9-30-01

   The third quarter came to an end with a lot of uncertainty after the bombings in New York and at the Pentagon. Our national security is now in jeopardy and there is considerable economic trepidation. The markets, after a four-day hiatus, fell by 15%. By the end of the month they have stabilized somewhat, but are still in a sense of panic of what is next. Uncle Al reacted with a swift ½ % drop in the Fed Funds rate; mortgage rates are now nearing the lowest in several years. In October there is expectations that Greenspan will lower rates again. It's all in the name of spurring on the economy. We are undoubtedly in the bottom of the recession. Most economists now point to the first or second quarter before we see an upswing.
Lower interest rates help push the real estate market. It has been resilient through out the last two years and with lower interest rates, it will remain the pillar of strength in the market.

   DenSco in the first 10 weeks of existence was able to reach the goals we had made for our first quarter. We became fully invested as we took money in. We have a little under 1.5 million in our portfolio, financing just over 2.0 million real estate secured with deeds of trust. There is still strong demand for financing real estate in the Phoenix metro area. We turned down several loans because we were fully invested.

   We are operating just as planned; we financed 20 different loans, with four of those closing before quarter's end. We have several more in escrow, which should close in the next 10 days. We have lined up several deals in anticipation of this; again, trying to keep fully invested at all times. Our average loan has had a 57-day life before it closes. That's much shorter than anticipated, as we grow the portfolio and have more time under our belts it will lengthen to the more normal age of 120-150 days. Our average loan is $77,000, which gives us a good diversity of properties with this size of our portfolio. We have 10 different borrowers. We have properties all over the valley. We are extremely happy with the diversification that we have at this point.

   The goal this quarter is to grow the portfolio to between 2.0 and 3.0 million. This will enable us to continue to diversify the portfolio with different borrowers, more properties and allow for a maturation of the loans. I have updated some of the pictures of properties and will continue to do so through out the quarter.

   Denny J. Chittick