Friday, May 16, 2003 | 11:29 a.m.
Vestin Group Inc., a big Las Vegas commercial lender, on Thursday announced a first-quarter loss of $1.1 million, or 25 cents per share.
That compares to a first-quarter 2002 profit of $556,222, or 4 cents a share.
Revenue for the first quarter was $7.8 million, up 54 percent from the $5 million reported in the same 2002 quarter.
The company attributed its loss to an after-tax expense of $1.1 million after making a $1.6 million capital contribution to its Vestin Fund I lending fund. Without the contribution, Vestin said it would have posted a loss of $67,752.
John Alderfer, Vestin's chief financial officer, said the capital contribution was made to increase the accounts of investors in Fund I. Account balances had fallen slightly as interest distribution payments to members outpaced the income earned on loans financed through the fund.
Overall, the economy slowed business at Vestin, executives said.
"We experienced some weakness in loan demand during the first quarter, which has traditionally been our slowest quarter of the year," Lance Bradford, Vestin Group president, said in a statement. "The uncertainties associated with the start of the war in Iraq and the continued slow economy have undoubtedly caused some borrowers to delay projects and acquisitions."
To compensate for the slowdown, the company said it hired additional staff and increased advertising to seek out new loan opportunities.
Investors apparently weren't encouraged by the news. Vestin shares this morning fell 10 percent, or 36 cents, trading at $3.29.
Vestin Group also said that Del Mar Mortgage Inc., a company owned by Vestin founder and CEO Michael Shustek, has agreed to indemnify Vestin and its subsidiaries against any loss suffered in a U.S. District Court case involving developer Howard Bulloch.
In March, Bulloch won a $5 million judgement against Vestin Group, Vestin Mortgage and Del Mar. The judgment has been stayed, pending motions and hearings. Del Mar and Shustek have guaranteed payment of any verdicts, protecting the publicly traded Vestin Group.
"This is not, nor should it be, a Vestin Group problem," Alderfer said.
Vestin is scheduled to appear at a June 16 hearing ordered by the state Financial Institutions Division to answer previously reported allegations that three possible violation were committed in its dealings with Bulloch.
Shustek said he has yet to receive a copy of the hearing order.
On Thursday, Shustek outlined the company's business plan for a group of potential investors at the Las Vegas Money Show.
To date, he said, Vestin has 8,000 investors and has issued 4,500 loans totaling about $2 billion.
"And not one penny of principal has been lost," Shustek said, adding that the company currently has $670 million in management today and expects to have $1 billion under management by the end of the year.
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