A Stern Glance

LAS VEGAS–August 11–Vestin Realty Mortgage II (Nasdaq: VRTB - News) today reported a net loss for the second quarter ended June 30, 2008 of approximately $28.6 million, or ($1.92) per share, on revenues of $5.9 million, compared with net income of approximately $4.4 million or $0.29 per share on revenues of $8.3 million in the comparable period a year ago.

For the six months ended June 30, 2008, the Company reported a net loss of approximately $25.3 million or ($1.70) per share compared with net income of approximately $10.8 million, or $0.72 per share for the same period in 2007.

The Company noted that the losses for both the quarter and the six months ended June 30, 2008 were in large part due to non-performing loans and the Company’s recording of a loan loss provision of approximately $22.3 million. In addition, the Company incurred write downs for real estate held for sale of approximately $11 million and $12.8 million for the quarter and six months ended June 30, 2008, respectively.

As of June 30, 2008, the Company had 43 loans outstanding with an aggregate principal amount approximating $288 million, of which 17 loans with an aggregate principal amount approximating $122 million were considered non-performing and three loans totaling approximately $29.3 million are considered delinquent. A loan is classified delinquent when they are temporarily past due. Loans are considered non-performing when based on current information and events; it is probable that the Company 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. Non-performing and delinquent loans increased from March 31, 2008 when the Company reported 10 loans representing approximately $58.2 million as non-performing loans. The Company has commenced foreclosure proceedings with respect to the 17 non-performing loans. In addition, the Company is conducting workout discussions with certain non-performing borrowers; however, no assurance can be made as to whether these discussions will be successful. During July 2008, we received payment in full on loan which was delinquent as of June 30, 2008 in the amount of $22.3 million, a principal payment of $4.9 million on a delinquent loan and the receipt of delinquent interest on a loan that was considered delinquent on June 30, 2008. As of August 8, 2008, we had foreclosed upon two of the non-performing loans and classified them as real estate held for sale. As of June 30, 2008, we owned five properties we acquired through foreclosure, compared with two properties owned as of June 30, 2007.

As of June 30, 2008 shareholder equity was $15.98 per common share. The Company had on its balance sheet $14.3 million of cash and cash equivalents, $253.1 million of investment in real estate loans, net of allowance of $34.5 million, $21.7 in real estate held for sale and $78.5 million in total liabilities as of June 30, 2008. Net cash flow from operating activities was $9.9 million.

Michael V. Shustek, Chairman and Chief Executive Officer, said, “Our results are largely attributable to the economic environment the country is experiencing. The downturn in the real estate market and the increased difficulties faced by our borrowers in obtaining take-out financing, has caused a number of our loans to become non-performing or delinquent and has caused a decline in the underlying collateral securing the Company’s loan portfolio. We are working aggressively to resolve our problem loans; however, this process will take time and our near term operating results are likely to suffer from the level of non-performing assets.”

Stern And Company
Strategic Communications
http://www.sdsternpr.com
info @ sdsternpr.com