% owned by Fund III and 1% by VRM II.

Immediately upon foreclosure, we committed to a plan to sell all interests in VREO XXV, at which point we began classifying the related assets of VREO XXV as assets held for sale, and the related liabilities as liabilities related to assets held for sale. Additionally, we have classified VREO XXV’s results as discontinued operations.

Assets and groups of assets and liabilities which comprise disposal groups are classified as “held for sale” when all of the following criteria are met: a decision has been made to sell, the assets are available for sale immediately, the assets are being actively marketed at a reasonable price in relation to the current fair value, a sale has been or is expected to be concluded within twelve months of the balance sheet date, and significant changes to the plan to sell are not expected. Assets held for sale are not depreciated.

Additionally, the operating results and cash flows related to these assets and liabilities are included in discontinued operations in the consolidated statements of operations and consolidated statements of cash flows for the nine months ended September 30, 2013.

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The following is summary of net assets held for sale through September 30, 2013:

	September 30, 2013
Assets:
Cash	$	183,000
Current assets		4,000
Property and equipment		3,855,000
Total assets	$	4,042,000

Liabilities:
Accounts payable and accrued liabilities	$	39,000
Total liabilities		39,000

Net assets held for sale	$	4,003,000

The following is a summary of the results of operations related to the assets held for sale for the three and nine months ended September 30, 2013:

	For The Three Months Ended September 30, 2013			For The Nine Months Ended September 30, 2013

Revenue	$	172,000		$	512,000
Expenses		(93,000	)		(264,000	)

Net Income	$	79,000		$	248,000

NOTE I — RELATED PARTY TRANSACTIONS

From time to time, we may acquire or sell investments in real estate loans from/to our manager or other related parties. Pursuant to the terms of our Management Agreement, such acquisitions and sales are made without any mark up or mark down. No gain or loss is recorded on these transactions, as it is not our intent to make a profit on the purchase or sale of such investments. The purpose is generally to diversify our portfolio by syndicating loans, thereby providing us with additional capital to make additional loans.

Transactions with the Manager

Our manager is entitled to receive from us an annual management fee of up to 0.25% of our aggregate capital contributions received by us and Fund I from the sale of shares or membership units, paid monthly. The amount of management fees paid to our manager for the three months and nine months ended September 30, 2013 was $69,000 and $207,000, respectively, for each period. Management fees paid to our manager for the three and nine months ended September 30, 2012 was $61,000 and $199,000, respectively, for each period.

As of September 30, 2013, and December 31, 2012, our manager owned 100,000 of our common shares, representing approximately 1.7% and 1.6%, respectively, of our total outstanding common stock. For the three and nine months ended September 30, 2013 and 2012, we declared $0 in dividends payable to our manager.

As of September 30, 2013 and December 31, 2012 we did not owe or have any receivables from our manager.

Transactions with Other Related Parties

As of September 30, 2013 and December 31, 2012, we owned 537,078 common shares of VRM II, representing approximately 4.7% and 4.4%, respectively, of their total outstanding common stock. For the three and nine months ended September 30, 2013 and 2012 we recognized $0 in dividend income from VRM II.

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As of September 30, 2013 and December 31, 2012, VRM II owned 538,178 of our common shares, approximately 9.3% and 8.5%, respectively, of our total outstanding common stock. For the three and nine months ended September 30, 2013 and 2012 we declared $0 in dividends payable to VRM II.

As of September 30, 2013, we owned 53,365 of our common shares of MVP REIT common stock. For the three and nine months ended September 30, 2013 we declared $1,300 in dividends income from MVP REIT.

As of September 30, 2013 and December 31, 2012, we owed VRM II approximately $5,000 and $0.2 million, respectively, primarily related to legal fees.

As of September 30, 2013, we had no receivable from Fund III. As of December 31, 2012 we had a receivable with Fund III of approximately $8,000.

During April 2013, we sold $0.5 million in investments in real estate loans to MVP REIT, Inc., an entity managed by a company majority owned by Mr. Shustek.

See also Notes J and M below.

NOTE J— NOTES RECEIVABLE

As of November 30, 2010, we had five loans totaling approximately $19.0 million, of which our portion is approximately $0.5 million, before allowances totaling approximately $7.3 million, of which our portion was approximately $0.2 million, and were guaranteed by common guarantors. Pursuant to agreements entered into on March 16, 2009 and July 2, 2009, which modified these loans, three of these loans continued to be secured by real property and two became unsecured due to the permanent financing being obtained for less than the outstanding balance on the loans. On November 30, 2010, we entered into additional agreements to modify the terms related to these five loans in order to further enhance our investment. Pursuant to these additional agreements, we obtained an additional guarantor, interest in operating profits and any aggregate sales proceeds of approximately $534,000 less operating profits previously received related to these properties. The new guarantor is the managing member of the borrowing entities who is also the principal manager of L.L. Bradford and was a former officer of our manager from April 1999 through January 2005. As a result of releasing our deeds of trust we classified these loans as unsecured notes receivable for the same amount and recognized a full allowance on this balance.

During 2013, SERE, LLC (“SERE”), the loan guarantor whose managing member is also the principal manager of L.L. Bradford and was a former officer of our manager from April 1999 through January 2005, entered into a purchase agreement with MVP REIT, Inc. (“MVP REIT”) to sell six office buildings associated with the unsecured notes receivables mentioned above. Upon the closing of the sale of each office building, we will terminate the unsecured note receivable and receive from SERE MVP REIT shares of common stock which equate to the amount of our notes receivable pursuant to MVP REIT’s current offering. We have recorded these shares as Investment in MVP REIT on our balance sheet and recognized their receipt as a gain related to recovery of notes receivable previously written off on the consolidated statements of operations for the quarter ending September 30, 2013.

The following is a summary of the MVP REIT shares we have or will receive in consideration of cancelling the unsecured notes receivable:

Property Name	Date shares received	Approximate Receivable Balance		Price Per Share		Number of shares received
Wolfpack, LLC	August 2013	$	43,000		8.865		4,800
Building C, LLC	August 2013	$	196,000		8.775		22,328
Building A, LLC	September 2013	$	196,000		8.775		22,328
Devonshire, LLC	September 2013	$	34,000		8.775		3,909
SE Property, LLC	October 2013	$	35,000		8.775		4,041
ExecuSuites, LLC	Estimated November 2013	$	30,000		8.775		3,404

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NOTE K — FAIR VALUE

As of September 30, 2013, financial assets and liabilities utilizing Level 1 inputs included investment in marketable securities and marketable securities - related party. We had no assets or liabilities utilizing Level 2 inputs, and assets and liabilities utilizing Level 3 inputs included investments in real estate loans.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, our degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an asset or liability will be classified in its entirety based on the lowest level of input that is significant to the measurement of fair value.

Fair value is a market-based measure considered from the perspective of a market participant who holds the asset or owes the liability rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, our own assumptions are set to reflect those that market participants would use in pricing the asset or liability at the measurement date. We use prices and inputs that are current as of the measurement date, including during periods of market dislocation, such as the recent illiquidity in the auction rate securities market. In periods of market dislocation, the observability of prices and inputs may be reduced for many instruments. This condition may cause our financial instruments to be reclassified from Level 1 to Level 2 or Level 3 and/or vice versa.

Our valuation techniques will be consistent with at least one of the three possible approaches: the market approach, income approach and/or cost approach. Our Level 1 inputs are based on the market approach and consist primarily of quoted prices for identical items on active securities exchanges. Our Level 2 inputs are primarily based on the market approach of quoted prices in active markets or current transactions in inactive markets for the same or similar collateral that do not require significant adjustment based on unobservable inputs. Our Level 3 inputs are primarily based on the income and cost approaches, specifically, discounted cash flow analyses, which utilize significant inputs based on our estimates and assumptions.

The following tables present the valuation of our financial assets as of September 30, 2013 and December 31, 2012, measured at fair value on a recurring basis by input levels:

	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 9/30/13		Carrying Value on Balance Sheet at 9/30/13
Assets
Investment in marketable securities - related party	$	929,000	$	--	$	--	$	929,000	$	929,000
Investment in marketable securities	$	1,239,000	$	--	$	--	$	1,239,000	$	1,239,000
Investment in real estate loans	$	--	$	--	$	5,440,000	$	5,440,000	$	5,463,000

	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

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The following table presents the changes in our financial assets and liabilities that are measured at fair value on a recurring basis using significant unobservable inputs (Level 3) from January 1, 2013 to September 30, 2013. There were no liabilities measured at fair value on a recurring basis using significant unobservable inputs as of January 1, 2013 to September 30, 2013.

	Investment in real estate loans

Balance on January 1, 2013	$	13,870,000
Change in temporary valuation adjustment included in net income
Net increase in allowance for loan losses		(567,000	)
Purchase and additions of assets
New mortgage loans and mortgage loans bought		2,317,000
Sales, pay downs and reduction of assets
Collections of principal and sales of investment in real estate loans		(8,235,000	)
Sale of assets to related parties		(1,700,000	)
Sale of assets to third parties		(210,000	)
Temporary change in estimated fair value based on future cash flows		(35,000	)

Balance on September 30, 2013, net of temporary valuation adjustment	$	5,440,000


	Investment in real estate loans

Balance on January 1, 2012	$	10,827,000
Change in temporary valuation adjustment included in net income (loss)
Net increase in allowance for loan losses		(40,000	)
Write-off of allowance for uncollectable loan		1,000,000
Transfer of allowance on real estate loans converted to unsecured notes receivable		989,000
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		284,000
Reduction of allowance on real estate loan following settlement of loan		1,101,000
Purchase and additions of assets
New mortgage loans and mortgage loans bought		15,395,000
Transfer of real estate loans to real estate held for sale		(936,000	)
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		(8,703,000	)
Reduction of balance of real estate loan following settlement		(1,101,000	)
Write-off for uncollectable loan		(1,000,000	)
Temporary change in estimated fair value based on future cash flows		(708,000	)

Balance on September 30, 2012, net of temporary valuation adjustment	$	13,210,000

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NOTE L — INVESTMENT IN EQUTIY METHOD INVESTEE

On July 26, 2013 we, MVP REIT and VRM II entered into an agreement to acquire six parking facilities from the same seller. We have formed limited liability companies with MVP REIT and VRM II to acquire five of the properties based on ownership noted in the table below. The limited liability companies will be jointly managed by MVP Realty Advisors, LLC and Vestin Mortgage, LLC. MVP REIT has the right, at any time, with 10 days written notice, to purchase VRM II’s and our interest in the limited liability company (the “Purchase Right”). The price for the Purchase Right shall be equal to VRM II’s and our capital contribution plus a 7.5% annual cumulative return less any Distributions received by VRM II or us.

The following is a summary of the purchase per the agreement:

				Ownership
Property Name	Purchase Date	Purchase Price		VRM II			VRM I			MVP
MVP PF Ft Lauderdale 2013, LLC	July 31, 2013	$	3,400,000		68	%		--			32	%
MVP PF Memphis Court 2013, LLC	August 28, 2013	$	1,000,000		51	%		44	%		5	%
MVP PF Memphis Poplar 2013, LLC	August 28, 2013	$	2,000,000		51	%		44	%		5	%
MVP PF Kansas City 2013, LLC	August 28, 2013	$	2,800,000		51	%		44	%		5	%
MVP PF Baltimore 2013, LLC	September 4, 2013	$	2,300,000		51	%		44	%		5	%
MVP PF St. Louis 2013, LLC	September 4, 2013	$	2,000,000		51	%		44	%		5	%
		$	13,500,000

All of the parking facilities are currently leased to tenants under triple net leases, therefore no specific party has additional management responsibility or decision making authority beyond their ownership interest.

In accordance with ASC 805-10-25-13, the following is the preliminary purchase price allocation:

Property Name	Amount		VRM I’s Accounting Method
Ft Lauderdale	$	3,400,000	Not applicable
Memphis Court	$	190,000	Equity Method
Memphis Poplar	$	2,685,000	Equity Method
Kansas City	$	1,550,000	Equity Method
Baltimore	$	1,550,000	Equity Method
St. Louis	$	4,125,000	Equity Method
	$	13,500,000

Upon the closing of the purchases described above, three of the six triple net leases were terminated which included a 180 day termination period. Management is in current negotiations to enter into new triple net leases. Upon completion of the new lease agreements, we will obtain updated appraisals to determine final purchase price allocation.

Management has commenced a plan to sell MVP PF Baltimore 2013, LLC and MVP PF Kansas City 2013, LLC. These properties have been reported as Discontinued Operations in the accompanying statement of operations.

The following table summarizes the estimated fair values of the assets acquired at the acquisition date for our 2013 acquisition:

Assets
Land and improvements – continued operations	$	770,000
Building and improvements – continued operations		2,310,000
Land and improvements – discontinued operations		341,000
Building and improvements – discontinued operations		1,023,000
Total assets acquired		4,444,000
Liabilities
Liabilities		--
Total liabilities		--
Net assets and liabilities acquired	$	4,444,000

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The following is a summary of the results of operations related to the acquisitions for the three and nine months ended September 30, 2013:

	For The Three and Nine Months Ended September 30, 2013

Triple-net lease revenue – continued operations	$	35,000
Triple-net lease revenue – discontinued operations		16,000
Expenses – continued operations		(92,000	)
Expenses – discontinued operations		(36,000	)
Net loss		(77,000	)
% of ownership		44	%
	$	(34,000	)

NOTE M — INVESTMENT IN MVP REIT, INC.

As of September 30, 2013, we owned 53,365 shares of common stock of MVP REIT, Inc. (“MVP REIT”), a non-traded REIT. The shares were assigned to us by SERE, LLC in consideration of the cancellation of certain unsecured notes, as described in Note H above. . We recorded a gain of approximately $469,000 upon receipt of such shares and the shares are recorded on our balance sheet as Investment in MVP REIT valued at $469,000. Such amount was determined based upon the offer price for such shares in MVP REIT’s pending public offering.

NOTE N — RECENT ACCOUNTING PRONOUNCEMENTS

No new accounting pronouncements have been defined that would materially impact our financial statements.

NOTE O — 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. Shustek’s 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 P – 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 manager’s 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 manager’s net income in any particular period.

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NOTE P — 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 Commerce’s 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, which sum was returned to the Company in October 2013.

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 being held in a debtor in possession account subject to the Hotel’s operating accounts payable and claims made through the bankruptcy court. The balance, if any, will be paid over to the owners of 1701 Commerce according to their interest.

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.

NOTE Q — SUBSEQUENT EVENTS

The following subsequent events have been evaluated through the date of this filing with the SEC.

On October 31, 2013, MVP PF Baltimore 2013, LLC entered into an agreement to sell its sole asset for $1,550,000. The agreement allows for 30 days of due diligence prior to the closing of the transaction. The sale of this asset is not expected to result in a significant gain or loss.

During October 2013, we, VRM II and VF III received approximately $0.8 million, of which our portion was approximately $64,000 related to 1701 Commerce. These proceeds were a return of a $1.0 million deposit that was made pursuant to a court order that was made during August 2012. These proceeds will be reported as income in the discontinued operations section on the statement of operations.

During November 2013, we, VRM I and Fund III sold a REO property to an unrelated third party for approximately $0.2 million, of which our portion was approximately $60,000. This property is fully allowed for and a net gain will be recorded for the full amount.

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ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is a financial review and analysis of our financial condition and results of operations for the three and nine months ended September 30, 2013 and 2012. This discussion should be read in conjunction with our consolidated financial statements and accompanying notes and other detailed information regarding us appearing elsewhere in this report on Form 10-Q and our report on Form 10-K, Part II, Item 7 Management’s Discussion and Analysis of Financial Conditions and Results of Operations for the year ended December 31, 2012.

FORWARD-LOOKING STATEMENTS

Certain statements in this report, including, without limitation, matters discussed under this Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations, should be read in conjunction with the consolidated financial statements, related notes, and other detailed information included elsewhere in this report on Form 10-Q. We are including this cautionary statement to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Statements that are not historical fact are forward-looking statements. Certain of these forward-looking statements can be identified by the use of words such as “believes,” “anticipates,” “expects,” “intends,” “plans,” “projects,” “estimates,” “assumes,” “may,” “should,” “will,” or other similar expressions. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors, which could cause actual results, performance or achievements to differ materially from future results, performance or achievements. These forward-looking statements are based on our current beliefs, intentions and expectations. These statements are not guarantees or indicative of future performance. Important assumptions and other important factors that could cause actual results to differ materially from those forward-looking statements include, but are not limited to, those factors, risks and uncertainties of this Quarterly Report on Form 10-Q and in our other securities filings with the Securities and Exchange Commission (“SEC”). Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and involve inherent risks and uncertainties. Our estimates of the value of collateral securing our loans may change, or the value of the underlying property could decline subsequent to the date of our evaluation. As a result, such estimates are not guarantees of the future value of the collateral. The forward-looking statements contained in this report are made only as of the date hereof. We undertake no obligation to update or revise information contained herein to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

RESULTS OF OPERATIONS

OVERVIEW

Our primary business objective is to generate income while preserving principal by investing in real estate loans. We believe there is a significant market opportunity to make real estate loans to owners and developers of real property whose financing needs are not met by other real estate lenders. The loan underwriting standards utilized by our manager and the mortgage brokers we utilize are less strict than those used by many institutional real estate lenders. In addition, one of our competitive advantages is our ability to approve loan applications more quickly than many institutional lenders. As a result, in certain cases, we may make real estate loans that are riskier than real estate loans made by many institutional lenders such as commercial banks. However, in return, we seek a higher interest rate and our manager takes steps to mitigate the lending risks such as imposing a lower loan-to-value ratio. While we may assume more risk than many institutional real estate lenders, in return, we seek to generate higher yields from our real estate loans.

Our operating results are affected primarily by: (i) the amount of capital we have to invest in real estate loans, (ii) the level of real estate lending activity in the markets we service, (iii) our ability to identify and work with suitable borrowers, (iv) the interest rates we are able to charge on our loans and (v) the level of non-performing assets, foreclosures and related loan losses which we may experience.

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Our operating results have been adversely affected by increases in allowances for loan losses and increases in non-performing assets. This negative trend accelerated sharply during the year ended December 31, 2008 and continues to affect our operations. See Note G – Real Estate Held for Sale, Note H – Assets Held for Sale and “Non-performing Loans” in Note D – Investments In Real Estate Loans of the Notes to the Consolidated Financial Statements included in Part I, Item I Consolidated Financial Statements of this Quarterly Report on Form 10-Q.

We believe that the current level of our non-performing assets is a direct result of the deterioration of the economy and credit markets several years ago. As the economy weakened and credit became more difficult to obtain, many of our borrowers who develop and sell commercial real estate projects were unable to complete their projects, obtain takeout financing or were otherwise adversely impacted. While the general economy has improved, the commercial real estate markets in many of the areas where we make loans have not recovered from the downturn. Our exposure to the negative developments in the credit markets and general economy has likely been increased by our business strategy, which entails more lenient underwriting standards and expedited loan approval procedures. Moreover, declining real estate values in the principal markets in which we operate has in many cases eroded the current value of the security underlying our loans.

Continued weakness in the commercial real estate markets and the weakness in lending may continue to have an adverse impact upon our markets. This may result in further defaults on our loans, and we might be required to record additional reserves based on decreases in market values, or we may be required to restructure additional loans. This increase in loan defaults has materially affected our operating results and led to the suspension of dividends to our stockholders. For additional information regarding our non-performing loans see “Non-Performing Loans” in Note D – Investments In Real Estate Loans of the Notes to the Consolidated Financial Statements included in Part I, Item I Consolidated Financial Statements of this Quarterly Report on Form 10-Q.

During the nine months ended September 30, 2013, we funded four loans totaling approximately $2.3 million. During the nine months ended September 30, 2012, we funded ten loans totaling approximately $14.2 million. As of September 30, 2013, our loan-to-value ratio was 64.92%, net of allowances for loan losses, on a weighted average basis generally using updated appraisals. Additional increases in loan defaults accompanied by additional declines in real estate values, as evidenced by updated appraisals generally prepared on an “as-is-basis,” will have a material adverse effect on our financial condition and operating results.

As of September 30, 2013, we have provided a specific reserve allowance for one performing loan based on updated appraisals of the underlying collateral and our evaluation of the borrower for this loan, obtained by our manager. For further information regarding allowance for loan losses, refer to Note D – Investments in Real Estate Loans of the Notes to the Consolidated Financial Statements included in Part I, Item I Consolidated Financial Statements of this Quarterly Report on Form 10-Q.

Our capital, subject to a 3% reserve, will constitute the bulk of the funds we have available for investment in real estate loans.

As of September 30, 2013, our loans were in the following states: Arizona, Michigan, Nevada, and Texas.

At our annual meeting held on December 15, 2011, a majority of the shareholders voted to amend our Bylaws to expand our investment policy to include investments in and acquisition, management and sale of real property or the acquisition of entities involved in the ownership or management of real property. A majority of the shareholders also voted to amend our charter to change the terms of our existence from its expiration date of December 31, 2019 to perpetual existence. As a result we will begin to acquire, manage, renovate, reposition, sell or otherwise invest in real property or acquire entities involved in the ownership or management of real property.

As of September 30, 2013, we have invested approximately $4.5 million which represents a 44% ownership interest in five parking facilities subject to triple net leases.

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SUMMARY OF FINANCIAL RESULTS

Comparison of Operating Results for the three months ended September 30, 2013 to the three months ended September 30, 2012

Total Revenue:	2013		2012		$ Change			% Change
Interest income from investment in real estate loans	$	173,000	$	291,000	$	(118,000	)		(41	%)
Recovery of allowance for doubtful notes receivable		491,000		30,000		461,000			1537	%
Gain related to pay off of real estate loan, including recovery of allowance for loan loss		--		22,000		(22,000	)		(100	%)
Total	$	664,000	$	343,000	$	321,000			94	%

Our revenue from interest income is dependent upon the balance of our investment in real estate loans and the interest earned on these loans. During the three months ended September 30, 2013, proceeds from loan payoffs were used towards investments in real estate which resulted in a decrease in interest income from investment in real estate loans. During August and September 2013, 53,365 shares of common stock of MVP REIT, Inc. (“MVP REIT”) in consideration of cancellation of certain unsecured notes guaranteed by SERE, LLC. The unsecured notes had previously been written off. The value of the gain was based upon the price charged by MVP REIT for its shares in its pending public offering. The managing member of SERE, LLC is also the principal manager of L.L. Bradford and was a former officer of our manager from April 1999 through January 2005. As we have liquidated all of our loans and/or or foreclosed on the underlying properties, we do not expect any future interest income from loans.

For additional information see Note D – Investments in Real Estate Loans and Note M – Investment in MVP REIT, Inc. of the Notes to the Consolidated Financial Statements included in Part I, Item 1 Consolidated Financial Statements of this Quarterly Report on Form 10-Q.

Operating Expenses:	2013		2012		$ Change			% Change
Management fees – related party	$	69,000	$	61,000	$	8,000			13	%
Provision for loan loss		588,000		21,000		567,000			2700	%
Acquisition expense		7,000		--		7,000			100	%
Interest expense		2,000		2,000		--			--
Professional fees		94,000		135,000		(41,000	)		(30	%)
Insurance		53,000		55,000		(2,000	)		(4	%)
Consulting		19,000		20,000		(1,000	)		(5	%)
Other		15,000		41,000		(26,000	)		(63	%)
Total	$	847,000	$	335,000	$	512,000			153	%

Operating expenses were 153% higher during the three months ended September 30, 2013 than during the three months ended September 30, 2012. This increase is mainly due to an increase in provision for loan loss which was necessary due to the decrease in appraised value of a property upon which we hold a second trust deed. There was a decrease in professional fees resulting from a decrease in audit fees and a significant decrease in pending litigation and potential merger activity.

See Note Q – Legal Matters Involving The Company of the Notes to the Consolidated Financial Statements included in Part I, Item 1 Consolidated Financial Statements of this Quarterly Report on Form 10-Q.

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Non-operating income (loss):	2013			2012		$ Change			% Change
Income from settlement		--			55,000		(55,000	)		(100	%)
Gain on sale of marketable securities- related party		79,000			3,000		76,000			2533	%
Dividend income		3,000			--		3,000			100	%
Loss from investment in equity method investee		(25,000	)		--		(25,000	)		(100	%)
Recovery from settlement with loan guarantor		--			267,000		(267,000	)		(100	%)
Total	$	57,000		$	325,000	$	(268,000	)		(83	%)

Non-operating income we impacted by a number of non-recurring items. During the three months ended September 30, 2013, we sold 51,066 shares of a publicly traded company which invests in loans collateralized by real estate for a realized gain of approximately $79,000. Additionally, during the three months ended September 30, 2013, we acquired a non-controlling interest in five parking facilities along with VRM II and MVP REIT. However management entered into a plan to sell two of the five parking facilities immediately upon the closing of the acquisition. The results of operations related to the non-controlling interest in the three properties not held for sale is recognized as a loss from investment in equity method investee as a part of the non-operating income (loss) included in the statements of operations. In July, 2012, we along with our Manager, VRM II, Vestin Group, Vestin Originations and Michael Shustek entered into a Settlement Agreement and Mutual Release with the State of Hawaii and The Huntington National Bank as successor trustee to the Rightstar Trusts. Under the Settlement Agreement, we and VRM II were entitled to receive a portion of certain net proceeds from certain claims from third parties through litigation, settlement or otherwise. The agreement resulted in payments to claimants of $145,000, with our portion being approximately $55,000.

See Note Q – Legal Matters Involving The Company and Note L – Acquisitions of the Notes to the Consolidated Financial Statements included in Part I, Item I Consolidated Financial Statements of this Quarterly Report on Form 10-Q.

Discontinued operations, net of income taxes:	2013			2012			$ Change			% Change
Net gain on sale of real estate held for sale	$	(1,000	)	$	--		$	(1,000	)		(100	%)
Recovery from 1701 Commerce		19,000			--			19,000			100	%
Income from assets held for sale		79,000			79,000			--			--
Loss from investment in equity method investee		(9,000	)		--			(9,000	)		(100	%)
Expenses related to real estate held for sale		(4,000	)		(29,000	)		25,000			86	%
Total	$	84,000		$	50,000		$	34,000			68	%

During the three months ended September 30, 2013, we received a settlement related to 1701 Commerce. Additionally, during the three months ended September 30, 2013, we acquired a non-controlling interest in five parking facilities along with VRM II and MVP REIT; however management entered into a plan to sell two of the five parking facilities immediately upon the closing of the acquisition. The results of operations related to the non-controlling interest in the two properties held for sale is recognized as a loss from investment in equity method investee as a part of discontinued operations included in the statements of operations.

See Note G — Real Estate Held For Sale and Note H – Assets Held for Sale and Discontinued Operations of the Notes to the Financial Statements included in Part I, Item I Consolidated Financial Statements of this Annual Report on Form 10-Q.

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Comparison of Operating Results for the nine months ended September 30, 2013 to the nine months ended September 30, 2012

Total Revenue:	2013		2012		$ Change			% Change
Interest income from investment in real estate loans	$	732,000	$	643,000	$	89,000			14	%
Recovery of allowance for doubtful notes receivable		539,000		89,000		450,000			506	%
Gain related to pay off of real estate loan, including recovery of allowance for loan loss		21,000		210,000		(189,000	)		(90	%)
Total	$	1,292,000	$	942,000	$	350,000			37	%

Our revenue from interest income is dependent upon the balance of our investment in real estate loans and the interest earned on these loans. During the third quarter, proceeds from loan payoffs were used towards investments in real estate which as a result we will continue to recognize a lower interest income from investment in real estate loans in future periods than we have in the previous periods. During August and September 2013, 53,365 shares of common stock of MVP REIT in consideration of cancellation of certain unsecured notes guaranteed by SERE, LLC. The unsecured notes had previously been written off. The value of the gain was based upon the price charged by MVP REIT for its shares in its pending public offering. The managing member of SERE, LLC is also the principal manager of L.L. Bradford and was a former officer of our manager from April 1999 through January 2005. As we have liquidated all of our loans and/or or foreclosed on the underlying properties, we do not expect any future interest income from loans. During May 2012, we, VRM II and Fund III sold our portions of a fully reserved loan of $14.0 million, of which our portion was $1.2 million to a third party. We received a payment of approximately $0.1 million which was recorded as a gain.

For additional information see Note D – Investments in Real Estate Loans of the Notes to the Consolidated Financial Statements included in Part I, Item 1 Consolidated Financial Statements of this Quarterly Report on Form 10-Q.

Operating Expenses:	2013		2012		$ Change			% Change
Management fees – related party	$	207,000	$	199,000	$	8,000			4	%
Interest expense		3,000		3,000		--			--
Provision for loan losses		588,000		40,000		548,000			1370	%
Acquisition expense		7,000		--		7,000			100	%
Professional fees		299,000		523,000		(224,000	)		(43	%)
Insurance		162,000		166,000		(4,000	)		(2	%)
Consulting		69,000		58,000		11,000			19	%
Other		63,000		121,000		(58,000	)		(48	%)
Total	$	1,398,000	$	1,110,000	$	288,000			26	%

Operating expenses were 26% higher during the nine months ended September 30, 2013 than during the nine months ended September 30, 2012. This increase is mainly due to an increase in provision for loan loss which was necessary due to the decrease in appraised value of a property we hold the second trust deed. There was a decrease in professional fees resulting from a decrease in audit fees and a significant decrease in pending litigation and merger activity.

See “Specific Loan Allowance” in Note D – Investments in Real Estate Loans and Note Q – Legal Matters Involving The Company of the Notes to the Consolidated Financial Statements included in Part I, Item 1 Consolidated Financial Statements of this Quarterly Report on Form 10-Q.

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Non-operating income (loss):	2013			2012			$ Change			% Change
Income from settlement	$	--		$	55,000		$	(55,000	)		(100	%)
Dividend income		3,000			--			3,000			100	%
Gain on sale of marketable securities- related party		79,000			3,000			76,000			2533	%
Settlement expense		--			(23,000	)		23,000			100	%
Reversal of settlement reserve		16,000			--			16,000			100	%
Loss from investment in equity method investee		(25,000	)		--			(25,000	)		(100	%)
Recovery from settlement with loan guarantor		--			978,000			(978,000	)		(100	%)
Total	$	73,000		$	1,013,000		$	(940,000	)		(93	%)

During September 2010, we established reserves related to our Nevada lawsuit settlement. As of June 30, 2013 management determined that the remaining reserves of $16,000 are no longer necessary and have recognized this amount as a reversal of settlement reserve. During the third quarter, we sold 51,066 shares of a publicly traded company which invests in loan collateralized by real estate for a realized gain of approximately $79,000. Additionally, during the third quarter, we acquired a non-controlling interest in five parking facilities along with VRM II and MVP REIT; however, management entered into a plan to sell two of the five parking facilities immediately upon the closing of the acquisition. The results of operations related to the non-controlling interest in the three properties not held for sale is recognized as a loss from investment in equity method investee as a part of the non-operating income (loss) included in the statements of operations. During January 2011, we, VRM II and Fund III were awarded unsecured claims up to $3.6 million from a bankruptcy settlement with a guarantor of certain loans. Pursuant to the terms of the settlement, we received payment of approximately $1.0 million during 2012. No such activity occurred in 2013. In July, 2012, we along with our Manager, VRM II, Vestin Group, Vestin Originations and Michael Shustek entered into a Settlement Agreement and Mutual Release with the State of Hawaii and The Huntington National Bank as successor trustee to the Rightstar Trusts. Under the Settlement Agreement, we and VRM II were entitled to receive a portion of certain net proceeds from certain claims from third parties through litigation, settlement or otherwise. The agreement resulted in payments to claimants of $145,000, with our portion was approximately $55,000. During the three months ended March 31, 2012, we settled a lawsuit with an acquirer of property previously foreclosed upon and sold, which resulted in an expense of approximately $23,000, and did not have similar expense in 2013.

See Note Q – Legal Matters Involving The Company of the Notes to the Consolidated Financial Statements included in Part I, Item I Consolidated Financial Statements of this Quarterly Report on Form 10-Q.

Discontinued operations, net of income taxes:	2013			2012			$ Change			% Change
Net gain on sale of real estate held for sale	$	25,000		$	4,000		$	21,000			525	%
Recovery from 1701 Commerce		19,000			--			19,000			100	%
Income from assets held for sale		248,000			118,000			130,000			110	%
Loss from investment in equity method investee		(9,000	)		--			(9,000	)		(100	%)
Write downs on real estate held for sale		--			(316,000	)		316,000			100	%
Expenses related to real estate held for sale		(33,000	)		(116,000	)		83,000			72	%
Total	$	250,000		$	(310,000	)	$	560,000			181	%

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During the six months ended June 30, 2013 we recorded net gain of approximately $26,000 related to the sale of HFS in December 2011. During 2012 we recorded net gains on sale of real estate held for sale for properties sold in prior periods due to payments on settlement agreements. We received income from assets held for sale during the nine months ended September 30, 2013 and 2012. The income recorded in the nine months ended September 30, 2013 was for a full nine months, as opposed to five months in 2012. The decrease in write-downs on real estate held for sale is mainly due to the acceptance of a purchase contract during 2012 on one property, along with the stabilization of the markets where our real estate owned are located and a decrease in upkeep and litigation of the properties. During the third quarter 2013, we received a settlement related to our previous investment in 1701 Commerce. Additionally, during the third quarter, we acquired a non-controlling interest in five parking facilities along with VRM II and MVP REIT; however, management entered into a plan to sell two of the five parking facilities immediately upon the closing of the acquisition. The results of operations related to the non-controlling interest in the two properties held for sale is recognized as a loss from investment in equity method investee as a part of discontinued operations included in the statements of operations.

CAPITAL AND LIQUIDITY

Liquidity is a measure of a company’s ability to meet potential cash requirements, including ongoing commitments to fund lending activities and general operating purposes. Subject to a 3% working capital reserve, we generally seek to use all of our available funds to invest in real estate loans. Distributable cash flow generated from such loans is paid out to our stockholders, in the form of a dividend. We do not anticipate the need for hiring any employees, acquiring fixed assets such as office equipment or furniture, or incurring material office expenses during the next twelve months. We may pay our manager an annual management fee of up to 0.25% of our aggregate capital received by us and Fund I from the sale of shares or membership units.

During the nine months ended September 30, 2013, net cash flows used in operating activities approximated $0.2 million. Operating cash flows were used for the payment of normal operating expenses such as management fees, accounting fees and legal bills. Cash flows related to investing activities consisted of cash used by loan investments in new real estate loans of approximately $2.3 million and investment in real property of approximately $4.5 million. In addition, cash flows related to investing activities consisted of cash provided by notes receivable payoffs of approximately $70,000, cash provided by payoffs of real estate loans of approximately $8.2 million and cash provided by sale of investments in real estate loans to VRM II, MVP REIT and third parties of approximately $1.9 million. Cash flows used in financing activities consisted of cash for payments on notes payable of approximately $106,000 to finance our directors and officers’ insurance policy and purchase of treasury stock for approximately $0.9 million. Cash flows provided by investing activities totaled approximately $0.4 million and were from a distribution from our assets held for sale.

At September 30, 2013, we had approximately $3.9 million in cash, $2.2 million in marketable securities related and unrelated party and approximately $21.3 million in total assets. We intend to meet short-term working capital needs through a combination of proceeds from loan payoffs, loan sales, sales of real estate held for sale and/or borrowings. We believe we have sufficient working capital to meet our operating needs during the next 12 months.

We have no current plans to sell any new shares. Although a small percentage of our shareholders had elected to reinvest their dividends, we suspended payment of dividends in June 2008 and at this time are not able to predict when dividend payments will resume. Accordingly, we do not expect to issue any new shares through our dividend reinvestment program in the foreseeable future.

When economic conditions permit, we may seek to expand our capital resources through borrowings from institutional lenders or through securitization of our loan portfolio or similar arrangements. No assurance can be given that, if we should seek to borrow additional funds or to securitize our assets, we would be able to do so on commercially attractive terms. Our ability to expand our capital resources in this manner is subject to many factors, some of which are beyond our control, including the state of the economy, the state of the capital markets and the perceived quality of our loan portfolio.

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On February 21, 2008, our Board of Directors authorized the repurchase of up to $5 million worth of our common stock. Depending upon market conditions, shares may be repurchased from time to time at prevailing market prices through open market or privately negotiated transactions. During the year ended December 31, 2011, we used approximately $104,000 to acquire 78,600 shares of our common stock. These shares were retired in 2012. During the nine months ended September 30, 2013, we used approximately $922,000 to acquire 558,924 shares of our common stock. As of December 31, 2012, we had no treasury stock. We are not obligated to purchase any additional shares. Under the Maryland General Corporation Law, shares of its own stock acquired by a corporation constitute authorized but unissued shares

We maintain working capital reserves of approximately 3% in cash and cash equivalents, certificates of deposits and short-term investments or liquid marketable securities. This reserve is available to pay expenses in excess of revenues, satisfy obligations of underlying properties, expend money to satisfy our unforeseen obligations and for other permitted uses of working capital. As of November 14, 2013, we met our 3% reserve.

Investments in Real Estate Loans Secured by Real Estate Portfolio

We offer five real estate loan products consisting of commercial property, construction, acquisition and development, land, and residential. The effective interest rates on all product categories range from 6.0% to 10%. Revenue by product will fluctuate based upon relative balances during the period.

For additional information on our investments in real estate loans, refer to Note D – Investments In Real Estate Loans of the Notes to the Consolidated Financial Statements included in Part I, Item I Consolidated Financial Statements of this Quarterly Report on Form 10-Q.

Asset Quality and Loan Reserves

As a commercial real estate lender willing to invest in riskier loans, rates of delinquencies, foreclosures and our losses on our loans could be higher than those generally experienced in the commercial mortgage lending industry during this period of economic slowdown and recession. Problems in the sub-prime residential mortgage market have adversely affected the general economy and the availability of funds for commercial real estate developers. We believe this lack of available funds has led to an increase in defaults on our loans. Furthermore, problems experienced in U.S. credit markets from 2007 through 2009 reduced the availability of credit for many prospective borrowers. While credit markets have generally improved, the commercial real estate markets in our principal areas of operation have not recovered, thereby resulting in continuing constraints on the availability of credit in these markets. These problems have made it more difficult for our borrowers to obtain the anticipated re-financing necessary in many cases to pay back our loans. Thus, we have had to work with some of our borrowers to either modify, restructure and/or extend their loans in order to keep or restore the loans to performing status. Our manager will continue to evaluate our loan portfolio in order to minimize risk associated with current market conditions.

OFF-BALANCE SHEET ARRANGEMENTS

As of September 30, 2013, we do not have any interests in off-balance sheet special purpose entities nor do we have any interests in non-exchange traded commodity contracts.

RELATED PARTY TRANSACTIONS

From time to time, we may acquire or sell investments in real estate loans from/to our manager or other related parties pursuant to the terms of our Management Agreement without a premium. No gain or loss is recorded on these transactions, as it is not our intent to make a profit on the purchase or sale of such investments. The purpose is generally to diversify our portfolio by syndicating loans, thereby providing us with additional capital to make additional loans. For further information regarding related party transactions, refer to Note I – Related Party Transactions of the Notes to the Consolidated Financial Statements included in Part I, Item I Consolidated Financial Statements of this Quarterly Report on Form 10-Q.

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CRITICAL ACCOUNTING ESTIMATES

Revenue Recognition

Interest income on loans is accrued by the effective interest method. We do not accrue interest income from loans once they are determined to be non-performing. A loan is considered non-performing when, 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.

The following table presents a sensitivity analysis, averaging the balance of our loan portfolio at the end of the last six quarters, to show the impact on our financial condition at September 30, 2013, from fluctuations in weighted average interest rate charged on loans as a percentage of the loan portfolio:

Changed Assumption	Increase (Decrease) in Interest Income
Weighted average interest rate assumption increased by 1.0% or 100 basis points	$	114,000
Weighted average interest rate assumption increased by 5.0% or 500 basis points	$	571,000
Weighted average interest rate assumption increased by 10.0% or 1,000 basis points	$	1,142,000
Weighted average interest rate assumption decreased by 1.0% or 100 basis points	$	(114,000	)
Weighted average interest rate assumption decreased by 5.0% or 500 basis points	$	(571,000	)
Weighted average interest rate assumption decreased by 10.0% or 1,000 basis points	$	(1,142,000	)

The purpose of this analysis is to provide an indication of the impact that the weighted average interest rate fluctuations would have on our financial results. It is not intended to imply our expectation of future revenues or to estimate earnings. We believe that the assumptions used above are appropriate to illustrate the possible material impact on the consolidated financial statements.

Allowance for Loan Losses

We maintain an allowance for loan losses on our investments in real estate loans for estimated credit impairment in our investment in real estate loans portfolio. Our manager’s estimate of losses is based on a number of factors including the types and dollar amounts of loans in the portfolio, adverse situations that may affect the borrower’s ability to repay, prevailing economic conditions and the underlying collateral securing the loan. Additions to the allowance are provided through a charge to earnings and are based on an assessment of certain factors, which may indicate estimated losses on the loans. Actual losses on loans are recorded as a charge-off or a reduction to the allowance for loan losses. Subsequent recoveries of amounts previously charged off are added back to the allowance or included as income.

The following table presents a sensitivity analysis to show the impact on our financial condition at September 30, 2013, from increases and decreases to our allowance for loan losses as a percentage of the loan portfolio:

Changed Assumption	Increase (Decrease) in Allowance for Loan Losses
Allowance for loan losses assumption increased by 1.0% of loan portfolio	$	62,000
Allowance for loan losses assumption increased by 5.0% of loan portfolio	$	311,000
Allowance for loan losses assumption increased by 10.0% of loan portfolio	$	621,000
Allowance for loan losses assumption decreased by 1.0% of loan portfolio	$	(62,000	)
Allowance for loan losses assumption decreased by 5.0% of loan portfolio	$	(311,000	)
Allowance for loan losses assumption decreased by 10.0% of loan portfolio	$	(621,000	)

Estimating allowances for loan losses requires significant judgment about the underlying collateral, including liquidation value, condition of the collateral, competency and cooperation of the related borrower and specific legal issues that affect loan collections or taking possession of the property. As a commercial real estate lender willing to invest in loans to borrowers who may not meet the credit standards of other financial institutional lenders, the default rate on our loans could be higher than those generally experienced in the mortgage lending industry. We and our manager generally approve loans more quickly than other real estate lenders and, due to our expedited underwriting process, there is a risk that the credit inquiry we perform will not reveal all material facts pertaining to a borrower and the security.

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We may discover additional facts and circumstances as we continue our efforts in the collection and foreclosure processes. This additional information often causes management to reassess its estimates. In recent years, we have revised estimates of our allowance for loan losses. Circumstances that may cause significant changes in our estimated allowance include, but are not limited to:

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;

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.

Real Estate Held for Sale

Real estate held for sale includes real estate acquired through foreclosure and will be carried at the lower of the recorded amount, inclusive of any senior indebtedness, or the property’s estimated fair value, less estimated costs to sell, with fair value based on appraisals and knowledge of local market conditions. The carrying values of real estate held for sale are assessed on a regular basis from updated appraisals, comparable sales values or purchase offers.

RECENT ACCOUNTING PRONOUNCEMENTS

See Note O – Recent Accounting Pronouncements of the Notes to the Consolidated Financial Statements included in Part I, Item I Consolidated Financial Statements of this Quarterly Report on Form 10-Q.

ITEM 4.

CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

The Company’s Chief Executive Officer and Chief Financial Officer has evaluated the Company’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as of the end of the period covered by this report, and they have concluded that these controls and procedures are effective.

(b) Changes in Internal Control over Financial Reporting

There have been no changes in internal control over financial reporting during the third quarter of 2013 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting

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PART II – OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

Please refer to Note P – Legal Matters Involving the Manager and Note Q – Legal Matters Involving the Company of the Notes to the Consolidated Financial Statements included in Part I, Item I Consolidated Financial Statements of this Quarterly Report on Form 10-Q for information regarding our legal proceedings, which are incorporated herein by reference.

ITEM 2.

UNREGISTERED SALES OF EQUITY AND USE OF PROCEEDS

None.

The following is a summary of our stock purchases during the three months ended September 30, 2013, as required by Regulation S-K, Item 703.

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
July1, 2013 –July 31, 2013		--	$	--		--	$	3,228,475
August 1, 2013 – August 31, 2013		68,013		1.96		68,013		3,160,462
September1, 2013 – September 30, 2013		--		--		--		3,160,462

Total		68,013	$	1.96		68,013	$	3,160,462

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ITEM 6.

EXHIBITS

EXHIBIT INDEX

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 nine months ended September 30, 2013, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of September 30, 2013 and December 31, 2012 (unaudited), (ii) Consolidated Statements of Operations for the three and nine months ended September 30, 2013 and 2012 (unaudited) (iii) Consolidated Statements of Other Comprehensive Income for the three and nine months ended September 30, 2013 and 2012 (unaudited) (iv) Consolidated Statement of Equity for the nine months ended September 30, 2013 (unaudited) (v) Consolidated Statements of Cash Flows for the nine months ended September 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)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Vestin Realty Mortgage I, Inc.

	By:	/s/ Michael V. Shustek
		Michael V. Shustek
		President and Chief Executive Officer
	Date:	November 14, 2013

	By:	/s/ Tracee Gress
		Tracee Gress
		Chief Financial Officer
	Date:	November 14, 2013

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Exhibit 31.1

CERTIFICATIONS

I, Michael V. Shustek, certify that:

1. I have reviewed this Form 10-Q of Vestin Realty Mortgage I, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:

(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

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(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.

Date: November 14, 2013

/s/ Michael V. Shustek

Michael V. Shustek

Chief Executive Officer

Vestin Realty Mortgage I, Inc.

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Exhibit 31.2

CERTIFICATIONS

I, Tracee Gress, certify that:

1. I have reviewed this Form 10-Q of Vestin Realty Mortgage I, Inc.;

(a)

(b)

(c)

(d)

(a)

(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.

Date: November 14, 2013

/s/ Tracee Gress

Tracee Gress

Chief Financial Officer

Vestin Realty Mortgage I, Inc.

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Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

Michael V. Shustek, as Chief Executive Officer of Vestin Realty Mortgage I, Inc. (the “Registrant”), and Tracee Gress, as Chief Financial Officer of the Registrant, hereby certify, pursuant to 18 U.S.C. Sec. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Registrant’s Report on Form 10-Q for the nine months ended September 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.

Date: November 14, 2013

/s/ Michael V. Shustek

Michael V. Shustek

Chief Executive Officer

Vestin Realty Mortgage I, Inc.

Date: November 14, 2013

/s/ Tracee Gress

Tracee Gress

Chief Financial Officer

Vestin Realty Mortgage I, Inc.

Attached files

Vestin Realty Mortgage I, Inc. Reports

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