Note K - Fair Value

6 Months Ended

Jun. 30, 2012

Fair Value Disclosures [Text Block]

NOTE K — FAIR VALUE

As of June 30, 2012, financial assets and liabilities utilizing Level 1 inputs included investment in 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 table presents the valuation of our financial assets as of June 30, 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 6/30/2012		Carrying Value on Balance Sheet at 6/30/2012
Assets
Investment in marketable securities - related party	$	631,000	$	--	$	--	$	631,000	$	631,000
Investment in real estate loans	$	--	$	--	$	11,733,000	$	11,733,000	$	11,739,000

	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 12/31/2011		Carrying Value on Balance Sheet at 12/31/2011
Assets
Investment in marketable securities - related party	$	651,000	$	--	$	--	$	651,000	$	651,000
Investment in real estate loans	$	--	$	--	$	10,827,000	$	10,827,000	$	10,802,000

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, 2012 to June 30, 2012.  There were no liabilities measured at fair value on a recurring basis using significant unobservable inputs as of January 1, 2012 to June 30, 2012.

	Investment in real estate loans
Balance on January 1, 2012	$	10,827,000
Change in temporary valuation adjustment included in net income (loss)
Net decrease in allowance for loan losses		134,000
Transfer of allowance on real estate loans converted to unsecured notes receivable		1,062,000
Transfer of allowance on real estate loan to other real estate owned		150,000
Transfer of allowance on real estate loan to asset held for sale		1,375,000
Reduction of allowance on real estate loan following payment of loan		1,101,000
Purchase and additions of assets
New mortgage loans and mortgage loans bought		12,163,000
Transfer of real estate loans to other real estate owned		(937,000	)
Transfer of real estate loan to asset held for sale		(4,434,000	)
Transfer of real estate loans converted to unsecured notes receivable		(989,000	)
Sales, pay downs and reduction of assets
Collections of principal and sales of investment in real estate loans		(8,688,000	)
Temporary change in estimated fair value based on future cash flows		(31,000	)
Balance on June 30, 2012, net of temporary valuation adjustment	$	11,733,000

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, 2011 to June 30, 2011:

		Investment in real estate loans
Balance on January 1, 2011	$	6,660,000
Change in temporary valuation adjustment included in net loss
Increase in allowance for loan losses		(116,000)
Purchase and additions of assets
New mortgage loans and mortgage loans bought		490,000
Reduction of allowance for loan losses relative to settlement of   investment in real estate loan		986,000
Sales, pay downs and reduction of assets
Collections of principal and settlements of investment in real estate loans		(1,120,000)
Temporary change in estimated fair value based on future cash flows		(98,000)
Balance on June 30, 2011, net of temporary valuation adjustment	$	6,802,000