POS AM 1 formposam.htm formposam.htm

 




As filed with the Securities and Exchange Commission
on March 5, 2008

Registration No. 333-125629

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

POST EFFECTIVE AMENDMENT NO. 7 TO THE
REGISTRATION STATEMENT NO. 333-125629
AS FILED ON AUGUST 4, 2005

Under

THE SECURITIES ACT OF 1933


REDWOOD MORTGAGE INVESTORS VIII
(Exact name of registrant as specified in its charter)

CALIFORNIA
6611
94-3158788
(State or other jurisdiction of incorporation or organization)
(Primary Standard Industrial Classification Code Number)
(I.R.S. Employer Identification No.)

900 Veterans Blvd., Suite 500, Redwood City, California 94063   (650) 365-5341
(Address and telephone number of principal executive offices)

900 Veterans Blvd., Suite 500, Redwood City, California 94063   (650) 365-5341
(Address of principal place of business
or intended principal place of business)

Michael R. Burwell
900 Veterans Blvd., Suite 500, Redwood City, California 94063   (650) 365-5341
(Name, address, including zip code and telephone number,
including area code of agent for service)

Copies to:

Stephan J Schrader

Baker & McKenzie LLP
Two Embarcadero Center, 11th Floor
San Francisco, CA  94111-3802

Approximate date of commencement
of proposed sale to the public:

As soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box:[x]


1



Supplement No. 5 dated March 5, 2008
to the Prospectus dated August 4, 2005

Redwood Mortgage Investors VIII,
A California Limited Partnership

The following information updates the Prospectus of Redwood Mortgage Investors VIII, a California limited partnership (the “Partnership”) dated August 4, 2005 (“the Prospectus”).  This Supplement No. 5 replaces in its entirety, Supplement No. 4.  You should no longer refer to or rely on the information contained in Supplement No. 4.

This supplement updates certain information regarding the Partnership and its General Partners.  Important additional information regarding the business of the Partnership and the risks involved in investing in the Partnership are contained in the Prospectus.  You should carefully read the Prospectus along with this Supplement.

This supplement also updates the accompanying prospectus by adding the following:

1.           Summary of Partnership Activities.  The Partnership is engaged in business as a mortgage lender.  The Partnership makes loans to individuals and business entities secured by residential, investment or commercial property.  In order to ensure repayment of the loans, the loans are secured by first and second, and in some limited cases, third deeds of trust on the property.  For a more detailed discussion of deeds of trust and other factors affecting the loans made by the Partnership, you should carefully review the Section of the Prospectus entitled “CERTAIN LEGAL ASPECTS OF PARTNERSHIP LOANS.”

Current Offering.  In August, 2005, we elected to continue offering Units in the Partnership in order to increase the Partnership’s loan portfolio.  By increasing the Partnership’s loan portfolio, we can continue to increase diversity and add additional safety to the Portfolio.  In August, 2005, the Partnership began offering Units in its sixth Offering of $100,000,000.

¡           Status of Current Offering.  As of September 30, 2007, the Partnership had sold $71,823,000 of Units from the current Offering.  This brings the total proceeds received from the initial Offerings and the current Offering to $271,636,000 as of September 30, 2007.  The Partnership had outstanding secured loans with a total principal balance of $285,092,000 as of September 30, 2007.  As of September 30, 2007, the Partnership had, in connection with its current offering of $100,000,000 of Units, incurred no organizational costs and $1,325,000 in syndication costs.

¡           No Adverse Business Development.  As of the date of this Supplement, there have been no adverse business developments or conditions in the Partnership, or any prior limited partnerships in which the General Partners are involved, that would be material to a prospective investor.

2.           Financial Statements. Financial Statements of the Partnership.  The consolidated Financial Statements of the Partnership included in this Supplement have been audited by Armanino McKenna, LLP, independent registered public accounting firm as of December 31, 2006 and 2005 and for each of the years in the three year period ended December 31, 2006.  This Supplement also contains unaudited, interim financial statements for the Partnership as of September 30, 2007 and for the three and nine month periods ended September 30, 2007 and September 20, 2006.

Financial Statements of Corporate General Partners.  The Balance Sheet of Redwood Mortgage Corp., as of September 30, 2007 included in this Supplement has been audited by Armanino McKenna, LLP, independent registered public accounting firm.  The Balance Sheet of Gymno Corporation., as of December 31, 2006 included in this Supplement has been audited by Armanino McKenna, LLP, independent registered public accounting firm.

3.           RELATED PARTY POLICIES

For a description of the Partnership’s policies and procedures for the review, approval or ratification of related party transactions, please refer to the discussion under the caption “Compensation of the General Partners and its Affiliates” beginning on page 23 of the Prospectus, the discussion under the caption “Conflicts of Interest” beginning on page 28 and the discussion under the captions “Investment Objectives and Criteria – Loans to General Partners and Affiliates” and “Investment Objectives and Criteria – Purchase of Loans from Affiliates and Other Third Parties” on page 42.

2







REDWOOD MORTGAGE INVESTORS VIII
 INTERIM FINANCIAL STATEMENTS



In the opinion of the management of Redwood Mortgage Investors VIII, a California Limited Partnership, all adjustments necessary for a fair presentation of the financial position as of the interim period presented herein have been made.  All such adjustments are of a normal, recurring nature.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted.  However, management believes that the disclosures contained herein are adequate to make the information presented not misleading.  It is suggested that this unaudited financial statement be read in conjunction with the corresponding audited financial statement and the notes thereto included elsewhere in this prospectus.


3



REDWOOD MORTGAGE INVESTORS VIII
 
(A California Limited Partnership)
 
CONSOLIDATED BALANCE SHEETS
 
AS OF SEPTEMBER 30, 2007 (unaudited) AND DECEMBER 31, 2006 (audited)
 
($ in thousands)
 
             
ASSETS
 
             
   
September 30,
   
December 31,
 
   
2007
   
2006
 
Cash and cash equivalents
  $
27,698
    $
18,096
 
                 
Loans
               
Loans, secured by deeds of trust
   
285,092
     
261,097
 
Allowance for loan losses
    (3,618 )     (2,786 )
Net loans
   
281,474
     
258,311
 
                 
                 
Interest and other receivables
               
Accrued interest and late fees
   
4,734
     
3,384
 
Due from affiliate
   
667
     
-
 
Advances on loans
   
373
     
96
 
Total interest and other receivables
   
5,774
     
3,480
 
                 
Loan origination fees, net
   
26
     
104
 
Real estate held for sale, net of allowance of $1,417
               
for September 30, 2007 and $2,348 for December 31, 2006
   
23,294
     
25,231
 
Total other assets
   
23,320
     
25,335
 
Total assets
  $
338,266
    $
305,222
 
                 
                 
                 
                 
The accompanying notes are an integral part of the consolidated financial statements.
 






4



REDWOOD MORTGAGE INVESTORS VIII
 
(A California Limited Partnership)
 
CONSOLIDATED BALANCE SHEETS
 
AS OF SEPTEMBER 30, 2007 (unaudited) AND DECEMBER 31, 2006 (audited)
 
($ in thousands)
 
             
LIABILITIES AND PARTNERS' CAPITAL
 
             
   
September 30,
   
December 31,
 
   
2007
   
2006
 
Liabilities
           
Line of credit
  $
32,450
    $
30,700
 
Accounts payable
   
184
     
76
 
Payable to affiliate
   
516
     
481
 
Total liabilities
   
33,150
     
31,257
 
Minority interest
   
3,127
     
3,017
 
Investors in applicant status
   
566
     
557
 
Partners' capital
               
Limited partner's capital, subject to redemption net of unallocated
               
syndication costs of $1,782 for September 30, 2007 and $1,743 for
               
December 31, 2006; and Formation Loan receivable of $13,338
               
for September 30, 2007 and $12,693 for December 30, 2006
   
301,169
     
270,160
 
                 
General partners' capital, net of unallocated syndication costs of $18
               
for September 30, 2007 and $17 for December, 31, 2006
   
254
     
231
 
Total partners' capital
   
301,423
     
270,391
 
Total liabilities and partners' capital
  $
338,266
    $
305,222
 
                 
                 
                 
The accompanying notes are an integral part of the consolidated financial statements.
         





5



REDWOOD MORTGAGE INVESTORS VIII
 
(A California Limited Partnership)
 
CONSOLIDATED STATEMENTS OF INCOME
 
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006 (unaudited)
 
($ in thousands, except for per limited partner amounts)
 
                         
   
THREE MONTHS ENDED
   
NINE MONTHS ENDED
 
   
SEPTEMBER 30,
   
SEPTEMBER 30,
 
   
2007
   
2006
   
2007
   
2006
 
Revenues
                       
Interest on loans
  $
7,315
    $
6,616
    $
21,074
    $
19,839
 
Interest - interest bearing accounts
   
22
     
18
     
63
     
40
 
Late fees
   
74
     
94
     
221
     
230
 
Imputed interest on Formation loan
   
176
     
99
     
507
     
295
 
Other
   
33
     
20
     
53
     
99
 
Total revenues
   
7,620
     
6,847
     
21,918
     
20,503
 
                                 
Expenses
                               
Mortgage servicing fees
   
-
     
630
     
1,310
     
1,845
 
Interest expense
   
480
     
557
     
1,455
     
1,902
 
Amortization of loan origination fees
   
26
     
23
     
78
     
67
 
Provisions for losses on loans and real estate held
                               
for sale
   
755
     
301
     
924
     
1,155
 
Asset management fees
   
293
     
255
     
839
     
726
 
Clerical costs through Redwood Mortgage Corp.
   
83
     
82
     
249
     
246
 
Professional services
   
208
     
15
     
372
     
166
 
Amortization of discount on imputed interest
   
176
     
99
     
507
     
295
 
Other
   
47
     
55
     
172
     
233
 
Total expenses
   
2,068
     
2,017
     
5,906
     
6,635
 
Net income
  $
5,552
    $
4,830
    $
16,012
    $
13,868
 
                                 
Net income:
                               
General partners ( 1%)
  $
55
    $
48
    $
160
    $
138
 
Limited partners (99%)
   
5,497
     
4,782
     
15,852
     
13,730
 
    $
5,552
    $
4,830
    $
16,012
    $
13,868
 
Net income per $1,000 invested by limited
                               
partners for the entire period
                               
                                 
-where income is compounded and retained
  $
17
    $
17
    $
53
    $
53
 
                                 
-where partner receives income in monthly
                               
distributions
  $
17
    $
17
    $
52
    $
52
 
                                 
                                 
The accompanying notes are an integral part of the consolidated financial statements.
                 


6



REDWOOD MORTGAGE INVESTORS VIII
 
(A California Limited Partnership)
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006 (unaudited)
 
($ in thousands)
 
             
   
2007
   
2006
 
Cash flows from operating activities
           
Net income
  $
16,012
    $
13,868
 
Adjustments to reconcile net income to net cash provided by operating activities
               
Imputed interest income
    (507 )     (295 )
Amortization of discount
   
507
     
295
 
Amortization of loan origination fees
   
78
     
67
 
Provision for loan and real estate losses
   
924
     
1,155
 
Change in operating assets and liabilities
               
Accrued interest and late fees
    (1,818 )     (36 )
Advances on loans
    (332 )     (52 )
Loan origination fees
   
-
      (19 )
Accounts payable
   
108
     
20
 
Due from/payable to affiliate
    (633 )     (62 )
Other liabilities
   
-
     
72
 
Net cash provided by operating activities
   
14,339
     
15,013
 
Cash flows from investing activities
               
Loans originated
    (94,812 )     (131,328 )
Principal collected on loans
   
69,125
     
92,893
 
Payments for development of real estate
    (773 )     (280 )
Pay off term loan and related payables
    (845 )    
-
 
Proceeds from disposition of real estate
   
5,680
     
637
 
Net cash used in investing activities
    (21,625 )     (38,078 )
Cash flows from financing activities
               
Borrowings (payments) on line of credit, net
   
1,750
     
2,700
 
Contribution by partner applicants
   
24,824
     
27,355
 
Partners' withdrawals
    (8,769 )     (7,249 )
Syndication costs paid
    (320 )     (297 )
Formation loan lending
    (1,874 )     (2,114 )
Formation loan collections
   
1,167
     
1,112
 
Increase/(decrease) in minority interest
   
110
      (53 )
Net cash provided by financing activities
   
16,888
     
21,454
 
Net decrease in cash and cash equivalents
   
9,602
      (1,611 )
Cash and cash equivalents - beginning of period
   
18,096
     
28,853
 
Cash and cash equivalents - end of period
  $
27,698
    $
27,242
 
Supplemental disclosures of cash flow information
               
Cash paid for interest
  $
1,455
    $
1,902
 
                 
                 
                 
The accompanying notes are an integral part of the consolidated financial statements.
         




7


During the first quarter of 2007, the partnership acquired a single family residence through foreclosure.  This resulted in an increase in asset value of real estate held for sale of $2,640,000, an increase in notes payable of $844,000 and a decrease of $1,320,000 in loans receivable, $399,000 in accrued interest, $52,000 in advances and $25,000 in late charge receivables.  In addition, the partnership sold a defaulted loan to a third party in return for cash.  As a result, $360,000 was written off, which resulted in a decrease in loans receivable and a decrease in the allowance for loan loss reserve.

In the second quarter of 2007, the partnership sold one property held as real estate held for sale and sustained a loss of $602,000, which resulted in a decrease in real estate held for sale receivables and a decrease in the real estate held for sale allowance.

In the third quarter of 2007, the partnership reached a settlement of a note from a defaulted borrower.  As a result, $47,000 was written off against the allowance for loan loss reserve including:  $13,000 for the note balance, $32,000 for accrued interest and $2,000 in accrued late charges.


8


REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2007 (unaudited)


NOTE 1 – GENERAL

In the opinion of the management of the partnership, the accompanying unaudited consolidated financial statements contain all adjustments, consisting of normal, recurring adjustments, necessary to present fairly the consolidated financial information included therein.  These consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the partnership’s Form 10-K for the fiscal year ended December 31, 2006 filed with the Securities and Exchange Commission.  The results of operations for the nine month period ended September 30, 2007 are not necessarily indicative of the operating results to be expected for the full year.

Formation Loans

The following summarizes Formation Loan transactions to September 30, 2007 ($ in thousands):

   
Offerings
 
   
1st
   
2nd
   
3rd
   
4th
   
5th
   
6th
   
Total
 
Limited partner
                                         
contributions
  $
14,932
    $
29,993
    $
29,999
    $
49,985
    $
74,904
    $
71,823
    $
271,636
 
                                                         
Formation Loan made
   
1,075
     
2,272
     
2,218
     
3,777
     
5,661
     
5,435
     
20,438
 
Discount on imputed
                                                       
interest
   
-
      (118 )     (136 )     (305 )     (1,161 )     (1,397 )     (3,117 )
Formation Loan made,
                                                       
net
   
1,075
     
2,154
     
2,082
     
3,472
     
4,500
     
4,038
     
17,321
 
Repayments to date
    (991 )     (1,538 )     (1,075 )     (1,452 )     (1,261 )     (351 )     (6,668 )
Early withdrawal
                                                       
penalties applied
    (84 )     (139 )     (104 )     (46 )     (59 )    
-
      (432 )
Formation Loan, net
                                                       
at September 30, 2007
   
-
     
477
     
903
     
1,974
     
3,180
     
3,687
     
10,221
 
Unamortized discount
                                                       
on imputed interest
   
-
     
118
     
136
     
305
     
1,161
     
1,397
     
3,117
 
Balance
                                                       
at September 30, 2007
  $
-
    $
595
    $
1,039
    $
2,279
    $
4,341
    $
5,084
    $
13,338
 
Percent loaned
    7.2 %     7.6 %     7.4 %     7.6 %     7.6 %     7.6 %     7.5 %

The Formation Loan has been deducted from limited partners’ capital in the consolidated balance sheets.  As amounts are collected from Redwood Mortgage Corp., the deduction from capital will be reduced.  Interest has been imputed at the market rate of interest in effect at the date of the offerings’ close.  An estimated amount of imputed interest was recorded for the offerings still outstanding.  During the three month periods ended September 30, 2007 and 2006, amortization expense of $507,000 and $295,000, respectively, was recorded related to the discount on the imputed interest.  For the nine month periods ended September 30, 2007 and 2006, amortization expense of $176,000 and $99,000, respectively, was recorded related to the discount on the imputed interest.

9


REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2007 (unaudited)


NOTE 1 – GENERAL (continued)

Syndication costs

The partnership bears its own syndication costs (other than certain sales commissions), including legal and accounting expenses, printing costs, selling expenses, and filing fees.  Syndication costs are charged against partners’ capital and are allocated to the individual partners consistent with the partnership agreement.

Through September 30, 2007, syndication costs of $4,583,000 had been incurred by the partnership for the current (sixth) offering and the previous five offerings with the following distribution ($ in thousands):

Costs incurred
  $
4,583
 
Early withdrawal penalties applied
    (143 )
Allocated to date
    (2,640 )
September 30, 2007 balance
  $
1,800
 

The sixth offering of 100,000,000 units ($100,000,000) commenced on August 4, 2005.  Syndication costs attributable to the sixth offering will be limited to the lesser of 10% of the gross proceeds or $4,000,000 with any excess to be paid by the general partners.  As of September 30, 2007, the sixth offering had incurred syndication costs of $1,325,000 (1.84% of contributions).  Syndication costs are typically higher in the early stages of an offering.


NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The partnership’s consolidated financial statements include the accounts of its 100%-owned subsidiaries, Russian Hill Property Company, LLC (“Russian”) and Borrette Property Company, LLC (“Borrette”), and its 72.5%-owned subsidiary, Larkin Property Company, LLC (“Larkin”).  All significant intercompany transactions and balances have been eliminated in consolidation.

Loans secured by deeds of trust

At September 30, 2007 and December 31, 2006, the partnership had seventeen and seven loans, respectively, past due 90 days or more in regularly scheduled monthly payment (“90 Day Past Due Loans”) totaling $22,637,000 and $5,519,000, respectively.

10


REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2007 (unaudited)


NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Loans secured by deeds of trust (continued)

Most of the partnership’s loans contain balloon payments at their maturity date, meaning that a lump sum payment of principal and interest is due at the maturity date.  Borrowers occasionally are not able to pay the full amount due at the maturity date.  The partnership may allow these borrowers to continue making the previously regularly scheduled monthly payments for certain periods of time to assist the borrower in meeting the balloon payment obligation.  These loans for which the principal and/or any accrued interest is due and payable, but the borrower has failed to make such payment of principal and/or accrued interest are referred to herein as “Past Maturity Loans”.  At September 30, 2007 and December 31, 2006, the partnership had seventeen loans totaling $61,527,000 and seven loans totaling $28,706,000, respectively, which were Past Maturity Loans.  Some of the Past Maturity Loans are also categorized and included in the totals of the 90 Day Past Due Loans when they are both past their maturity date and they are more than 90 days late on regularly scheduled monthly payments.  The total combined number of 90 Day Past Due Loans and Past Maturity Loans at September 30, 2007 and December 31, 2006 was 27 totaling $71,787,000 and ten totaling $30,055,000, respectively.  Accrued interest, advances and late charge receivables on these loans totaled $2,573,000 and $1,568,000 as of September 30, 2007 and December 31, 2006, respectively.  The partnership does not consider these loans to be impaired because, in the opinion of management, there is sufficient collateral to cover the outstanding amount due to the partnership and the partnership is still accruing interest on these loans.  At September 30, 2007 and December 31, 2006 there were no loans categorized as impaired by the partnership.

Allowance for loan losses

The composition of the allowance for loan losses as of September 30, 2007 and December 31, 2006 was as follows (in thousands):

         
Percent
         
Percent
 
   
September 30,
   
to total
   
December 31,
   
to total
 
   
2007
   
loans
   
2006
   
loans
 
Real estate mortgage
                       
Single-family (1-4 units)
  $
2,004
      66.56 %   $
1,673
      73.10 %
Apartments
   
134
      4.71 %    
160
      5.71 %
Commercial
   
1,417
      27.89 %    
887
      20.40 %
Land
   
63
      0.84 %    
66
      0.79 %
    $
3,618
      100.00 %   $
2,786
      100.00 %



11


REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2007 (unaudited)


NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Allowance for loan losses (continued)

Activity in the allowance for loan losses for the nine months ended September 30, 2007 and for the year ended December 31, 2006 was as follows ($ in thousands):

   
September 30,
   
December 31,
 
   
2007
   
2006
 
Balance at beginning of period
  $
2,786
    $
3,138
 
                 
Charge-offs
               
Domestic
               
Real estate mortgage
               
Single-family (1-4 units)
   
-
      (112 )
Apartments
    (11 )    
-
 
Commercial
    (363 )     (15 )
Land
    (46 )    
-
 
      (420 )     (127 )
Recoveries
               
Domestic
               
Real estate mortgage
               
Single-family (1-4 units)
   
-
     
-
 
Apartments
   
-
     
-
 
Commercial
   
-
     
-
 
Land
   
-
     
-
 
     
-
     
-
 
Net charge-offs
    (420 )     (127 )
Additions charged to operations
   
924
     
927
 
Transfer to real estate held for sale reserve
   
-
      (1,152 )
Transfer from real estate held for sale reserve
   
328
     
-
 
Balance at end of period
  $
3,618
    $
2,786
 
Ratio of net charge-offs during the period to average
               
secured loans outstanding during the period
    0.15 %     0.05 %

Income taxes

No provision for federal and state income taxes (other than an $800 state minimum tax) is made in the consolidated financial statements since income taxes are the obligation of the limited partners if and when income taxes apply.



12


REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2007 (unaudited)


NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Net income per $1,000 invested

Amounts reflected in the consolidated statements of income as net income per $1,000 invested by limited partners for the entire period are amounts allocated to limited partners who held their investment throughout the period and have elected to either leave their earnings to compound or have elected to receive periodic distributions of their net income.  Individual income is allocated each month based on the limited partners’ pro rata share of partners’ capital.  Because the net income percentage varies from month to month, amounts per $1,000 will vary for those individuals who made or withdrew investments during the period, or selected other options.
 

Profits and losses

Profits and losses are allocated among the limited partners according to their respective capital accounts monthly after 1% of the profits and losses is allocated to the general partners.

Management estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions about the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities, at the date of the financial statements and the reported amounts of revenues and expenses during the reported periods.  Such estimates relate principally to the determination of the allowance for loan losses, including the valuation of impaired loans and the valuation of real estate held for sale. Actual results could differ significantly from these estimates.


NOTE 3 – GENERAL PARTNERS AND RELATED PARTIES

 
The following are commissions and/or fees, which are paid to the general partners.

Mortgage brokerage commissions

For fees in connection with the review, selection, evaluation, negotiation and extension of loans, Redwood Mortgage Corp. may collect an amount equivalent to 12% of the loaned amount until six months after the termination date of the offering.  Thereafter, loan brokerage commissions (points) will be limited to an amount not to exceed 4% of the total partnership assets per year.  The loan brokerage commissions are paid by the borrowers and thus, are not an expense of the partnership.

Mortgage servicing fees

Monthly mortgage servicing fees of up to 1/8 of 1% (1.5% annual) of the unpaid principal are paid to Redwood Mortgage Corp., based on the unpaid principal balance of the loan portfolio, or such lesser amount as is reasonable and customary in the geographic area where the property securing the mortgage is located.  Once a loan is categorized as impaired, mortgage servicing fees are no longer accrued thereon.  Additional service fees are recorded upon the receipt of any subsequent payments on impaired loans.


13


REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2007 (unaudited)


 
NOTE 3 – GENERAL PARTNERS AND RELATED PARTIES (continued)

 
Asset management fees

The general partners receive monthly fees for managing the partnership’s loan portfolio and operations in an amount up to 1/32 of 1% of the “net asset value” (3/8 of 1% annually), which is the partnership’s total assets less its total liabilities.

Other fees

The Partnership Agreement provides for other fees such as reconveyance, mortgage assumption and mortgage extension fees. Such fees are incurred by the borrowers and are paid to the general partners.

 
Operating expenses

Redwood Mortgage Corp., a general partner, is reimbursed by the partnership for all operating expenses incurred on behalf of the partnership, including without limitation, out-of-pocket general and administration expenses of the partnership, accounting and audit fees, legal fees and expenses, postage and preparation of reports to limited partners.


 
NOTE 4 – REAL ESTATE HELD FOR SALE

The following schedule reflects the cost of the properties and recorded reductions to estimated fair values, including estimated costs to sell, at September 30, 2007 and December 31, 2006 ($ in thousands):

   
September 30,
   
December 31,
 
   
2007
   
2006
 
Cost of properties
  $
24,711
    $
27,579
 
Reduction in value
    (1,417 )     (2,348 )
Real estate held for sale, net
  $
23,294
    $
25,231
 

In September 2004, the partnership acquired a single-family residence through a foreclosure sale.  At the time the partnership took ownership of the property, the partnership’s investment totaled $1,937,000 including accrued interest and advances.  The borrower had begun a substantial renovation of the property, which was not completed at the time of foreclosure.  The partnership has decided to pursue development of the property by processing plans for the creation of two condominium units on the property.  These plans will incorporate the majority of the existing improvements currently located on the property.  At September 30, 2007 and December 31, 2006, the partnership’s total investment in this property was $1,816,000 and $1,759,000, respectively, net of a valuation allowance of $500,000.

In December 2004, the partnership acquired land through a deed in lieu of foreclosure. At the time the partnership took ownership of the property, the partnership’s investment totaled $4,377,000 including accrued interest and advances.  During 2006, management established a $490,000 reserve against this property to reduce the carrying amount to management’s estimate of the net realizable value of the property.  During the third quarter of 2006, the partnership sold one of the three parcels at a loss of approximately $73,000, for which a reserve had been previously established.  At September 30, 2007 and December 31, 2006, the partnership’s investment in this property was $3,222,000, net of a valuation allowance of $417,000.

14


REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2007 (unaudited)


 
NOTE 4 – REAL ESTATE HELD FOR SALE (continued)

During 2006, the partnership acquired a single-family residence through foreclosure.  At the time the partnership took ownership of the property, the partnership’s investment totaled $6,028,000.  As of June 30, 2007 and December 31, 2006, approximately $253,000 and $111,000, respectively, in costs related to the development of this property had been capitalized.  In June 2007, the property was sold at a loss of $602,000, which was offset against a valuation allowance of $919,000, which was allocated for this property.

Russian

During 2002, a single-family residence that secured a partnership loan totaling $4,402,000, including accrued interest and advances, was transferred via a statutory warranty deed to a new entity named Russian Hill Property Company, LLC (“Russian”).  Russian was formed by the partnership to complete the development and sale of the property.  The assets, liabilities and operating results of Russian have been consolidated into the accompanying consolidated financial statements of the partnership.  Costs related to the sale and development of this property were capitalized during 2003.  Commencing January 2004, costs related to sales and maintenance of the property were expensed.  At each of September 30, 2007 and December 31, 2006, the partnership’s total investment in Russian was $3,979,000, net of a valuation allowance of $500,000.

Larkin

During 2005, the partnership acquired a multi-unit property through foreclosure.  At the time the partnership took ownership of the property, the partnership’s investment, together with three other affiliate partnerships, totaled $10,595,000, including accrued interest and advances.  Upon acquisition, the property was transferred via a statutory warranty deed to a new entity named Larkin Street Property Company, LLC (“Larkin”).  The partnership owns a 72.50% interest in the property and the other three affiliates collectively own the remaining 27.50%.  No valuation allowance has been established against this property as management is of the opinion that the property will have adequate equity to allow the partnership and its affiliates to recover their investments.  The assets, liabilities and operating results of Larkin have been consolidated into the accompanying consolidated financial statements of the partnership.  The partnership has commenced making improvements to the property in anticipation of listing the property for sale in late 2008.  As of September 30, 2007, approximately $1,299,000 in costs related to the development of this property have been capitalized.  The partnership pursued efforts to recover funds from the guarantors of the original loan and during the third quarter of 2006 obtained $431,000, representing the partnership’s pro rata share of the recovery, from one of them.  These proceeds were applied to reduce the partnership’s investment and as of September 30, 2007, the partnership’s investment, together with the other affiliated partnerships, totaled $11,463,000.

Borrette

In February 2007, the partnership acquired a single-family residence through foreclosure.  At the time the partnership took ownership of the property, the partnership’s investment totaled $2,640,000 including accrued interest, late charges, advances and the balance owed to the senior lien holder, including accrued charges.  In September 2007, the senior lien holder was paid in full.  A single asset entity named Borrette Property Company, LLC (“Borrette”) holds title to the property.  The partnership beneficially owns 100% of the membership interests in Borrette.  As of September 30, 2007, the partnership has spent approximately $174,000 for property improvements in anticipation of listing the property for sale.  As of September 30, 2007, the partnership’s total investment in Borrette was $2,814,000.


15


REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2007 (unaudited)


NOTE 5 – BANK LINE OF CREDIT

The partnership has a bank line of credit in the maximum amount of the lesser of (1) $75,000,000, (2) one-third of partners’ capital or (3) the borrowing base as defined in the credit agreement.  The line of credit matures on November 15, 2008, with borrowings at prime less 0.50% and secured by the partnership’s loan portfolio.  The line of credit may be converted to a three year fully amortizing loan at its maturity.  The outstanding balances were $32,450,000 and $30,700,000 at September 30, 2007 and December 31, 2006, respectively.  The interest rate was 7.25% at September 30, 2007 and 7.75% at December 31, 2006.  Each of these rates was 0.50% below the bank’s prime rate of 7.75% and 8.25% respectively.  The partnership may be subject to a 0.50% availability fee on specified balances in the event the average usage levels are not maintained.  During 2007, the partnership’s average usage fell below the average usage threshold and therefore the partnership was obligated to pay a 0.50% availability fee.  The line of credit requires the partnership to comply with certain financial covenants.  The partnership was in compliance with these covenants at September 30, 2007 and December 31, 2006.


NOTE 6 – NOTE PAYABLE

During the third quarter of 2007, the partnership paid off its sole note payable of $500,000 and all accrued interest related to the Borrette property (please see Note 4).

The partnership had taken title to the Borrette property subject to an existing loan in the principal amount of $500,000 secured by a senior deed of trust.  The loan was past maturity and due in full; however, the partnership had negotiated a forbearance agreement with the note holder to extend the time to repay this obligation.  The senior mortgage called for a balloon payment of principal and interest due April 30, 2007, as extended by the forbearance agreement.  The note carried an interest rate of 12.50% per annum with a $5,208 monthly payment of interest only.


NOTE 7 – FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair value of financial instruments:

(a)  
Cash and cash equivalents.  The carrying amount equals fair value.  All amounts, including interest bearing accounts, are subject to immediate withdrawal.

(b)  
Secured loans carrying value was $285,092,000 and $261,097,000 at September 30, 2007 and December 31, 2006, respectively.  The fair value of these loans of $286,762,000 and $261,692,000, respectively, was estimated based upon projected cash flows discounted at the estimated current interest rates at which similar loans would be made.  The applicable amount of the allowance for loan losses along with accrued interest and advances related thereto should also be considered in evaluating the fair value versus the carrying value.

(c)  
Line of credit and loan commitments.  The carrying amount equals fair value.  All amounts, including interest payable, are subject to immediate repayment.


16


REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2007 (unaudited)


NOTE 8 – ASSET CONCENTRATIONS AND CHARACTERISTICS ($ in thousands)

Loans are secured by recorded deeds of trust.  At September 30, 2007 and December 31, 2006 there were 108 and 103 secured loans outstanding, respectively, with the following characteristics:

   
September 30,
   
December 31,
 
   
2007
   
2006
 
Number of secured loans outstanding
   
108
     
103
 
Total secured loans outstanding
  $
285,092
    $
261,097
 
Average secured loan outstanding
  $
2,640
    $
2,487
 
Average secured loan as percent of total secured loans
    0.93 %     0.95 %
Average secured loan as percent of partners' capital
    0.88 %     0.92 %
Largest secured loan outstanding
  $
33,678
    $
32,156
 
Largest secured loan as percent of total secured loans
    11.81 %     12.32 %
Largest secured loan as percent of partners' capital
    11.17 %     11.89 %
Largest secured loan as percent of total assets
    9.95 %     10.54 %
Number of counties where security is located (all California)
   
29
     
26
 
Largest percentage of secured loans in one county
    26.63 %     17.69 %
Number of secured loans in foreclosure status
   
5
     
2
 
Amount of secured loans in foreclosure
  $
5,170
    $
2,108
 


17


REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2007 (unaudited)


NOTE 8 – ASSET CONCENTRATIONS AND CHARACTERISTICS (in thousands) (continued)

The following secured loan categories were held at September 30, 2007 and December 31, 2006:

   
September 30,
   
December 31,
 
   
2007
   
2006
 
First trust deeds
  $
100,960
    $
125,061
 
Second trust deeds
   
178,729
     
133,623
 
Third trust deeds
   
5,403
     
2,413
 
Total loans
   
285,092
     
261,097
 
Prior liens due other lenders at time of loan
   
417,747
     
329,554
 
Total debt
  $
702,839
    $
590,651
 
Appraised property value at time of loan
  $
1,031,474
    $
895,621
 
                 
Total secured loans as a percent of appraisals
               
based on appraised values and prior liens
               
at time loan was consummated
    68.14 %     65.95 %
                 
Secured loans by type of property
               
Single-family (1-4 units)
  $
189,737
    $
190,859
 
Apartments
   
13,422
     
14,914
 
Commercial
   
79,525
     
53,262
 
Land
   
2,408
     
2,062
 
Total secured loans
  $
285,092
    $
261,097
 

The interest rates on the loans range from 7.00% to 13.00% at September 30, 2007 and December 31, 2006.  This range of interest rates is typical of our portfolio.

Scheduled maturity dates of secured loans as of September 30, 2007 are as follows:

   
Amount
 
Prior to December 31, 2007
  $
86,696
 
Between January 1, 2008 and December 31, 2008
   
103,381
 
Between January 1, 2009 and December 31, 2009
   
38,668
 
Between January 1, 2010 and December 31, 2010
   
36,508
 
Between January 1, 2011 and December 31, 2011
   
6,942
 
Thereafter
   
12,897
 
    $
285,092
 


18


REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2007 (unaudited)


NOTE 8 – ASSET CONCENTRATIONS AND CHARACTERISTICS (in thousands) (continued)

The scheduled maturities for 2007 include seventeen Past Maturity Loans totaling $61,527,000 at September 30, 2007.  Interest payments on eight of these loans totaling $13,590,000 were categorized as 90 Day Past Due Loans.  Occasionally the partnership allows borrowers to continue to make the payments on Past Maturity Loans for periods of time.  One of the Past Maturity Loans totaling $4,072,000 was in foreclosure as of September 30, 2007.

At times the partnership’s cash deposits exceed federally insured limits. Management believes deposits are maintained in financially secure financial institutions.

NOTE 9 – COMMITMENTS AND CONTINGENCIES

Construction/Rehabilitation Loans

The partnership makes construction and rehabilitation loans which are not fully disbursed at loan inception.  The partnership approves the borrowers up to a maximum loan balance; however, disbursements are made periodically during completion phases of the construction or rehabilitation or at such other times as required under the loan documents.  At September 30, 2007, there were $7,491,000 of undisbursed loan funds which will be funded by a combination of borrower monthly mortgage payments, line of credit draws, retirements of principal on current loans, cash and capital contributions from investors.  The partnership does not maintain a separate cash reserve to hold the undisbursed obligations which are intended to be funded.

Workout Agreements

The partnership has negotiated various contractual workout agreements with borrowers whose loans are past maturity or who are delinquent in making payments.  The partnership was not obligated to fund additional money on these loans as of September 30, 2007. There was one loan totaling $66,000 subject to a workout agreement as of September 30, 2007.

Legal proceedings

From time to time, the partnership is involved in various legal actions arising in the normal course of business.  In the opinion of management, such matters will not have a material effect upon the financial position of the partnership.




19












REDWOOD MORTGAGE INVESTORS VIII
(A CALIFORNIA LIMITED PARTNERSHIP)
CONSOLIDATED FINANCIAL STATEMENTS
AND SUPPLEMENTAL INFORMATION
DECEMBER 31, 2006 AND 2005
AND FOR EACH OF THE THREE YEARS
IN THE PERIOD ENDED DECEMBER 31, 2006

20


ARMANINO McKENNA LLP
CERTIFIED PUBLIC ACCOUNTANTS
12667 Alcosta Blvd., Suite 500
San Ramon, CA 94583
(925) 790-2600




REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Partners
Redwood Mortgage Investors VIII
Redwood City, California

We have audited the accompanying consolidated balance sheets of Redwood Mortgage Investors VIII (a California limited partnership) as of December 31, 2006 and 2005 and the related consolidated statements of income, changes in partners' capital and cash flows for each of the three years in the period ended December 31, 2006.  These consolidated financial statements are the responsibility of Redwood Mortgage Investors VIII's management.  Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.  Redwood Mortgage Investors VIII is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Redwood Mortgage Investors VIII's internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Redwood Mortgage Investors VIII as of December 31, 2006 and 2005 and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2006 in conformity with accounting principles generally accepted in the United States of America.

Our audits were conducted for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole. Schedules II and IV are presented for purposes of additional analysis and are not a required part of the basic consolidated financial statements. Such information has been subjected to the auditing procedures applied in the audits of the basic consolidated financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic consolidated financial statements taken as a whole.


/s/  ARMANINO McKENNA  LLP
San Ramon, California
________________________
March 26, 2007

21


REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
Consolidated Balance Sheets
December 31, 2006 and 2005
(in thousands)

ASSETS
 
     
2006
     
2005
 
Cash and cash equivalents
 
$
18,096
   
$
28,853
 
                 
Loans
               
Loans, secured by deeds of trust
   
261,097
     
214,012
 
Allowance for loan losses
   
(2,786
)
   
(3,138
)
Net loans
   
258,311
     
210,874
 
                 
Interest and other receivables
               
Accrued interest and late fees
   
3,384
     
3,254
 
Advances on loans
   
96
     
103
 
Total interest and other receivables
   
3,480
     
3,357
 
                 
Other assets
               
Loan origination fees, net
   
104
     
72
 
Real estate held for sale, net
   
25,231
     
21,328
 
Total other assets
   
25,335
     
21,400
 
                 
Total assets
 
$
305,222
   
$
264,484
 

LIABILITIES AND PARTNERS’ CAPITAL
 
Liabilities
               
Line of credit
 
$
30,700
   
$
32,000
 
Accounts payable
   
76
     
10
 
Payable to affiliate
   
481
     
489
 
Total liabilities
   
31,257
     
32,499
 
                 
Investors in applicant status
   
557
     
776
 
Minority interest
   
3,017
     
3,042
 
                 
Partners’ capital
               
Limited partners’ capital, subject to redemption, net of unallocated
               
syndication costs of $1,743 and $1,653 for2006 and 2005, respectively;
               
and net of Formation Loan receivable of $12,693 and $11,506 for
               
2006 and 2005, respectively
   
270,160
     
227,970
 
                 
General partners’ capital, net of unallocated syndication costs of $18
               
and $16 for 2006 and 2005, respectively
   
231
     
197
 
Total partners’ capital
   
270,391
     
228,167
 
                 
Total liabilities and partners’ capital
 
$
305,222
   
$
264,484
 

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

22


REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
Consolidated Statements of Income
For the Years Ended December 31, 2006, 2005 and 2004
(in thousands, except for per limited partner amounts)

     
2006
     
2005
     
2004
 
                         
Revenues
                       
Interest on loans
 
$
26,395
   
$
19,203
   
$
16,437
 
Late fees
   
241
     
120
     
218
 
Other
   
689
     
865
     
478
 
     
27,325
     
20,188
     
17,133
 
                         
Expenses
                       
Mortgage servicing fees
   
2,479
     
1,736
     
1,565
 
Interest expense
   
2,344
     
278
     
622
 
Amortization of loan origination fees
   
91
     
65
     
56
 
Provision for losses on loans and real estate held for sale
   
1,195
     
855
     
1,146
 
Asset management fees
   
991
     
814
     
630
 
Clerical costs from Redwood Mortgage Corp.
   
329
     
298
     
307
 
Professional services
   
231
     
147
     
211
 
Amortization of discount on imputed interest
   
500
     
395
     
319
 
Other
   
293
     
232
     
145
 
     
8,453
     
4,820
     
5,001
 
                         
Income before minority interest
   
18,872
     
15,368
     
12,132
 
                         
Minority interest share of subsidiary loss
   
     
     
 
                         
Net income
 
$
18,872
   
$
15,368
   
$
12,132
 
                         
Net income
                       
General partners (1%)
 
$
188
   
$
154
   
$
121
 
Limited partners (99%)
   
18,684
     
15,214
     
12,011
 
                         
   
$
18,872
   
$
15,368
   
$
12,132
 
                         
Net income per $1,000 invested by
                       
limited partners for entire period
                       
Where income is reinvested
 
$
71
   
$
70
   
$
72
 
Where partner receives income in monthly distributions
 
$
69
   
$
68
   
$
70
 


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

23


REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
Consolidated Statements of Changes in Partners’ Capital
For the Years Ended December 31, 2006, 2005 and 2004
(in thousands)

         
Limited Partners
 
   
Investors
   
Capital
               
Total
 
   
In
   
Account
   
Unallocated
   
Formation
   
Limited
 
   
Applicant
   
Limited
   
Syndication
   
Loan,
   
Partners’
 
   
Status
   
Partners
   
Costs
   
Gross
   
Capital
 
                               
Balances at December 31, 2003
  $
1,210
    $
147,074
    $ (875 )   $ (7,550 )   $
138,649
 
Contributions on application
   
40,954
     
     
     
     
 
Formation loan increases
   
     
     
      (3,117 )     (3,117 )
Formation loan payments received
   
     
     
     
855
     
855
 
Interest credited to partners in applicant status
   
20
     
     
     
     
 
Interest withdrawn
    (8 )    
     
     
     
 
Transfers to partners’ capital
    (41,752 )    
41,752
     
     
     
41,752
 
Net income
   
     
12,011
     
     
     
12,011
 
Syndication costs incurred
   
     
      (417 )    
      (417 )
Allocation of syndication costs
   
      (192 )    
192
     
     
 
Partners’ withdrawals
   
      (6,365 )    
     
      (6,365 )
Early withdrawal penalties
   
      (77 )    
16
     
61
     
 
                                         
Balances at December 31, 2004
   
424
     
194,203
      (1,084 )     (9,751 )    
183,368
 
Contributions on application
   
39,816
     
     
     
     
 
Formation loan increases
   
     
     
      (2,978 )     (2,978 )
Formation loan payments received
   
     
     
     
1,178
     
1,178
 
Interest credited to partners in applicant status
   
41
     
     
     
     
 
Interest withdrawn
    (15 )    
     
     
     
 
Transfers to partners’ capital
    (39,490 )    
39,490
     
     
     
39,490
 
Net income
   
     
15,214
     
     
     
15,214
 
Syndication costs incurred
   
     
      (837 )    
      (837 )
Allocation of syndication costs
   
      (257 )    
257
     
     
 
Partners’ withdrawals
   
      (7,465 )    
     
      (7,465 )
Early withdrawal penalties
   
      (56 )    
11
     
45
     
 
                                         
Balances at December 31, 2005
   
776
     
241,129
      (1,653 )     (11,506 )    
227,970
 
Contributions on application
   
34,811
     
     
     
     
 
Formation loan increases
   
     
     
      (2,674 )     (2,674 )
Formation loan payments received
   
     
     
     
1,422
     
1,422
 
Interest credited to partners in applicant status
   
21
     
     
     
     
 
Interest withdrawn
    (7 )    
     
     
     
 
Transfers to partners’ capital
    (35,044 )    
35,044
     
     
     
35,044
 
Net income
   
     
18,684
     
     
     
18,684
 
Syndication costs incurred
   
     
      (440 )    
      (440 )
Allocation of syndication costs
   
      (335 )    
335
     
     
 
Partners’ withdrawals
   
      (9,846 )    
     
      (9,846 )
Early withdrawal penalties
   
      (80 )    
15
     
65
     
 
                                         
Balances at December 31, 2006
  $
557
    $
284,596
    $ (1,743 )   $ (12,693 )   $
270,160
 


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


24


REDWOOD MORTGAGE INVESTORS VIII
(A California Limited Partnership)
Consolidated Statements of Changes in Partners’ Capital (continued)
For the Years Ended December 31, 2006, 2005 and 2004
(in thousands)


   
General Partners
       
   
Capital
         
Total
       
   
Account
   
Unallocated
   
General
   
Total
 
   
General
   
Syndication
   
Partners’
   
Partners’
 
   
Partners
   
Costs
   
Capital
   
Capital
 
                         
Balances at December 31, 2003
  $
132
    $ (9 )   $
123
    $
138,772
 
Contributions on application
   
     
     
     
 
Formation loan increases
   
     
     
      (3,117 )
Formation loan payments received
   
     
     
     
855
 
Interest credited to partners in applicant status
   
     
     
     
 
Interest withdrawn
   
     
     
     
 
Capital contributed
   
41
     
     
41
     
41,793
 
Net income
   
121
     
     
121
     
12,132
 
Syndication costs incurred
   
      (4 )     (4 )     (421 )
Allocation of syndication costs
    (2 )    
2
     
     
 
Partners’ withdrawals
    (118 )    
      (118 )     (6,483 )
Early withdrawal penalties
   
     
     
     
 
                                 
Balances at December 31, 2004
   
174
      (11 )    
163
     
183,531
 
Contributions on application
   
     
     
     
 
Formation loan increases
   
     
     
      (2,978 )
Formation loan payments received