UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March~~June 3130, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to _____________

Commission File Number: 000-27816

REDWOOD MORTGAGE INVESTORS VIII, L.P.

a California Limited Partnership

(Exact name of registrant as specified in its charter)

California

94-3158788

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)


177 Bovet Road, Suite 520, San Mateo, CA	94402
(Address of principal executive offices)	(Zip Code)

(650) 365-5341

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol(s)	Name of each exchange on which registered
None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ NO

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ NO

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Smaller reporting company	☒

Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ YES ☒ NO

REDWOOD MORTGAGE INVESTORS VIII, L.P.

A California Limited Partnership

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION	3
Item 1.	Financial Statements	3
	Consolidated Balance Sheets	3
	Consolidated Statements of Income	4
	Consolidated Statements of Changes in Partners’ Capital	5
	Consolidated Statements of Cash Flows	67
	Notes to Consolidated Financial Statements	89
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2829
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3743
Item 4.	Controls and Procedures	3743
PART II.	OTHER INFORMATION	3845
Item 1.	Legal Proceedings	3844
Item 1A.	Risk Factors	3844
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3844
Item 3.	Defaults Upon Senior Securities	3844
Item 4.	Mine Safety Disclosures	3845
Item 5.	Other Information	3845
Item 6.	Exhibits	3946
Signatures		4047

Part I –FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

REDWOOD MORTGAGE INVESTORS VIII, L.P.

A California Limited Partnership

Consolidated Balance Sheets

~~March~~June 3130, 2023 ~~(unaudited)~~ and December 31, 2022 (unaudited)

($ in thousands)

	March 31,			December 31,
	June 30,			December 31,
	2023			2022
ASSETS
Cash, in banks	$	~~2,834~~469		$	963
Loan payments in trust		1			—
Loans
Principal		57,~~979~~292			60,088
Advances		77109		59
Accrued interest		1,~~004~~333			570
Prepaid interest		(~~450~~340	)		(496	)
Loan balances secured by deeds of trust		58,~~610~~394			60,221
Allowance for credit losses		(120	)		(55	)
Loan balances secured by deeds of trust, net		58,~~490~~274			60,166
Receivable from related party (Note 3)		2019			68
Real estate owned (REO), net		5,911			5,911
Debt issuance costs, net		2921			36
Other assets		6981			49
Total assets	$	6764,~~354~~775		$	67,193

LIABILITIES AND PARTNERS' CAPITAL
Accounts payable	$	~~307~~358		$	284
Payable to related party (Note 3)		6552			154
Distributions and withdrawals to limited partners (Note 3)		2,630			—
Accrued liabilities		1,265			1,103
Accrued liabilities		1,224			1,103
Line of credit		9,100			10,000
Line of credit		10,000			10,000
Promissory note to related party (Note 3)		3,300			—
Mortgage payable		1,~~347~~319			1,347
Total liabilities		15,~~573~~394			12,888
Commitments and Contingencies (Note 8)
Partners’ capital
Limited partners’ capital		5552,~~090~~691			57,616
General partners’ deficit		(~~607~~608	)		(609	)
Total partners’ capital		5452,~~483~~083			57,007
Receivable from manager (formation loan)		(2,702	)		(2,702	)
Partners’ capital, net of formation loan		5149,~~781~~381			54,305
Total liabilities and partners’ capital	$	6764,~~354~~775		$	67,193

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

REDWOOD MORTGAGE INVESTORS VIII, L.P.

A California Limited Partnership

Consolidated Statements of Income (Loss)

For the Three and Six Months Ended ~~March~~June 3130, 2023 and 2022 (unaudited)

($ in thousands)

	Three Months Ended March 31 ,
	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Revenue
Interest income	$	1,~~268~~304		$	1,~~320~~286		$	2,572		$	2,606
Interest expense
Line of credit		(~~201~~215	)		(60136	)		(416	)		(196	)
Mortgages payable		(14	)		(15	)		(28	)		(30	)
Total interest expense		(~~215~~229	)		(75151	)		(444	)		(226	)
Net interest income		1,~~053~~075			1,~~245~~135			2,128			2,380
Late fees		3			422			6			26
Total revenue, net		1,056			1,249
Gain on sale, loans		—			81			—			81
Provision for credit losses		—			—
Total revenue, net		1,078			1,238			2,134			2,487
Operations expense
Provision for credit losses		—			—			—			—
Mortgage servicing fees to Redwood Mortgage Corp.		221			223
Operations expense
Asset management fees to Redwood Mortgage Corp.		54			65
Mortgage servicing fees to Redwood Mortgage Corp.		217			237			438			460
Costs from Redwood Mortgage Corp.		178			175
Asset management fees to Redwood Mortgage Corp.		52			62			106			127
Professional services		473			351
Costs from Redwood Mortgage Corp.		167			164			345			339
REO, net (Note 5)		54			84
Professional services		256			207			729			558
Other		10			1
Dissolution Consent Solicitation		353			—			353			—
Total operations expense		990			899
REO, net (Note 5)		78			58			132			142
Net income	$	66		$	350
Other		3			18			13			19
Net income
Total operations expense		1,126			746			2,116			1,645
Limited partners (99%)	$	65		$	346
Net income (loss)	$	(48	)	$	492		$	18		$	842
General partners (1%)		1			4
Net income (loss)
	$	66		$	350
Limited partners (99%)	$	(47	)	$	487		$	18		$	833
General partners (1%)		(1	)		5			—			9
	$	(48	)	$	492		$	18		$	842

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

REDWOOD MORTGAGE INVESTORS VIII, L.P.

A California Limited Partnership

Consolidated Statements of Changes in Partners’ Capital

For the Three Months Ended ~~March~~June 3130, 2023 (unaudited)

($ in thousands)

	Limited			General			Total
	Partners’			Partners’			Partners’
	Capital			Capital (Deficit)			Capital
Balance, December 31, 2022	$	57,616		$	(609	)	$	57,007
Adoption of ASC 326		167			1			168
Balance, January 1, 2023		57,783			(608	)		57,175
Net income		65			1			66
Distributions		(207	)		—			(207	)
Withdrawals		(2,551	)		—			(2,551	)
Balance, March 31, 2023	$	55,090		$	(607	)	$	54,483
Net loss		(47	)		(1	)		(48	)
Distributions		(131	)		—			(131	)
Withdrawals		(2,221	)		—			(2,221	)
Balance, June 30, 2023	$	52,691		$	(608	)	$	52,083

For the ~~Three~~Six Months Ended ~~March~~June 3130, ~~2022~~2023 (unaudited)

($ in ~~thousands~~thousand)

	Limited			General			Total
	Partners’			Partners’			Partners’
	Capital			Capital (Deficit)			Capital
Balance, December 31, 2021	$	69,555		$	(626	)	$	68,929
Balance at December 31, 2022	$	57,616		$	(609	)	$	57,007
Net income		346			4			350
Adoption of ASC 326		167			1			168
Distributions		(308	)		—			(308	)
Balance, January 1, 2023		57,783			(608	)		57,175
Withdrawals		(3,245	)		—			(3,245	)
Net income		18			—			18
Balance, March 31, 2022	$	66,348		$	(622	)	$	65,726
Distributions		(338	)		—			(338	)
Withdrawals		(4,772	)		—			(4,772	)
Balance, June 30, 2023	$	52,691		$	(608	)	$	52,083

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

REDWOOD MORTGAGE INVESTORS VIII, L.P.

A California Limited Partnership

Consolidated Statements of ~~Cash~~Changes ~~Flows~~in Partners’ Capital

For the Three Months Ended ~~March~~June 3130, ~~2023 and~~ 2022 (unaudited)

($ in thousands)

	Three Months Ended March 31 ,
	Limited			General			Total
	2023			2022
	Partners’			Partners’			Partners’
Operating activities
	Capital			Capital (Deficit)			Capital
Interest income received	$	1,020		$	1,055
Balance, March 31, 2022	$	66,348		$	(622	)	$	65,726
Interest expense		(187	)		(29	)
Net income		487			5			492
Late fees and other loan income		1			21
Distributions		(288	)		—			(288	)
Operations expense		(927	)		(801	)
Withdrawals		(3,341	)		—			(3,341	)
Total cash (used in) provided by operating activities		(93	)		246
Balance, June 30, 2022	$	63,206		$	(617	)	$	62,589
Investing activities
Loans
Loans funded		(5,700	)		(10,489	)
Principal collected		3,853			2,355
Loans transferred to related mortgage fund		3,956			—
Advances (funded) collected		(17	)		91
Total - Loans		2,092			(8,043	)
Total cash provided by (used in) investing activities		2,092			(8,043	)
Financing activities
Partners' capital
Partner withdrawals, net of early withdrawal penalties		—			(3,208	)
Early withdrawal penalties		(39	)		(37	)
Partner distributions		(89	)		(308	)
Cash distributions to partners, net		(128	)		(3,553	)
Line of credit
Advances		—			10,800
Repayments		—			(1,000	)
Debt issuance costs		—			(57	)
Cash provided by (used in) line of credit		—			9,743
RMC payments - formation loan		—			125
Total cash (used in) provided by financing activities		(128	)		6,315
Net increase (decrease) in cash		1,871			(1,482	)
Cash, beginning of year		963			3,903
Cash, end of year	$	2,834		$	2,421

~~Non-cash~~For ~~investing activities includes approximately $6.5 million for~~ the ~~three~~Six ~~months~~Months ~~ended~~Ended ~~March~~June 3130, 2022 ~~for loans transferred to held for sale. There were no loans transferred to held for sale during the three months ended March 31, 2023.~~(unaudited)

~~Limited partners withdrawals of approximately~~ ($~~2.5~~ ~~million and March limited partners distributions of approximately $118 thousand were paid out~~ in ~~April 2023, and are included in the balance sheet as distributions and withdrawals to limited partners as of March 31, 2023.~~thousands)


	Limited			General			Total
	Partners’			Partners’			Partners’
	Capital			Capital (Deficit)			Capital
Balance, December 31, 2021	$	69,555		$	(626	)	$	68,929
Net income		833			9			842
Distributions		(596	)		—			(596	)
Withdrawals		(6,586	)		—			(6,586	)
Balance, June 30, 2022	$	63,206		$	(617	)	$	62,589

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

REDWOOD MORTGAGE INVESTORS VIII, L.P.

A California Limited Partnership

Consolidated Statements of Cash Flows

For the ~~Three~~Six Months Ended ~~March~~June 3130, 2023 and 2022 (unaudited)

($ in thousands)

Reconciliation of net income to net cash (used in) provided by operating activities:


	Six Months Ended June 30,
	2023			2022
Operating activities
Interest income received	$	1,886		$	2,407
Interest expense		(435	)		(143	)
Late fees and other loan income		6			(99	)
Operations expense		(1,937	)		(1,537	)
Total cash (used in) provided by operating activities		(480	)		628

Investing activities
Loans
Loans funded		(5,700	)		(30,838	)
Principal collected		4,540			15,866
Loans transferred to related mortgage fund		3,956			996
Loans sold to non-affiliate		—			6,583
Advances (funded) collected		(50	)		88
Total - Loans		2,746			(7,305	)
Total cash provided by (used in) investing activities		2,746			(7,305	)

Financing activities
Partners' capital
Partner withdrawals, net of early withdrawal penalties		(4,723	)		(6,510	)
Early withdrawal penalties		(49	)		(76	)
Partner distributions		(360	)		(596	)
Cash distributions to partners, net		(5,132	)		(7,182	)
Line of credit
Advances		—			11,000
Repayments		(900	)		(1,000	)
Debt issuance costs		—			(57	)
Cash (used in) provided by line of credit		(900	)		9,943

Promissory note received from related party		3,300			1,000
Promissory note repaid to related party		—			(1,000	)
Mortgages repaid		(28	)		—
RMC payments - formation loan		—			334
Total cash (used in) provided by financing activities		(2,760	)		3,095

Net (decrease) in cash		(494	)		(3,582	)
Cash, beginning of period		963			3,903
Cash, end of period	$	469		$	321

	Three Months Ended March 31 ,
	2023			2022
Cash flows from operating activities
Net income	$	66		$	350
Adjustments to reconcile net income to net cash (used in) provided by operating activities
Amortization of debt issuance costs		7			14
Change in operating assets and liabilities
Loan payments in trust		(1	)		17
Accrued interest		(201	)		(265	)
Prepaid interest		(47	)		—
Receivable from related party		48			(4	)
Other assets		(20	)		46
Accounts payable and accrued liabilities		144			73
Payable to related party		(89	)		15
Total cash (used in) provided by operating activities	$	(93	)	$	246

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

REDWOOD MORTGAGE INVESTORS VIII, L.P.

A California Limited Partnership

Consolidated Statements of Cash Flows

For the Six Months Ended June 30, 2023 and 2022 (unaudited)

($ in thousands)

Reconciliation of net income to net cash (used in) provided by operating activities:


	Six Months Ended June 30,
	2023			2022
Cash flows from operating activities
Net income	$	18		$	842
Adjustments to reconcile net income to net cash (used in) provided by operating activities
Gain on sale, loans		—			(81	)
Amortization of debt issuance costs		14			21
Change in operating assets and liabilities
Loan payments in trust		—			(125	)
Accrued interest		(530	)		(200	)
Prepaid interest		(155	)		—
Receivable from related party		49			—
Other assets		(10	)		55
Accounts payable and accrued liabilities		236			114
Payable to related party		(102	)		2
Total cash (used in) provided by operating activities	$	(480	)	$	628

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

REDWOOD MORTGAGE INVESTORS VIII, L.P.

A California Limited Partnership

Notes to Consolidated Financial Statements

~~March~~June 3130, 2023 (unaudited)

NOTE 1 – ORGANIZATION AND GENERAL

Redwood Mortgage Investors VIII, L.P., a California Limited Partnership (“RMI VIII” or “the partnership”), was formed in 1993 to engage in business as a mortgage lender and investor by making and holding-for-investment mortgage loans secured by California real estate, primarily by first and second deeds of trust. The partnership is externally managed by Redwood Mortgage Corp. (“RMC” or “the manager”). The general partners are RMC and Michael R. Burwell, the President, Secretary and Treasurer of RMC and its principal shareholder. RMC provides the personnel and services necessary to conduct the business as RMI VIII has no employees of its own. The general partners are entitled to one percent (1%) of profits or loss of the partnership. The mortgage loans the partnership funds and/or invests in, are arranged and generally are serviced by RMC.

In the opinion of management of RMC, the accompanying unaudited consolidated financial statements contain all adjustments, consisting of normal, recurring adjustments, necessary to present fairly and accurately the consolidated financial information included therein. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the partnership’s Form 10-K for the year ended December 31, 2022 filed with the U.S. Securities and Exchange Commission (“SEC”). The results of operations for the three and six months ended ~~March~~June 3130, 2023 are not necessarily indicative of the operating results to be expected for the full year.

~~The~~On ~~rights~~June 6, ~~duties~~2023, ~~and powers of~~ the ~~limited~~partnership ~~partners~~filed ~~and~~a ~~general~~definitive ~~partners~~Consent ofSolicitation ~~the~~Statement ~~partnership~~pursuant ~~are~~to ~~governed~~Section ~~by the Limited Partnership Agreement~~ 14(~~“Partnership Agreement”~~a). ~~Limited~~of ~~partners~~the ~~representing~~Securities aExchange ~~majority~~Act of ~~the~~1934, ~~outstanding~~as ~~units may~~amended, ~~without~~with the ~~consent~~SEC ofin ~~the~~connection ~~general~~with ~~partners,~~a ~~vote~~solicitation ~~to:~~of ~~(i)~~consents ~~dissolve~~from the ~~partnership;~~limited ~~(ii)~~partners ~~amend the Partnership Agreement subject~~ to ~~certain limitations; (iii)~~ approve ~~or disapprove~~ the ~~sale~~dissolution of ~~all or substantially all of~~ the ~~assets of the~~ partnership; ~~and~~ (~~iv) remove or replace one or all of~~ the ~~general~~“Dissolution”) ~~partners.~~and Aa ~~majority~~Plan ~~in interest~~ of ~~partnership~~Dissolution ~~units~~for ~~is required to elect a new general partner to continue~~ the partnership ~~business~~(the ~~after~~“Plan” aor ~~general~~“Plan ~~partner~~of ~~ceases to be a general partner due to its withdrawal~~Dissolution”).

On August 4, 2023 (the “Dissolution Date”), the general partners of RMI VIII entered into the Plan of Dissolution following the receipt of required consents of limited partners approving the Dissolution and the Plan of Dissolution. Pursuant to the Plan of Dissolution, RMC will wind up the affairs of the partnership commencing from the Dissolution Date until the complete liquidation of the partnership’s assets and the termination of the partnership in accordance with the Plan of Dissolution, the partnership’s Sixth Amended and Restated Limited Partnership Agreement dated July 28, 2005 (as amended, the “Partnership Agreement”), and the California Uniform Limited Partnership Act of 2008.

Under the Plan, RMI VIII will cease making new loans and will only engage in business activities necessary or convenient to wind-up the partnership’s business and distribute partnership assets. As part of the wind-up activities, RMC, in its sole discretion, will liquidate the partnership’s assets as promptly as is consistent with obtaining the current fair value thereof, which may include: (i) collecting loan payments from borrowers under existing loan terms; (ii) selling loans to third parties; (iii) selling loans to either or both general partners or their affiliates, subject to the limitations set forth in the Partnership Agreement; (iv) enforcing delinquent loans through foreclosure or negotiating settlements with the borrowers and/or any guarantors or other obligors on such loans; (v) selling any “real estate owned” (property acquired by foreclosure) held by the partnership; and (vi) taking any other actions determined by RMC to be consistent with recovering the fair market value of any partnership assets and authorized in the Partnership Agreement and the Plan. RMC may sell all, or substantially all, of the loans in the partnership’s portfolio to one or more unaffiliated third party purchasers (a “Portfolio Sale”), provided RMC determines, in its reasonable judgment, that the applicable Portfolio Sale is in the interest of the partnership and the limited partners taking into account the value of the loans in the portfolio being sold and the potential cost savings and other economic advantages gained from the sale of several loans in a single transaction rather than on a loan-by-loan basis. Under the Plan, RMC is entitled to a dissolution fee in an amount equal to 7.0% of each capital distribution to be made to the limited partners over the course of the wind-up period (the “Dissolution Fee”). The Dissolution Fee is to be paid to RMC quarterly, on or by the last business day of each calendar quarter based on the expected capital distribution to be paid to the limited partners for such quarter. The Dissolution Fee will be treated as an expense of the partnership and included in the allocation of income/losses to limited partners’ capital accounts. RMC will continue to collect loan servicing fees, cost reimbursements, and other fees received as manager of the partnership, in addition to the Dissolution Fee, and the general partners will continue to collect asset management fees.

In addition, effective as of the Dissolution Date: (i) all limited partners, including limited partners who previously elected not to receive periodic distributions of partnership net income under the Partnership Agreement, begin receiving quarterly distributions of the partnership’s net income (if any); and (ii) all scheduled withdrawals of limited partner capital made pursuant to the Partnership Agreement terminated in favor of quarterly pro rata withdrawals to all limited partners of cash received from the liquidation of partnership assets and available to fund capital in accordance with the distribution provisions set forth in the Plan.

REDWOOD MORTGAGE INVESTORS VIII, L.P.

A California Limited Partnership

Notes to Consolidated Financial Statements

June 30, 2023 (unaudited)

Under the Plan of Dissolution, all assets of the partnership, including cash available from interest and principal payments on partnership loans, proceeds from the sale of real estate owned and partnership loans, and RMC’s repayment (primarily from the proceeds of the Dissolution Fee) of the amounts owed on the formation loan and of the General Partners’ capital deficit (i.e., the deficit restoration obligation will be applied and distributed in the following order of priority:

•

First, to the payment of operations expense, including liabilities to professional services providers and government agencies (principally property and other taxes), fees and cost reimbursements to RMC, asset management fees to the general partners, loan administration and collection costs, and such other general and administrative expenses of the partnership’s business and compliance activities and then to the payment and discharge of all of the partnership’s then current debts and liabilities to banks (and any other lenders); and

•

Thereafter, quarterly, within seven (7) business days after the end of each calendar quarter, to the limited and general partners in proportion to their respective positive capital account balances, after (i) taking into account income and loss allocations for the applicable calendar quarter and (ii) deducting the Dissolution Fee as calculated on the last business day of the quarter. Quarterly net income, if any, will be distributed pro rata to all limited partners and by disbursement separate from capital distribution payments.

The Plan of Dissolution is filed as Exhibit 2.1 to the partnership’s Form 8-K filed with the SEC on August 9, 2023.

The following is a summary of certain provisions of the Partnership Agreement and is qualified in its entirety by the terms of the Partnership Agreement itself. Limited partners should refer to the Partnership Agreement for complete disclosure of its provisions.

The manager is responsible for managing the business and affairs of RMI VIII, subject to the voting rights of the partners on specified matters. The manager acting alone has the power and authority to act for and bind the partnership. RMC is entitled to fees and reimbursements of qualifying costs as specified in the Partnership Agreement.

The partnership’s primary investment objectives are to:

•

yield a high rate of return from mortgage lending, after the payment of certain fees and expenses to the general partners and their related mortgage funds; and

•

preserve and protect the partnership’s capital.

Net income (losses) are allocated among the limited partners according to their respective capital accounts after one percent (1%) of the net income (losses) are allocated to the general partners. The monthly results are subject to subsequent adjustment as a result of quarterly and year-end accounting and reporting. Investors should not expect the partnership to provide tax benefits of the type commonly associated with limited partnership tax shelter investments.

The partnership’s net income, cash available for distribution, and net-distribution rate fluctuates depending on:

•

loan origination volume and the balance of capital available to lend;

•

the current and future interest rates negotiated with borrowers;

•

line of credit advances, repayments and the interest rate thereon;

•

loan sales to unaffiliated third parties, and any gains received thereon;

•

the amount of fees and cost reimbursements to RMC;

•

the timing and amount of other operation expense; and

•

the timing and amount of payments from RMC on the formation loan.

Federal and state income taxes are the obligation of the partners, other than the annual California franchise tax and the California LLC cash receipts taxes paid by the partnership’s subsidiaries. The tax basis in the net assets of the partnership differs from the book basis by the amount of the allowance for credit losses and the amount of the valuation allowance for real estate owned.

810

REDWOOD MORTGAGE INVESTORS VIII, L.P.

A California Limited Partnership

Notes to Consolidated Financial Statements

~~March~~June 3130, 2023 (unaudited)

~~The~~In periods prior to the Dissolution Date, the ongoing sources of funds for loans ~~are~~were the proceeds (net of withdrawals from limited partners’ capital accounts and operation expense) from:

•

loan payoffs;

•

borrowers’ monthly principal and interest payments;

•

line of credit advances;

•

loan sales to unaffiliated third parties;

•

REO sales;

•

payments from RMC on the outstanding balance of the formation loan; and

•

earnings retained (i.e., not distributed) in partners’ capital accounts.

~~The~~In periods prior to the Dissolution Date, the partnership ~~intends~~intended to hold until maturity the loans in which it ~~invests~~invested and ~~does~~did not ~~presently~~ intend to invest in mortgage loans primarily for the purpose of reselling such loans in the ordinary course of business~~; however~~, ~~the~~except ~~partnership may sell mortgage loans (or fractional interests therein)~~ when the manager ~~determines~~determined that it ~~appears~~appeared to be advantageous for the partnership to do so, based upon then current interest rates, the length of time that the loan ~~has~~had been held by the partnership, the partnership’s credit risk and concentration risk and the overall investment objectives of the partnership. Loans sold to third parties ~~may~~were be sold for par, at a premium or, in the case of non-performing or under performing loans, at a discount. Partnership loans ~~may~~were be sold to third parties or to ~~the manager or its~~ related mortgage funds; ~~however,~~managed ~~any~~by ~~loan~~RMC. Any loans sold to the manager or a related mortgage fund thereof ~~will~~were be sold for a purchase price equal to the greater of (i) the par value of the loan or (ii) the fair market value of the loan. The manager ~~will~~did not receive commissions or broker fees with respect to loan sales conducted for the partnership; however, selling loans ~~will~~did increase partnership capital available for investing in new loans for which the manager ~~will~~earned ~~earn~~ brokerage fees and other forms of compensation.

Distributions to limited partners

At the time of their subscription to the partnership, limited partners elected either to receive monthly, quarterly or annual cash distributions from the partnership, or to compound income in their capital account. If an investor initially elected to receive monthly, quarterly or annual distributions, such election, once made, is irrevocable. If the investor initially elected to compound income in their capital account, in lieu of cash distributions, the investor ~~may~~was permitted, after three (3) years, to change the election and receive monthly, quarterly or annual cash distributions. Income allocable to limited partners who ~~elect~~elected to compound income in their capital account ~~will~~would be retained by the partnership for making further loans or for other proper partnership purposes and such amounts ~~will~~were be added to such limited partners’ capital accounts. The percentage of limited partners electing distribution of allocated net income, by weighted average to total partners’ capital was approximately 5453% and 5758% at ~~March~~June 3130, 2023 and 2022, respectively.

From and after the Dissolution Date, all limited partners, including limited partners who previously elected not to receive periodic distributions, begin receiving quarterly distributions of the partnership’s net income (if any).

Capital withdrawals and early withdrawals

There are substantial restrictions on transferability of units, and there is no established public trading and/or secondary market for the units. To provide liquidity to limited partners, the Partnership Agreement ~~provides~~provided that limited partners, after the minimum five-year period, ~~may~~could withdraw all or a portion of their capital accounts in 20 quarterly installments or longer, as determined by the general partners in light of partnership cash flow, beginning the last day of the calendar quarter following the quarter in which the notice of withdrawal iswas given. A limited partner ~~may~~could liquidate all or a part of the limited partner’s capital account in four quarterly installments beginning on the last day of the calendar quarter following the quarter in which the notice of withdrawal iswas given, subject to a 10% early withdrawal penalty applicable to any sums withdrawn prior to the time when such sums could have been withdrawn without penalty. There iswas a limited right of accelerated liquidation for an investor’s heirs upon an investor’s death.

9The partnership had not established a cash reserve from which to fund withdrawals and, accordingly, the partnership’s capacity to return a limited partner’s capital was subject to the availability of partnership cash.

Effective as of the Dissolution Date, all scheduled withdrawals of limited partner capital made pursuant to the Partnership Agreement terminated in favor of quarterly pro rata withdrawals to all limited partners of cash received from the liquidation of partnership assets and available to fund capital distributions in accordance with the distribution provisions set forth in the Plan.

REDWOOD MORTGAGE INVESTORS VIII, L.P.

A California Limited Partnership

Notes to Consolidated Financial Statements

~~March~~June 3130, 2023 (unaudited)

The partnership has not established a cash reserve from which to fund withdrawals and, accordingly, the partnership’s capacity to return a limited partner’s capital is subject to the availability of partnership cash. The general partner is under no obligation to sell loans from the portfolio in order to honor withdrawal requests, and the program can be restricted or suspended at any time. Cash flow is considered to be available only after all current partnership expenses have been paid (including compensation to the general partners and related mortgage funds) and adequate provision has been made for the payment of all periodic cash distributions on a pro rata basis which must be paid to limited partners who elected to receive such distributions upon subscription for units. Pursuant to the Partnership Agreement, no more than 20% of the total limited partners’ capital account balances at the beginning of any year may be liquidated during any calendar year. Notwithstanding this 20% limitation, the general partners have the discretion to further limit the percentage of total limited partners’ capital accounts that may be withdrawn in order to comply with the safe harbor provisions of the regulations under Section 7704 of the Internal Revenue Code of 1986, as amended, to avoid the partnership being taxed as a corporation. If notices of withdrawal in excess of these limitations are received by the general partners, the priority of distributions among limited partners is determined as follows: first to those limited partners withdrawing capital accounts according to the 20 quarter or longer installment liquidation period, then to benefit plan investors withdrawing capital accounts after five years over four quarterly installments, then to executors, heirs, and other administrators withdrawing capital accounts upon the death of a limited partner and finally to all other limited partners withdrawing capital accounts. Except as provided above, withdrawal requests will be considered by the general partners in the order received. In the event the current level of withdrawal requests by limited partners continues, the general partners may elect to restrict or suspend future capital withdrawals, as permitted by the terms of the Partnership Agreement.

Term of the partnership

The partnership will continue until 2032, unless sooner terminated as provided in the Partnership Agreement.

On May 19, 2023, the partnership filed a Consent Solicitation Statement pursuant to Section 14(a) of the Securities Exchange Act of 1934 with the SEC in connection with a proposed solicitation of consents from the limited partners to dissolve the partnership, liquidate its assets and wind up its affairs (the “Dissolution”) pursuant to a Plan of Dissolution (the “Plan” or “Plan of Dissolution”).

If approved by an affirmative majority of the limited partnership interests (the “Requisite Consents”), the partnership will not be immediately terminated, but will continue until its affairs have been wound up. The partnership will cease making new loans and will only engage in business activities necessary or convenient to wind-up the partnership’s business and distribute partnership assets in accordance with the Plan, the Partnership Agreement and the California Uniform Limited Partnership Act of 2008 (the “Act”).

If the Dissolution and Plan are approved by the Requisite Consents, the general partners will enter into the Plan within 15 days of the receipt of the Requisite Consents, and RMC, as manager of the partnership,will wind-up the affairs of the partnership commencing from the effective date of the Plan (the “Dissolution Date”) until the complete liquidation of the partnership’s assets and the termination of the partnership (the “Wind-Up Period”) in accordance with the Plan, the Partnership Agreement and the Act. Effective as of the Dissolution Date: (i) all limited partners, including limited partners who previously elected not to receive periodic distributions of partnership net income under Section 4.3 of the Partnership Agreement, will begin receiving quarterly distributions of the partnership’s net income (if any); and (ii) all scheduled withdrawals of limited partner capital made pursuant to Article 8 of the Partnership Agreement will terminate in favor of quarterly pro rata withdrawals to all limited partners of cash received from the liquidation of partnership assets (each, a “Capital Distribution” and collectively, the “Capital Distributions”) over the course of the Wind-Up Period and available to fund Capital Distributions.

During the Wind-Up Period, the partnership will continue to be externally managed by RMC and RMC will, in such capacity, be solely responsible for managing partnership operations. RMC will liquidate the partnership’s assets as promptly as is consistent with obtaining the current fair value thereof, which may include: (i) collecting loan payments from borrowers under existing loan terms; (ii) selling loans to third parties; (iii) selling loans to either or both general partners or their affiliates, subject to the limitations set forth in the Partnership Agreement; (iv) enforcing delinquent loans through foreclosure or negotiating settlements with the borrowers and/or any guarantors or other obligors on such loans; (v) selling any REO held by the partnership; and (vi) taking any other actions determined by RMC to be consistent with recovering the fair market value of any partnership assets and authorized in the Partnership Agreement and the Plan. RMC will continue to collect loan servicing fees, cost reimbursements, and other fees received as manager of the partnership, in addition to the Dissolution Fee (as defined below), and the general partners will continue to collect asset management fees.

REDWOOD MORTGAGE INVESTORS VIII, L.P.

A California Limited Partnership

Notes to Consolidated Financial Statements

March 31, 2023 (unaudited)

Under the Partnership Agreement and Plan of Dissolution, all assets of the partnership, including proceeds from the sale of partnership assets, RMC’s repayment of the general partners’ capital deficit (i.e., the deficit restoration obligation) and the formation loan (primarily from the proceeds of the Dissolution Fee), and cash available from interest and principal payments on partnership loans will be applied and distributed in the following order of priority:

First, to the payment of operations expense, including liabilities to professional services providers and government agencies (principally property and other taxes), fees and cost reimbursements to RMC (including the Dissolution Fee), asset management fees to the general partners, loan administration and collection costs, and such other general and administrative expenses of the partnership’s business and compliance activities and then to the payment and discharge of all of the partnership’s then current debts and liabilities to banks (and any other lenders); and

Thereafter, quarterly, within seven (7) business days after the end of each calendar quarter, to the limited and general partners in proportion to their respective capital account balances, after taking into account income and loss allocations for the applicable calendar quarter. Quarterly net income, if any, will be distributed pro rata to all limited partners and by disbursement separate from capital distribution payments.

Under the Plan, RMC will be entitled to a quarterly dissolution fee equal to seven percent (7.0%) of each capital distribution made to the limited partners over the course of the Wind-Up Period (the “Dissolution Fee”), which Dissolution Fee will be treated as an expense of the partnership and included in the allocation of income/losses to limited partners’ capital accounts.

RMC expects to complete the wind-up activities approximately 12 to 18 months after the effective date of the Plan of Dissolution. Dissolution, however, can be an involved process which may depend on a number of factors, and some of these factors are beyond RMC’s control.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The partnership’s consolidated financial statements include the accounts of the partnership and its wholly-owned subsidiaries (consisting of single-member limited liability companies owning a single real property asset). All significant intercompany transactions and balances have been eliminated in consolidation.

Management estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions about the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities, at the dates of the financial statements and the reported amounts of revenues and expenses during the reported periods. Such estimates involve significant level of uncertainty and have had or are reasonably likely to have a material impact on the partnership’s financial condition or results of operations. Such estimates relate principally to the determination of the allowance for credit losses (including the fair value of the underlying collateral), and the valuation of real estate owned. Actual results could differ materially from these estimates.

Fair value estimates

The fair value of real property (as to loan collateral and REO) is determined by exercise of judgment based on RMC’s management’s experience informed by appraisals (by licensed appraisers), brokers’ opinion of values, and publicly available information on in-market transactions. Appraisals of commercial real property generally present three approaches to estimating value: 1) market-comparables or sales approach; 2) cost to replace; and 3) capitalized cash flows or income approach.

These approaches may or may not result in a common, single value. The market-comparables approach may yield several different values depending on certain basic assumptions, including the consideration of adjustments made for any attributes specific to the real estate.

REDWOOD MORTGAGE INVESTORS VIII, L.P.

A California Limited Partnership

Notes to Consolidated Financial Statements

March 31, 2023 (unaudited)

Management has the requisite familiarity with the markets it lends in generally and of the properties lent on specifically to analyze sales-comparables and assess their suitability/applicability. Management is acquainted with market participants – investors, developers, brokers, and lenders – that are useful, relevant secondary sources of data and information regarding valuation and valuation variability. These secondary sources may have familiarity with and perspectives on pending transactions, successful strategies to optimize value, and the history and details of specific properties – on and off the market – that enhance the process and analysis that is particularly and principally germane to establishing value in distressed markets and/or property types.

GAAP defines fair value as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact and (iv) willing to transact.

Fair values of assets and liabilities are determined based on the fair value hierarchy established in GAAP. The hierarchy is comprised of three levels of inputs to be used.

•

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the partnership has the ability to access at the measurement date. An active market is a market in which transactions occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

•

Level 2 inputs are inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly in active markets and quoted prices for identical assets or liabilities that are not active, and inputs other than quoted prices that are observable or inputs derived from or corroborated by market data.

•

Level 3 inputs are unobservable inputs for the asset or liability. Unobservable inputs reflect the partnership’s own assumptions about the assumptions market participants would use in pricing the asset or liability (including assumptions about risk). Unobservable inputs are developed based on the best information available in the circumstances and may include the partnership’s own data.

Cash in banks

Certain of the partnership’s cash balances in banks exceed federally insured limits of $250 thousand. The bank or banks in which funds are deposited are reviewed periodically for their general creditworthiness/investment grade credit rating. See Note 7 (Line of Credit) for compensating balance arrangements.

Loans and interest income

Loans are carried at amortized cost, which is generally equal to the unpaid principal balance (principal). Management has discretion to pay amounts (advances) to third parties on behalf of borrowers to protect the partnership’s interest in the loan. Advances include, but are not limited to, the payment of interest and principal on a senior lien to prevent foreclosure by the senior lien holder, property taxes, insurance premiums, and attorney fees. Advances generally are stated at the amounts paid out on the borrower’s behalf and any accrued interest on amounts paid out, until repaid by the borrower. For performing loans, interest is accrued daily on the principal plus advances, if any. In the normal course of the partnership’s operations, performing loans that are maturing or have matured may be renewed at then current market rates of interest and terms for new loans. (These loan extensions are not reported as new loans for financial reporting purposes.) The partnership may fund a specific loan net of an interest reserve (one to two years) to insure timely interest payments at the inception of the loan. Any interest reserve is amortized over the period that the amount is prepaid. In the event of an early loan payoff, any unapplied interest reserves would be first applied to any accrued but unpaid interest and then as a reduction of principal.

REDWOOD MORTGAGE INVESTORS VIII, L.P.

A California Limited Partnership

Notes to Consolidated Financial Statements

~~March~~June 3130, 2023 (unaudited)

~~Loans~~Cash ~~with a payment~~ in arrears continue to recognize interest income as long as the loan is in the process of collection with the borrower and is considered to be well-secured. Loans are placed on non-accrual status if management determines that the primary source of repayment will come from the foreclosure and subsequent sale of the collateral securing the loan (i.e., a notice of sale is filed and/or when the borrower files for bankruptcy) or when the loan is no longer considered well-secured (i.e., the LTV for the loan based on the estimated net realizable value of the collateral and the total principal, advances and accrued interest (at the note rate) is at or greater than eighty percent (80%), seventy-five percent (75%) for lands outside of metropolitan areas). When a loan is placed on non-accrual status, the accrual of interest is discontinued – beginning with the then current month - for accounting purposes only; however, previously recorded interest is not reversed. A loan may return to accrual status when all delinquent loan payments are cured and the loan becomes current in accordance with the terms of the loan agreement. In periods prior to January 1, 2023, loans were placed on non-accrual status if 180 days delinquent or earlier if management determined that the primary source of repayment would come from the foreclosure and subsequent sale of the collateral securing the loan (which usually occurs when a notice of sale is filed) or when the loan was no longer considered well-secured.banks

~~Payments~~Certain onof ~~loans~~the ~~are~~partnership’s ~~applied~~cash balances in ~~the~~banks ~~following~~exceed ~~order:~~federally ~~accrued~~insured ~~interest,~~limits ~~advances,~~of ~~and~~$250 ~~lastly to principal~~thousand. ~~Late~~The ~~fees~~bank ~~are~~or ~~recognized~~banks in ~~the~~which ~~period~~funds ~~received. Pursuant to California regulatory requirements borrower payments~~ are deposited ~~into a trust account established by RMC with an independent bank and~~ are ~~presented~~reviewed onperiodically ~~the~~for ~~balance~~their ~~sheet~~general ascreditworthiness/investment ~~“Loan~~grade ~~payments~~credit ~~in trust”~~rating. ~~Funds~~See ~~are~~Note ~~disbursed~~7 to(Line ~~the~~of ~~partnership~~Credit) ~~as collected which can range from same day~~ for ~~wire~~compensating ~~transfers~~balance ~~and up to two weeks after deposit for checks~~arrangements.

The partnership funds loans with the intent to hold the loans until maturity. From time to time, the partnership may sell certain loans when the manager determines it to be in the best interest of the partnership. Loans ~~are classified as held-for-sale once a decision has been made to sell loans~~ and ~~the~~interest ~~loans held-for-sale have been identified. Loans classified as held for sale are carried at the lower of cost or fair value.~~ income

Loans are carried at amortized cost, which is generally equal to the unpaid principal balance (principal). Management has discretion to pay amounts (advances) to third parties on behalf of borrowers to protect the partnership’s interest in the loan. Advances include, but are not limited to, the payment of interest and principal on a senior lien to prevent foreclosure by the senior lien holder, property taxes, insurance premiums, and attorney fees. Advances generally are stated at the amounts paid out on the borrower’s behalf and any accrued interest on amounts paid out, until repaid by the borrower. For performing loans, interest is accrued daily on the principal plus advances, if any. In the normal course of the partnership’s operations, performing loans that are maturing or have matured may be renewed at then current market rates of interest and terms for new loans. (These loan extensions are not reported as new loans for financial reporting purposes.) Prior to the Dissolution Date, the partnership funded specific loans net of an interest reserve (one to two years) to insure timely interest payments at the inception of the loan. Any interest reserve is amortized over the period that the amount is prepaid. In the event of an early loan payoff, any unapplied interest reserves are first applied to any accrued but unpaid interest and then as a reduction of principal.

Loans with a payment in arrears continue to recognize interest income as long as the loan is in the process of collection with the borrower and is considered to be well-secured. Loans are generally placed on non-accrual status if management determines that the primary source of repayment will come from the foreclosure and subsequent sale of the collateral securing the loan (i.e., a notice of sale is filed and/or when the borrower files for bankruptcy) or when the loan is no longer considered well-secured (i.e., the LTV for the loan based on the estimated net realizable value of the collateral and the total principal, advances and accrued interest (at the note rate) is at or greater than eighty percent (80%), seventy-five percent (75%) for lands outside of metropolitan areas). When a loan is placed on non-accrual status, the accrual of interest is discontinued – beginning with the then current month - for accounting purposes only; however, previously recorded interest is not reversed. A loan may return to accrual status when all delinquent loan payments are cured and the loan becomes current in accordance with the terms of the loan agreement. In periods prior to January 1, 2023, loans were placed on non-accrual status if 180 days delinquent or earlier if management determined that the primary source of repayment would come from the foreclosure and subsequent sale of the collateral securing the loan (which usually occurs when a notice of sale is filed) or when the loan was no longer considered well-secured.

Payments on loans are applied in the following order: accrued interest, advances, and lastly to principal. Late fees are recognized in the period received. Pursuant to California regulatory requirements, borrower payments are deposited into a trust account established by RMC with an independent bank and are presented on the balance sheet as “Loan payments in trust”. Funds are disbursed to the partnership as collected which can range from same day for wire transfers and up to two weeks after deposit for checks.

The partnership funded loans with the intent to hold the loans until maturity. From time to time, the partnership may sell certain loans when the manager determines it to be in the best interest of the partnership. Loans are classified as held-for-sale once a decision has been made to sell loans and the loans held-for-sale have been identified. Loans classified as held-for-sale are carried at the lower of cost or fair value.

Allowance for credit losses

Loan balances (i.e., the sum of the unpaid principal, advances and accrued interest) are analyzed on a periodic basis for ultimate recoverability. Collateral fair values are reviewed quarterly and the protective equity for each loan is computed. As used herein, “protective equity” is the dollar amount by which the net realizable value (i.e., fair value less the cost to sell) of the collateral, net of any senior liens exceeds the loan balance.

For a loan that is deemed collateral dependent for repayment, a provision for credit losses is recorded to adjust the allowance for credit losses to an amount such that the net carrying amount (unpaid principal, advances plus interest accrued, i.e., interest owed net of foregone interest for loans in non-accrual status) is reduced to the lower of the loan balance or the estimated fair value of the related collateral, net of any senior debt and claims and costs to sell.

As of January 1, 2023, the partnership adopted Accounting Standards Codification 326, Financial Instruments – Credit Losses using the modified retrospective approach, which requires a lifetime, current expected credit loss (CECL) measurement objective for the recognition of credit losses at the time a loan is originated or acquired. The allowance for credit losses is adjusted each period for changes in expected lifetime credit losses for loans and accrued interest. The determination of the amount of the allowance for credit losses considers historical loss experience, current fair value of collateral and the resultant LTV, current real estate and financial markets, as well as reasonable and supportable forecasts about future economic scenarios. The forward-looking estimates consider the likelihood that any combination of events would adversely impact economic conditions and real estate markets in California such that the substantial protective equity existing for the loans would no longer be sufficient to collect the recorded amounts of principal, advances and accrued interest due on the loan.

The limited number of loans and the short terms for which the loans are written enable a loan-by-loan analysis to determine the risk of loss. The primary determinate in the analysis is the LTV, and consideration of lien position of deed of trust. The analysis also considers the vintage in which the secured loans originated. The ultimate collectability of the amounts owed is reliant on the estimate of the fair value of the real property collateral securing the loans. Such estimation is not variant by vintage or time on file. Such considerations are consistent with the ‘no-credit-losses’ experience of the partnership over the preceding 5+ years.

The partnership charges off uncollectible loans and related receivables directly to the allowance account once it is determined the full amount is not collectible. Any amounts collected after a charge off is deemed a recovery. If the loan goes to foreclosure, an updated appraisal is ordered and the recorded investment in the loan is adjusted to the net realizable value of the real estate to be acquired.

Prior to the adoption of the CECL accounting model, if a loan modification was agreed to and was to result in an economic concession to the borrower (i.e., a significant delay or reduction in cash flows compared to the original note), the modification would have been deemed to be a troubled debt restructuring (“TDR”). The Company did not have any TDRs for the year ended December 31, 2022.

REDWOOD MORTGAGE INVESTORS VIII, L.P.

A California Limited Partnership

Notes to Consolidated Financial Statements

~~March~~June 3130, 2023 (unaudited)

The limited number of loans and the short terms for which the loans are written enable a loan-by-loan analysis to determine the risk of loss. The primary determinate in the analysis is the LTV, and consideration of lien position of deed of trust. The analysis also considered the vintage in which the secured loans originated. The ultimate collectability of the amounts owed is reliant on the estimation of the current fair value of the real property collateral and the time to maturity. Further there is no evidence, nor any indication in the analysis, that the ultimate collectability of the amounts owed fluctuates with the time on file or vintage. Such considerations are consistent with the ‘no-credit-losses’ experience of the partnership over the preceding 5+ years.

Prior to the adoption of the CECL accounting model, if a loan modification was agreed to and was to result in an economic concession to the borrower (i.e., a significant delay or reduction in cash flows compared to the original note), the modification would have been deemed to be a troubled debt restructuring (“TDR”). The partnership did not have any TDRs for the year ended December 31, 2022.

Real estate owned (REO)

Real estate owned (“REO”) is property acquired in full or partial settlement of loan obligations generally through foreclosure and is recorded at acquisition at the property’s fair value less estimated costs to sell. The fair value estimates are derived from information available in the real estate markets including similar property, and often require the experience and judgment of third parties such as commercial real estate appraisers and brokers. The estimates figure materially in calculating the value of the property at acquisition, the level of charge to the allowance for credit losses and any subsequent valuation reserves. After acquisition, costs incurred relating to the development and improvement of property are capitalized to the extent they do not cause the recorded value to exceed the net realizable value, whereas costs relating to holding and disposition of the property are expensed as incurred. REO is analyzed periodically for changes in fair values and any subsequent write down is charged to REO, net on the statements of income. Any recovery in the fair value subsequent to such a write down is recorded, not to exceed the value recorded at acquisition. Recognition of gains on the sale of real estate is dependent upon the transaction meeting certain criteria related to the nature of the property and the terms of the sale including potential seller financing.

Accrued liabilities

Accrued liabilities at ~~March~~June 3130, 2023 and December 31, 2022 were approximately $1.23 million and $1.1 million, respectively, the significant components of which are accrued professional and consulting fees (approximately $1.1 million and $993 thousand, respectively), accrued REO property taxes and mortgage interest expense (~~approximately~~ $510 ~~thousand~~ and approximately $13 thousand, respectively) and accrued interest on the line of credit (approximately $6870 thousand and $61 thousand, respectively).

Debt issuance costs

Debt issuance costs are the fees and commissions incurred in the course of obtaining a line of credit for services from banks, law firms and other professionals and are amortized on a straight-line basis, which approximates the interest method, as interest expense over the term of the line of credit.

Reclassification

A reclassification has been made in the prior year statement of cash flows to reclassify the presentation of formation loan collected from changes in partners' capital to a separate line item within the financing section of the statement of cash flows. There was no change in total cash used in financing activities.

Recently issued accounting pronouncements

None at ~~March~~June 3130, 2023 are applicable to the partnership.

REDWOOD MORTGAGE INVESTORS VIII, L.P.

A California Limited Partnership

Notes to Consolidated Financial Statements

June 30, 2023 (unaudited)

NOTE 3 – GENERAL PARTNERS AND OTHER RELATED PARTIES

The Partnership Agreement provides for fees as compensation to the manager and for reimbursement of qualifying expenses, as detailed below.

Mortgage servicing fees

The manager acting as servicing agent with respect to all loans is entitled to receive a servicing fee of up to 1.5% annually of the unpaid principal balance of the loan portfolio. The mortgage servicing fees are accrued monthly on all loans. Remittance to RMC is made monthly unless the loan has been assigned a specific loss reserve, at which point remittance is deferred until the specific loss reserve is no longer required, or the property has been acquired by the partnership.

Asset Management Fees

The general partners are entitled to monthly fees for managing the business and affairs of RMI VIII, including management of the partnership’s loan portfolio and operations, of up to 1/32 of 1% of the “net asset value” of the partnership (3/8 of 1% annually).

REDWOOD MORTGAGE INVESTORS VIII, L.P.

A California Limited Partnership

Notes to Consolidated Financial Statements

March 31, 2023 (unaudited)

Costs from RMC

The manager is entitled to request reimbursement for operations expense incurred on behalf of RMI VIII, including without limitation, RMC’s personnel and non-personnel costs incurred for qualifying business activities, including investor services, accounting, tax and data processing, postage and out-of-pocket general and administration expenses. Qualifying personnel/compensation costs and consulting fees are tracked by business activity, and then costs of qualifying activities are allocated to RMI VIII pro-rata based on the percentage of RMI VIII’s limited partners’ capital to the total capital of all related mortgage funds managed by RMC. Certain other non-personnel, qualifying costs such as postage and out-of-pocket general and administrative expenses can be tracked by RMC as specifically attributable to RMI VIII; other non-personnel, qualifying costs (e.g., RMC’s accounting and audit fees, legal fees and expenses, occupancy, and insurance premiums) are allocated pro-rata based on the percentage of RMI VIII's partners' capital to total capital of the related mortgage funds managed by RMC.

Commissions and fees are paid by the borrowers to RMC

Brokerage commissions, loan originations

For periods prior to the Dissolution Date, fees in connection with the review, selection, evaluation and negotiation of loans (including extensions), the general partners ~~may~~collected ~~collect~~ loan brokerage commissions (points) limited to an amount not to exceed 4% of the total partnership assets per year. The loan brokerage commissions ~~are~~were paid by the borrowers to RMC, and thus ~~are~~were not an expense of the partnership. Loan brokerage commissions paid by the borrowers to RMC approximated $0 and $471 thousand for the three months ended June 30, 2023 and 2022, respectively, and $150 thousand and $~~214~~633 thousand for the ~~three~~six months ended ~~March~~June 3130, 2023 and 2022, respectively.

Other fees

RMC receives fees for processing, notary, document preparation, credit investigation, reconveyance and other mortgage related services. The amounts received are customary for comparable services in the geographical area where the property securing the loan is located, and are payable solely by the borrower and not by the partnership.

Formation loan

Commissions for sales of limited partnership units paid to broker-dealers (“B/D sales commissions”) were paid by RMC and were not paid directly by the partnership out of offering proceeds. Instead, the partnership advanced to RMC amounts sufficient to pay the B/D sales commissions and premiums paid to partners in connection with unsolicited orders up to 7% of offering proceeds. The receivable arising from the advances is unsecured and non-interest bearing and is referred to as the “formation loan”. Since its inception, the partnership’s advances totaled $22.6 million, of which $2.7 million remains outstanding at March 31, 2023.

RMC is repaying the formation loan principally from loan brokerage commissions earned on loans, early withdrawal penalties on partner withdrawals and other fees paid by the partnership. If both or either one of the initial general partners is removed as a general partner by the vote of holders of a majority of the limited partnership units, and if such successor or additional general partner(s) begins using any other loan brokerage firm for the placement of loans, RMC will be immediately released from any further obligation under the formation loans (except for a proportionate share of the principal installment due at the end of that year). In addition, if both of the general partners are removed, no successor general partners are elected, the partnership is liquidated and RMC is no longer receiving any payments for services rendered, the debt on the formation loans shall be forgiven and RMC will be immediately released from any further obligations under the formation loans. As such, the formation loan is presented as contra equity.

REDWOOD MORTGAGE INVESTORS VIII, L.P.

A California Limited Partnership

Notes to Consolidated Financial Statements

~~March~~June 3130, 2023 (unaudited)

~~The~~Formation ~~formation~~ loan ~~transactions for the three months ended March 31 are presented in the following table ($ in thousands).~~

	2023		2022
Balance, January 1	$	2,702	$	3,361
Payments received from RMC		—		(125	)
Balance, March 31	$	2,702	$	3,236

~~The~~For periods prior to the Dissolution Date, RMC was repaying the formation loan isprincipally ~~repayable~~from byloan ~~RMC~~brokerage incommissions ~~annual~~earned ~~installments~~on ofloans, ~~approximately~~early ~~$650~~withdrawal ~~thousand~~penalties ~~which~~on ~~may~~partner bewithdrawals and other fees paid by ~~RMC~~the ~~either~~partnership. inIf ~~full~~both onor ~~December~~either ~~31st~~one of ~~each~~the ~~calendar~~initial ~~year~~general ~~during~~partners was removed as a general partner by the ~~term~~vote of holders of a majority of the limited partnership ~~(each~~units, anand ~~“Annual~~if ~~Payment~~such ~~Date”)~~successor or inadditional ~~four~~general ~~equal~~partner(s) ~~quarterly~~began ~~installments~~using ~~beginning~~any onother loan brokerage firm for the ~~Annual~~placement ~~Payment~~of ~~Date~~loans, ~~and~~RMC ~~continuing~~would ~~thereafter~~have onbeen immediately released from any further obligation under the ~~last~~formation ~~day~~loans (except for a proportionate share of ~~each~~the ~~calendar~~principal ~~quarter~~installment indue at the ~~following~~end of that year). ~~Any~~In ~~amount~~addition, if both of the ~~formation~~general ~~loan~~partners ~~balance~~were ~~remaining~~removed, ~~unpaid~~no onsuccessor ~~the~~general ~~last~~partners ~~day~~were ofelected, the partnership ~~term~~was isliquidated ~~payable~~and inRMC ~~full~~was no longer receiving any payments for services rendered, the debt on ~~that~~the ~~date~~formation loans was to be forgiven and RMC would have been immediately released from any further obligations under the formation loans. As such, the formation loan is presented as contra equity.

Prior to the Dissolution Date, the formation loan was being repaid by RMC in annual installments of approximately $650 thousand which was payable by RMC either in full on December 31st of each calendar year during the term of the partnership (each, an “Annual Payment Date”) or in four equal quarterly installments beginning on the Annual Payment Date.

The formation loan transactions for the six months ended June 30 are presented in the following table ($ in thousands).


	2023		2022
Balance, January 1	$	2,702	$	3,361
Payments received from RMC		—		(334	)
Balance, June 30	$	2,702	$	3,027

Effective as of the Dissolution Date, RMC will be entitled to collect the Dissolution Fee, which is equal to 7.0% of each capital distribution to be made to the limited partners over the course of the wind-up period. The Dissolution Fee amounts received by RMC are intended to first be remitted back to the partnership in satisfaction of amounts owed by RMC on the formation loan and to restore the general partners’ capital deficit (i.e., the deficit restoration obligation) required by the Partnership Agreement. Any proceeds of the Dissolution Fee remaining after payment of the formation loan and restoration of the general partners’ capital deficit will be retained by RMC. The Dissolution Fee will be treated as an expense of the partnership and included in the allocation of income/losses to limited partners’ capital accounts.

Limited partner capital - withdrawals

Withdrawals of limited partners’ capital for the three and six months ended ~~March~~June 3130 are presented in the following table ($ in thousands).

Withdrawals	2023			2022
	Three Months Ended June 30,						Six Months Ended June 30,
Without penalty	$	2,170		$	2,890
Withdrawals	2023			2022			2023			2022
With penalty		381			355
Without penalty	$	2,113		$	2,952		$	4,283		$	5,842
Total	$	2,551		$	3,245
With penalty		108			389			489			744
Scheduled, at March 31,	$	12,485		$	20,487
Total	$	2,221		$	3,341		$	4,772		$	6,586
Percentage of scheduled withdrawals in end of period capital		22.7	%		30.9	%
Scheduled, at June 30,	$	11,311		$	18,201		$	11,311		$	18,201
Percentage of scheduled withdrawals in end of period capital		21.5	%		28.8	%		21.5	%		28.8	%

~~Scheduled~~Effective ~~withdrawals~~as of the Dissolution Date: (i) all limited partners, including limited partners who previously elected not to receive periodic distributions of partnership net income under the Partnership Agreement, begin receiving quarterly distributions of the partnership’s net income (if any); and (ii) all scheduled withdrawals of limited partner capital made pursuant to the Partnership Agreement terminated in ~~periods~~favor asof quarterly pro rata withdrawals to all limited partners of ~~and~~cash ~~after~~received ~~March~~from ~~31,~~the ~~2023~~liquidation ~~are~~of ~~presented~~partnership assets and available to fund capital distributions in accordance with the ~~following~~distribution ~~table~~provisions ($set forth in ~~thousands)~~the Plan.

2023	$	5,189
2024		4,083
2025		1,934
2026		952
2027		299
Thereafter		28
Total	$	12,485

Scheduled withdrawals of limited partners’ capital of approximately $131 thousand are subject to early withdrawal penalties as the limited partners elected the accelerated payout option as permitted in the Partnership Agreement.

REDWOOD MORTGAGE INVESTORS VIII, L.P.

A California Limited Partnership

Notes to Consolidated Financial Statements

~~March~~June 3130, 2023 (unaudited)

Other related party transactions

Payable to/receivable from related parties

From time to time, in the normal course of business operations, the partnership may have payables to and/or receivables from related parties. At ~~March~~June 3130, 2023, the ~~partnership had a~~ payable to related parties of approximately $~~2.7~~52 ~~million~~thousand ~~consisting~~consisted ~~primarily~~ of ~~quarterly withdrawals of approximately $2.5 million, monthly distributions – for those partners electing such distributions – of approximately $118 thousand, and~~ accounts payable due to the manager ~~of approximately $65 thousand~~. The ~~receivables~~receivable from related parties of approximately $2019 thousand consisted of accounts receivable from a related ~~fund~~mortgage ~~at March 31, 2023~~fund. The related party transactions were settled in ~~May~~July 2023.

At December 31, 2022, the payable to related parties of approximately $154 thousand consisted of accounts payable and cost reimbursements to the manager. At December 31, 2022, the receivable from related parties of approximately $68 thousand consisted of accounts receivable from related mortgage funds. The related party transactions outstanding at December 31, 2022 were settled in March 2023.

Loan transactions with related parties

In the ordinary course of business, performing loans may be transferred by executed assignment, in-part or in-full, between the RMC managed mortgage funds at par, which approximates fair value.

In the ~~three~~six months ended ~~March~~June 3130, 2023, RMI VIII transferred to related mortgage funds five loans with aggregate principal of approximately $4.0 million at par value, which approximates fair value. The related mortgage ~~fund~~funds paid cash for the loans and RMI VIII has no continuing involvement with the loans. No loans were transferred from related mortgage funds to RMI VIII.

NoIn ~~loans~~the ~~were~~six months ended June 30, 2022, RMI VIII transferred to ora ~~from~~related mortgage fund one performing loan with aggregate principal of approximately $996 thousand at par value, which approximates fair value. The related mortgage ~~funds~~fund inpaid cash for the ~~three~~loan ~~months~~and ~~ended~~RMI ~~March~~VIII ~~31,~~has ~~2022~~no continuing involvement with the loan. No loans were transferred from related mortgage funds to RMI VIII.

Promissory note received from/repaid to related parties

On June 29, 2023, RMI VIII borrowed from a related mortgage fund $3.3 million secured by the net cash flow payable on three mortgage loans totaling approximately $7.5 million which are expected to be paid off by October 1, 2023. Interest on the loan accrues at 8.75% per annum on the three pledged mortgage loans through a term ending on the earlier of (i) the payoff of pledged loans; and (ii) October 1, 2023. The promissory note payable to the related mortgage fund is secured by all proceeds payable to RMI VIII upon the payoff or repayments of the loans net of any amounts outstanding by RMI VIII on its line of credit secured by the loans.

REDWOOD MORTGAGE INVESTORS VIII, L.P.

A California Limited Partnership

Notes to Consolidated Financial Statements

June 30, 2023 (unaudited)

NOTE 4 – LOANS

~~Loans~~In ~~generally~~periods ~~are~~prior to the Dissolution Date, loans were generally funded at a fixed interest rate with a loan term of up to five years. Loans acquired are generally done so within the first six months of origination and are purchased at par value, which approximates fair value. See Note 3 (General Partners and Other Related Parties) for a description of loans transferred by executed assignments between the related mortgage funds.

The partnership’s loans are ~~all~~ secured by real estate in coastal California metropolitan areas~~, which is a strategic market~~. The portfolio segments are first and second trust deeds mortgages and the key credit quality indicator is the LTV ratio. First mortgages are predominant, but second lien deeds of trust are not infrequent nor insignificant. First-mortgage loans comprised 95% of the portfolio at ~~March~~June 3130, 2023 (93% at December 31, 2022).

Secured loans unpaid principal balance (principal)

Secured loan transactions for the three and six months ended ~~March~~June 3130, 2023 are summarized in the following table ($ in thousands).

			2023
	Three Months Ended June 30, 2023												Six Months Ended June 30, 2023
	Total		~~Total~~		First Trust Deeds		~~First Trust Deeds~~		Second Trust Deeds		~~Second Trust Deeds~~		Total			First Trust Deeds			Second Trust Deeds
Principal, beginning of period	$	57,979	$	~~60,088~~	$	55,230	$	~~55,803~~	$	2,749	$	~~4,285~~	$	60,088		$	55,803		$	4,285
Loans funded		—		~~5,700~~		—		~~4,200~~		—		~~1,500~~		5,700			4,200			1,500
Principal collected		(687	)	~~(3,853~~	)	(686	)	~~(2,749~~	)	(1	)	~~(1,104~~	)	(4,540	)		(3,435	)		(1,105	)
Loans transferred to related mortgage fund		—		~~(3,956~~	)	—		~~(2,024~~	)	—		~~(1,932~~	)	(3,956	)		(2,024	)		(1,932	)
Principal, end of period	$	57,292	$	~~57,979~~	$	54,544	$	~~55,230~~	$	2,748	$	~~2,749~~	$	57,292		$	54,544		$	2,748

During the three and six months ended ~~March~~June 3130, 2023, the partnership extended one and two maturing ~~loan~~loans with aggregated principal of approximately $1.3 million and $2.2 million, respectively, which is not included in the activity shown in the table above. The ~~loan~~loans ~~was~~have ~~extended~~an ~~for~~average ~~one~~extension ~~year,~~period of approximately 10 months and ~~was~~were current and deemed well collateralized (i.e., the LTV for the collateral was within lending guidelines). Interest rates charged to borrowers may be adjusted in conjunction with the loan extensions to reflect current market conditions (in 2023, no extension included rate increases). These loan extensions were made not to forestall collection of a distressed nor an insufficiently collateralized debt from a borrower experiencing financial difficulties, but rather to provide – for an extension fee paid to RMC by the borrower – the additional time and flexibility to pursue opportunities to optimize the performance of the borrower’s real property investment. These opportunities may include expected lower-than-current long-term interest rates at the completion of the extension term and/or expected higher than current rents or sale prices, resulting from either improved market conditions or improved physical condition and/or financial performance of the property.

As of ~~March~~June 3130, 2023, there were no commitments to lend outstanding and no construction or rehabilitation loans outstanding.

1718

REDWOOD MORTGAGE INVESTORS VIII, L.P.

A California Limited Partnership

Notes to Consolidated Financial Statements

~~March~~June 3130, 2023 (unaudited)

Loan characteristics

Secured loans had the characteristics presented in the following table ($ in thousands).

	March 31,			December 31,
	June 30,			December 31,
	2023			2022
Number of secured loans		1615			21
First trust deeds		1413			18
Second trust deeds		2			3
Secured loans – principal	$	57,~~979~~292		$	60,088
First trust deeds	$	5554,~~230~~544		$	55,803
Second trust deeds	$	2,~~749~~748		$	4,285
Secured loans – lowest interest rate (fixed)		7.3	%		7.3	%
Secured loans – highest interest rate (fixed)		12.0	%		10.8	%
Average secured loan – principal	$	3,~~624~~819		$	2,861
Average principal as percent of total principal		6.27	%		4.8	%
Average principal as percent of partners’ capital, net of formation loan		7.07	%		5.3	%
Average principal as percent of total assets		5.49	%		4.3	%
Largest secured loan – principal	$	9,000		$	9,000
Largest principal as percent of total principal		15.57	%		15.0	%
Largest principal as percent of partners’ capital, net of formation loan		1718.42	%		16.6	%
Largest principal as percent of total assets		13.49	%		13.4	%
Smallest secured loan – principal	$	~~637~~634		$	437
Smallest principal as percent of total principal		1.1	%		0.7	%
Smallest principal as percent of partners’ capital, net of formation loan		1.23	%		0.8	%
Smallest principal as percent of total assets		01.90	%		0.7	%
Number of California counties where security is located		8			10
Largest percentage of principal in one California county		30.48	%		30.7	%

As of ~~March~~June 3130, 2023, 1110 loans with principal of approximately $4342.37 million provide for monthly payments of interest only, with the principal due at maturity, and 5 loans with principal of approximately $14.6 million (representing approximately 2526% of the aggregate principal of the partnership’s loan portfolio) provide for monthly payments of principal and interest, typically calculated on a 30-year amortization, with the remaining principal due at maturity.

As of ~~March~~June 3130, 2023, there were ~~two~~2 loans in second lien position. The aggregate principal of these loans is approximately $2.87 million and the weighted average LTV at loan closing iswas 50.5% . Both loans were performing as of ~~March~~June 3130, 2023.

As of March 31, 2023, there are four loans each with principal in excess of 10% of the total outstanding principal. The aggregate principal of these loans is approximately $32.1 million and the weighted average LTV at loan closing is 54.2%. The loans were in first lien position.19

The partnership’s largest loan, with principal of approximately $9 million (LTV 61%) is secured by an office building in the City of Orange in Orange County, bears an interest rate of 7.99% and matures on September 1, 2025.

The second loan, with principal of approximately $8.8 million (LTV 26%) is secured by a commercial building in the City of Santa Clara in Santa Clara County, bears an interest rate of 8.375% and matures on July 1, 2027.

The third loan, with principal of approximately $8 million (LTV 62%) is secured by a commercial building in the City and County of San Francisco, bears an interest rate of 8.375% and matured on April 1, 2023.

The fourth loan, with principal of approximately $6.3 million (LTV 75%) is secured by a multifamily building in the City and County of San Francisco, bears an interest rate of 7.75% and matured on April 1, 2023.

REDWOOD MORTGAGE INVESTORS VIII, L.P.

A California Limited Partnership

Notes to Consolidated Financial Statements

~~March~~June 3130, 2023 (unaudited)

As of June 30, 2023, there were 4 loans each with principal in excess of 10% of the total outstanding principal. The aggregate principal of these loans is approximately $32 million and the weighted average LTV at loan closing is 54.3%. The loans were in first lien position.

•

The partnership’s largest loan, with principal of approximately $9 million (LTV 60.8%) is secured by an office building in the City of Orange in Orange County, bears an interest rate of 7.990% and matures on September 1, 2025.

•

The second loan, with principal of approximately $8.8 million (LTV 25.5%) is secured by a commercial building in the City of Santa Clara in Santa Clara County, bears an interest rate of 8.375% and matures on July 1, 2027.

•

The third loan, with principal of approximately $8 million (LTV 62.2%) is secured by a commercial building in the City and County of San Francisco, bears an interest rate of 8.375% and matured on April 1, 2023.

•

The fourth loan, with principal of approximately $6.3 million (LTV 75.0%) is secured by a multifamily building in the City and County of San Francisco, bears an interest rate of 7.750% and matured on April 1, 2023.

Property type

Secured loans summarized by property type are presented in the following table ($ in thousands).

	March 31, 2023							December 31, 2022
	June 30, 2023							December 31, 2022
	Loans		Principal		Percent			Loans		Principal		Percent
Single family(1)		2	$	3,~~354~~353		6	%		4	$	5,874		10	%
Multi-family		2		7,550		13			3		8,326		14
Commercial		10		45,~~774~~755		7980			12		44,587		74
Land		21		~~1,301~~634		21			2		1,301		2
Total principal, secured loans		1615	$	57,~~979~~292		100	%		21	$	60,088		100	%

(1)

Single family includes 1-4 unit residential buildings, condominium units, townhouses and condominium complexes. At ~~March~~June 3130, 2023, single family consists of 2 loans with aggregate principal of approximately $ 3.4 million that are non-owner occupied. At December 31, 2022, single family consisted of 4 loans with aggregate principal of approximately $5.9 million that were non-owner occupied.

Lien position/LTV at origination

At funding, secured loans had the lien positions presented in the following table ($ in thousands).

	March 31, 2023								December 31, 2022
	June 30, 2023								December 31, 2022
	Loans		Principal			Percent			Loans		Principal			Percent
First trust deeds		1413	$	5554,~~230~~544			95	%		18	$	55,803			93	%
Second trust deeds		2		2,~~749~~748			5			3		4,285			7
Total principal, secured loans		1615		57,~~979~~292			100	%		21		60,088			100	%
Liens due other lenders at loan closing				9,681								8,956
Total debt			$	6766,~~660~~973							$	69,044
Appraised property value at loan closing			$	~~137~~136,~~894~~230							$	138,924
LTV (weighted average) at loan closing				54.57	%							55.4	%

1920

REDWOOD MORTGAGE INVESTORS VIII, L.P.

A California Limited Partnership

Notes to Consolidated Financial Statements

~~March~~June 3130, 2023 (unaudited)

Distribution of secured loans-principal by California counties

The distribution of secured loans within California by counties is presented in the following table ($ in thousands).

	March 31, 2023					December 31, 2022
	June 30, 2023					December 31, 2022
	Principal		Percent			Principal		Percent
San Francisco Bay Area(2)
San Francisco	$	17,645		30.48	%	$	18,425		30.7	%
San Mateo		—		0.0			2,519		4.2
Santa Clara		12,~~249~~232		21.13			12,266		20.4
Solano		3,550		6.12			3,550		5.9
Marin		1,500		2.6			1,099		1.8
Alameda		1,~~249~~248		2.2			1,687		2.8
		36,193		62.4			39,546		65.8
		36,175		63.1			39,546		65.8
Stanislaus		1,301		2.2			1,301		2.2
Other Northern California
Northern California Total		37,494		64.6			40,847		68.0
Stanislaus		634		1.1			1,301		2.2
Northern California Total		36,809		64.2			40,847		68.0
Southern California Coastal
Los Angeles		4,~~685~~683		8.12			5,597		9.3
Orange		15,800		27.36			11,600		19.3
Santa Barbara		—		0.0			2,044		3.4
Southern California Total		20,~~485~~483		35.48			19,241		32.0
Total principal, secured loans	$	57,~~979~~292		100.0	%	$	60,088		100.0	%

(2)

Includes the Silicon Valley

Scheduled maturities/Secured loans-principal

Secured loans scheduled to mature in periods as of and after ~~March~~June 3130, 2023 are presented in the following table ($ in thousands).

								First Trust Deeds				Second Trust Deeds
	Loans		Principal		Percent			Loans		Principal		Loans		Principal
2023 (scheduled to mature after March 31)		6	$	23,062		40	%		6	$	23,062		—	$	—
2023 (scheduled to mature after June 30)		5	$	9,733		17	%		5	$	9,733		—	$	—
2024		43		76,~~614~~950		1312			32		65,~~114~~450		1		1,500
2025		1		9,000		16			1		9,000		—		—
2026		1		1,~~249~~248		2			—		—		1		1,~~249~~248
2027		2		12,~~369~~351		2122			2		12,~~369~~351		—		—
Total scheduled maturities		1412		5339,~~294~~282		9269			1210		5036,~~545~~534		2		2,~~749~~748
Matured(3)		23		418,~~685~~010		831			23		418,~~685~~010		—		—
Total principal, secured loans		1615	$	57,~~979~~292		100	%		1413	$	5554,~~230~~544		2		2,~~749~~748

(3)

See Delinquency/Secured loans with payments in arrears below for additional information on matured loans.

Scheduled maturities are presented based on the most recent in-effect agreement with the borrower, including forbearance agreements. As a result, matured loans at ~~March~~June 3130, 2023, for the scheduled maturities table may differ from the same captions in the tables of delinquencies and payments in arrears that are based on the loan terms and do not consider forbearance agreements. For matured loans, the partnership may continue to accept payments while pursuing collection of principal or while negotiating an extension of the maturity date.

2021

REDWOOD MORTGAGE INVESTORS VIII, L.P.

A California Limited Partnership

Notes to Consolidated Financial Statements

~~March~~June 3130, 2023 (unaudited)

Delinquency/Secured loans

Secured loans principal summarized by payment-delinquency status are presented in the following table ($ in thousands).

	March 31, 2023				December 31, 2022
	June 30, 2023				December 31, 2022
	Loans		Principal		Loans		Principal
Current		11	$	4037,~~599~~177		18	$	54,359
Past Due
30-89 days		3—		~~11,555~~—		—		—
90-179 days		12		214,~~105~~290		2		2,009
180 or more days		12		35,~~720~~825		1		3,720
Total past due		54		1720,~~380~~115		3		5,729
Total principal, secured loans		1615	$	57,~~979~~292		21	$	60,088

At ~~March~~June 3130, 2023 and December 31, 2022, there were no loan forbearance agreements in effect. All ~~five~~four loans past due at ~~March~~June 3130, 2023 were in first lien position and had principal payments in arrears of approximately $~~4.7~~18 million.

Delinquency/Secured loans with payments in arrears

Payments in arrears for secured loans (54 loans) at ~~March~~June 3130, 2023 are presented in the following tables ($ in thousands).

	Loans				Principal				Interest(4)
At March 31, 2023	Pastmaturity		Monthlypayments		Pastmaturity		Monthlypayments		Pastmaturity		Monthlypayments		Totalpaymentsin arrears
At June 30, 2023	Pastmaturity		Monthlypayments		Pastmaturity		Monthlypayments		Pastmaturity		Monthlypayments		Totalpaymentsin arrears
Past due
30-89 days (1-3 payments)		1—		2—	$	~~965~~—	$	—	$	—	$	73—	$	~~1,038~~—
90-179 days (4-6 payments)		—2		1—		—14,290		2—		—289		55—		5714,579
180 or more days (more than 6 payments)		1		—1		3,720		—2		~~533~~633		—111		4,~~253~~466
Total past due		23		31	$	418,~~685~~010	$	2	$	~~533~~922	$	~~128~~111	$	519,~~348~~045

(4)

Interest for ~~March~~June 2023 is due on ~~April~~July 1, 2023 and is not included in the amounts of payments in arrears at ~~March~~June 3130, 2023.

Secured loans with payments in arrears, principal by LTV and lien position at ~~March~~June 3130, 2023 are presented in the following table ($ in thousands). The LTVs shown in this table use the appraisals at origination of the loans.

	Secured loans with payments in arrears, principal
LTV(5)	First trustdeeds		Percent(6)			Second trustdeeds		Percent(6)			Total Principal		Percent(6)
<40%	$	—		0.0	%	$	—		0.0	%	$	—		0.0	%
40-49%		—		0.0			—		0.0			—		0.0
50-59%		~~3,565~~—		60.10			—		0.0			~~3,565~~—		60.10
60-69%		117,~~710~~990		2013.29			—		0.0			117,~~710~~990		2013.29
Subtotal <70%		157,~~275~~990		2613.39			—		0.0			157,~~275~~990		2613.39
70-79%		212,~~105~~125		321.62			—		0.0			212,~~105~~125		321.62
Subtotal <80%		1720,~~380~~115		2935.91			—		0.0			1720,~~380~~115		2935.91
≥80%		—		0.0			—		0.0			—		0.0
Total	$	1720,~~380~~115		2935.91	%	$	—		0.0	%	$	1720,~~380~~115		2935.91	%

(5)

LTV classifications in the table above are based on principal, advances and interest unpaid at ~~March~~June 3130, 2023.

(6)

Percent of total principal, secured loans ($57.93 million) at ~~March~~June 3130, 2023.

2122

REDWOOD MORTGAGE INVESTORS VIII, L.P.

A California Limited Partnership

Notes to Consolidated Financial Statements

~~March~~June 3130, 2023 (unaudited)

Non-accrual status/Secured loans

Secured loans in non-accrual status are summarized in the following table ($ in thousands).

	March 31, 2023				December 31, 2022
	June 30, 2023		December 31, 2022
Number of loans	none	—		1		1
Principal			$	3,720	$	~~3,720~~
Advances				60		60
Accrued interest(7)				233		~~233~~
Total recorded investment			$	4,013	$	~~4,013~~
Foregone interest			$	233	$	~~233~~

(7)

Accrued interest in the table above is the amount of interest accrued prior to the loan being placed on non-accrual status, net of any payments subsequently.

In conjunction with the adoption of ASC 326 (CECL), the partnership changed its guidelines for non-accrual status and recognized a cumulative-effect adjustment (with an increase to partners’ capital) of $233 thousand to recognize previously foregone interest for loans designated non-accrual at December 31, 2022. In periods prior to January 1, 2023, loans were placed on non-accrual status if 180 days delinquent or earlier if management determined that the primary source of repayment would come from the foreclosure and subsequent sale of the collateral securing the loan (which usually occurs when a notice of sale is filed) or when the loan was no longer considered well-secured.

Provision/allowance for credit losses

Activity in the allowance for credit losses for the ~~three~~six months ended ~~March~~June 3130 is presented in the following table ($ in thousands).

	2023						2022
	Principal and Advances		Interest		Total		Principal and Advances		Interest		Total
Balance, December 31	$	30	$	25	$	55	$	30	$	25	$	55
Adoption of ASC 326 (CECL)		30		35		65		—		—		—
Balance, January 1		60		60		120		30		25		55
Provision (recovery) for credit losses		—		—		—		—		—		—
Provision for (recovery of) credit losses		—		—		—		—		—		—
Charge-offs		—		—		—		—		—		—
Balance, March 31	$	60	$	60	$	120	$	30	$	25	$	55
Balance, June 30	$	60	$	60	$	120	$	30	$	25	$	55

Each secured loan is reviewed quarterly for its delinquency, LTV adjusted for the most recent valuation of the underlying collateral, remaining term to maturity, borrower’s payment history and other factors.

In periods prior to January 1, 2023, the partnership followed the incurred loss model for recognition of credit losses and had recorded an allowance for loan losses of principal and interest totaling approximately $55 thousand to cover incurred, but not known, eventualities that occur from time to time, even though the secured loans had protective equity such that collection was deemed probable for all recorded amounts due on the loan. Such eventualities include the manager deeming it in the best interest of the partnership to agree to concessions to borrowers and/or senior-lien lenders to facilitate a refinance or a sale of the collateral primarily for secured loans in second lien position.

In conjunction with the adoption of ASC 326 (CECL), the partnership recognized a cumulative-effect adjustment (with a decrease to partners’ capital) of $65 thousand to the allowance for credit losses to recognize lifetime expected credit losses for secured loans at December 31, 2022. The limited number of loans ~~(16) – aided by the fact that four (4) of the loans comprise a significant portion of loan principal (approximately $32.1 million of the $58 million of loan principal)~~ and the short terms for which the loans are written - enabled the manager to do a loan-by-loan analysis to determine the risk of loss. Beginning in 2023, the analysis is updated quarterly with any change to the expected credit losses recognized in the period.

2223

REDWOOD MORTGAGE INVESTORS VIII, L.P.

A California Limited Partnership

Notes to Consolidated Financial Statements

~~March~~June 3130, 2023 (unaudited)

The analysis included projecting the outstanding principal for loans – individually and in total, by lien position – until maturity to determine the count, amount and weighted average LTV of the loans for future quarter and year ends.

								First Trust Deeds							Second Trust Deeds
	Loans		Principal		LTV~~(9)~~			Loans		Principal		LTV~~(9)~~			Loans		Principal		LTV~~(9)~~
2023(8)		87	$	3029,~~232~~549		3645.73	%		65	$	2726,~~483~~801		3644.48	%	2		$	2,~~749~~748		4050.26	%
2024		4		22,~~619~~599		47.01			3		21,~~369~~351		46.01			1		1,~~250~~248		63.67
2025		3		13,~~619~~599		3738.80			2		12,~~369~~351		35.24		1			1,~~250~~248		63.67
2026		2		12,~~369~~351		35.24		2			12,~~369~~351		35.24			—		—		0.0
2027		—		—		0.0			—		—		0.0			—		—		0.0

(8)

~~For~~At ~~purposes~~June of30, ~~this analysis~~2023, there were three loans past maturity aswith ofaggregate ~~March~~principal ~~31,~~of ~~2023,~~$18 ~~and~~million ~~loans~~which ~~subsequently maturing~~ are ~~expected~~not toincluded bein ~~paid by~~ the ~~calendar~~table ~~year end~~above.

The LTVs shown in this table are updated for any appraisals ordered and received by the manager after origination of the loan.

As indicated by the tables above, there is no future period covered in the analysis – nor is there any individual loan – in which a real estate market decline in values is likely to occur that would be sufficient to offset the substantial protective equity in the secured-loan portfolio (and in the individual loans) sufficient to put at risk collection of amounts owed under the notes, secured by the deeds of trust. In arriving at the determination, the manager consulted a range of banking/industry and academic studies and forecasts.

In performing the analysis, the manager considered the vintages in which the secured loans originated. The ultimate collectability of the amounts owed is reliant on the estimation of the current fair value of the real property collateral ~~securing~~and the ~~loans. Such~~time ~~estimation~~to ~~is not variant by vintage~~maturity. Further there is no evidence, nor any indication in the analysis, that the ultimate collectability of the amounts owed fluctuates with the time on file or vintage. Such considerations are consistent with the ‘no-credit-losses’ experience of the partnership over the preceding 5+ years. The LTVs shown in this table use the appraisals at origination of the loans.

	Secured loans, principal
LTV(10)	First trustdeeds		Percent			Count		Second trustdeeds		Percent			Count		Totalprincipal		Percent
LTV(9)	First trustdeeds		Percent			Count		Second trustdeeds		Percent			Count		Totalprincipal		Percent
<40%	$	13,~~019~~002		22.57	%		2	$	1,500		2.6	%		1	$	14,~~519~~502		25.13	%
40-49%		~~664~~—		10.10			1—		—		0.0			—		~~664~~—		10.10
50-59%		7,~~115~~113		12.34			3		—		0.0			—		7,~~115~~113		12.34
60-69%		2218,~~597~~874		3932.09			54		1,~~249~~248		2.12			1		2320,~~846~~122		4135.1
Subtotal <70%		4338,~~395~~989		7468.90			119		2,~~749~~748		4.78			2		4641,~~144~~737		7972.68
70-79%		1115,~~835~~555		2027.42			34		—		0.0			—		1115,~~835~~555		2027.42
Subtotal <80%		5554,~~230~~544		95.32			1413		2,~~749~~748		4.78			2		57,~~979~~292		100.0
≥80%		—		0.0			—		—		0.0			—		—		0.0
Total	$	5554,~~230~~544		95.32	%		1413	$	2,~~749~~748		4.78	%		2	$	57,~~979~~292		100.0	%

(9)

LTV classifications in the table above are based on principal, advances and interest unpaid at ~~March~~June 3130, 2023.

REDWOOD MORTGAGE INVESTORS VIII, L.P.

A California Limited Partnership

Notes to Consolidated Financial Statements

March 31, 2023 (unaudited)

NOTE 5 – REAL ESTATE OWNED (REO) AND MORTGAGE PAYABLE

REO at ~~March~~June 3130, 2023 was comprised of three properties with a carrying value of approximately $5.9 million.

•

In Los Angeles County (Hollywood Hills), two single-family residences on separate, adjoining parcels.

•

In San Francisco County, a real estate interest comprised of a condominium unit consisting of storage lockers and signage rights for the exterior façade of the building.

There were no REO transactions or valuation allowance adjustments during the three months ended March 31, 2023 and 2022.

The two Hollywood Hills single-family residences were acquired in June 2020 by foreclosure sales. The borrower contested the foreclosure sales by filing California state court actions. One of these actions was dismissed by the trial Court and the dismissal was appealed by the borrower. An Appellate Court affirmation of the dismissal is pending further potential appeal. The occupancy of one of the two properties is being contested. A remaining action (not related to property title) remains pending.

There is a mortgage note payable secured by a first trust deed on one of the Hollywood Hills properties that matures November 1, 2044. Principal was approximately $1.3 million at March 31, 2023. Monthly payments are approximately $8 thousand, with interest at 4.125% until October 31, 2024 after which interest is calculated at LIBOR plus 2.25%. As of March 31, 2023, payments on the mortgage note payable were paid through to September 30, 2022. Principal and interest in arrears (5 payments as of March 31, 2023; 6 months of interest) approximated $52 thousand (interest payable approximated $28 thousand). At March 31, 2023, accrued liabilities includes accrued property taxes of approximately $22 thousand and prepaid insurance of approximately $4 thousand. Accounts payable at March 31, 2023 includes $231 thousand for negative escrow and unpaid late charges.24

~~REO~~REDWOOD atMORTGAGE ~~March~~INVESTORS 31VIII, ~~2022 was comprised of the three properties above and two other properties with a total carrying value of approximately $8~~L.~~3 million~~P.

A California Limited Partnership

Notes to Consolidated Financial Statements

June 30, 2023 (unaudited)

There is a mortgage note payable secured by a first trust deed on one of the Hollywood Hills properties that matures November 1, 2044. Principal was approximately $1.3 million at June 30, 2023. Monthly payments are approximately $8 thousand, with interest at 4.125% until October 31, 2024 after which interest is calculated at LIBOR plus 2.25%. As of June 30, 2023, payments on the mortgage note payable were current on all payments due through May 2023. As a result, the notice of default previously recorded in May 2023 due to defaults by the original borrower was rescinded in June 2023. At June 30, 2023, the partnership had no accrued liabilities relating to REO. Accounts payable at June 30, 2023 includes $216 thousand for negative escrow and unpaid late charges.

REO at June 30, 2022 was comprised of the three properties above and two other properties with a total carrying value of approximately $8.3 million.

•

In San Francisco County, 1 residential unit in a condominium complex.

•

In Stanislaus County, approximately 14 acres of undeveloped land zoned commercial.

REO, net

REO, net (in operations expense/holding costs) were $5478 thousand and $8458 thousand for the three months ended ~~March~~June 3130, 2023 and 2022, respectively and $132 and $142 thousand for the six months ended June 30, 2023 and 2022, respectively, and was net of other income principally of month-to-month rents received of approximately $31 thousand and $7 thousand for the three months ended ~~March~~June 3130, 2023 and 2022, respectively and $3 and $9 thousand for the six months ended June 30, 2023 and 2022, respectively for unit-storage lockers and signage in San Francisco County.

NOTE 6 – FAIR VALUE

The following methods and assumptions are used when estimating fair value (Level 3 inputs).

Secured loans/performing

Due to the nature of the partnership’s loans and borrowers the fair value of loan balances secured by deeds of trust is deemed to approximate the recorded amount (per the consolidated financial statements) as the partnership's loans:

•

are of shorter terms at origination than commercial real estate loans by institutional lenders and conventional single-family home mortgage lenders;

•

are written without a prepayment penalty causing uncertainty/a lack of predictability as to the expected duration of the loan; and

•

have limited marketability and are not yet sellable into an established secondary market.

Secured loans, with payments in arrears

The fair value of secured non-performing loans is the lesser of the fair value of the collateral or the enforceable amount of the note. Secured non-performing loans are collateral dependent because it is expected that the primary source of repayment will not be from the borrower but rather from the collateral. The fair value of the collateral is determined on a nonrecurring basis by exercise of judgment based on management’s experience informed by appraisals (by licensed appraisers), brokers’ opinion of values and publicly available information on in-market transactions (Level 3 inputs). When the fair value of the collateral exceeds the enforceable amount of the note, the borrower is likely to redeem the note. Accordingly, third party market participants would generally pay the fair value of the collateral, but no more than the enforceable amount of the note.

REDWOOD MORTGAGE INVESTORS VIII, L.P.

A California Limited Partnership

Notes to Consolidated Financial Statements

March 31, 2023 (unaudited)

The following methods and assumptions are used to determine the fair value of the collateral securing a loan.

Single family – Management’s preferred method for determining the fair market value of its single-family residential assets is the sale comparison method. Management primarily obtains sales comparables (comps) via its subscription to the RealQuest service, but also uses free online services such as Zillow.com and other available resources to supplement this data. Sale comps are reviewed and adjusted for similarity to the subject property, examining features such as proximity to subject, number of bedrooms and bathrooms, square footage, sale date, condition and year built.

If applicable sale comps are not available or deemed unreliable, management will seek additional information in the form of brokers’ opinions of value or appraisals.

Multi-family residential – Management’s preferred method for determining the aggregate retail value of its multifamily units is the sale comparison method. Sale comps are typically provided in appraisals, or by realtors who specialize in multi-family residential properties. Sale comps are reviewed for similarity to the subject property, examining features such as proximity to subject, rental income, number of units, composition of units by the number of bedrooms and bathrooms, square footage, condition, amenities and year built.

REDWOOD MORTGAGE INVESTORS VIII, L.P.

A California Limited Partnership

Notes to Consolidated Financial Statements

June 30, 2023 (unaudited)

Management’s secondary method for valuing its multifamily assets as income-producing rental operations is the direct capitalization method. In order to determine market cap rates for properties of the same class and location as the subject, management refers to published data from reliable third-party sources such as the CBRE Cap Rate Survey. Management applies the appropriate cap rate to the subject’s most recent available annual net operating income to determine the property’s value as an income-producing project. When adequate sale comps are not available or reliable net operating income information is not available or the project is under development or is under-performing to market, management will seek additional information and analysis to determine the cost to improve and the intrinsic fair value and/or management will seek additional information in the form of brokers’ opinion of value or appraisals.

Commercial buildings – Management’s preferred method for determining the fair value of its commercial buildings is the sale comparison method. Sale comps are typically provided in appraisals, or by realtors who specialize in commercial properties. Sale comps are reviewed for similarity to the subject property, examining features such as proximity to subject, rental income, number of units, composition of units, common areas, and year built.

Management’s secondary method for valuing its commercial buildings is the direct capitalization method. In order to determine market cap rates for properties of the same class and location as the subject, management refers to reputable third-party sources such as the CBRE Cap Rate Survey. Management then applies the appropriate cap rate to the subject’s most recent available annual net operating income to determine the property’s value as an income-producing commercial rental project.

When adequate sale comps are not available or reliable net operating income information is not available or the project is under development or is under-performing to market, management will seek additional information and analysis to determine the cost to improve and the intrinsic fair value and/or management will seek additional information in the form of brokers’ opinion of value or appraisals.

Commercial land – Commercial land has many variations and uses, thus requiring management to employ a variety of methods depending upon the unique characteristics of the subject land, including a determination of its highest and best use. Management may rely on information in the form of a sale comparison analysis (where adequate sale comps are available), brokers’ opinion of value, or appraisal.

REDWOOD MORTGAGE INVESTORS VIII, L.P.

A California Limited Partnership

Notes to Consolidated Financial Statements

March 31, 2023 (unaudited)

NOTE 7 – LINE OF CREDIT

~~Activity~~In ~~involving~~March ~~the~~2020, ~~line~~RMI VIII entered into a Business Loan Agreement (Revolving Line of Credit and Term Loan Agreement) with Western Alliance Bank (“original credit ~~for~~agreement”), which was amended and modified by the ~~three~~First ~~months~~Loan ~~ended~~Modification Agreement effective March 314, is2022 ~~presented~~(the in“ first modification agreement” and together with the ~~following~~original ~~table~~credit ($agreement, inthe ~~thousands~~“credit agreement of 2022”). Advances on the line of credit are (and were) to be used exclusively to fund secured loans.

	2023		2022
Balance, January 1	$	10,000	$	—
Draws		—		10,800
Repayments		—		(1,000	)
Balance, March 31,	$	10,000	$	9,800
Line of credit - average daily balance	$	10,000	$	3,758

Under the terms of the credit agreement of 2022, RMI VIII could borrow up to a maximum principal of $10 million subject to a borrowing base calculation set forth in the credit agreement. Amounts advanced under the credit agreement are secured by a first priority security interest in the notes and deeds of trust of the pledged loans included in the borrowing base. The maturity date is March 13, 2024 when all amounts outstanding are then due. RMI VIII has the option at the maturity date to convert – for a fee of one-quarter of one percent (0.25%) – the then outstanding principal balance to a two-year term loan maturing in March 2026.

InThe ~~March~~credit ~~2020,~~agreement ~~RMI~~of ~~VIII~~2022 ~~entered~~provides ~~into~~for ainterest ~~revolving~~on ~~line~~the ofoutstanding principal under the credit line to be payable monthly and ~~term~~to ~~loan~~accrue ~~agreement~~at ~~with~~the ~~Western~~annual ~~Alliance~~rate ~~Bank~~that is the greater of: (~~“bank”~~i) ~~which~~the is30-day ~~governed~~American byInterbank ~~the~~Offered ~~terms~~Rate ofTerm -30 Index published for loans in United States Dollars by the ~~Business~~American ~~Loan~~Financial ~~Agreement~~Exchange (~~Revolving~~"Ameribor") ~~Line~~plus ofthree ~~Credit~~and one-quarter percent (3.25%); and ~~Term~~(ii) ~~Loan~~five ~~Agreement~~percent (5.0%). ~~between~~Prior to the ~~bank~~first modification agreement, interest on outstanding principal was payable monthly and accrued at the ~~partnership~~per annum rate of the greater of (~~“original~~i) ~~credit~~five ~~agreement”~~percent (5%), ~~which~~or ~~was~~(ii) ~~amended~~the sum of the one-month LIBOR rate plus three and ~~modified~~one-quarter bypercent (3.25%). If the ~~First~~partnership ~~Loan~~does ~~Modification~~not ~~Agreement~~maintain ~~made~~the ~~effective~~required ~~March~~compensating 4balance with a minimum daily average of $1.0 million for the calendar quarter, ~~2022~~the interest rate automatically increases by one-quarter of one percent (0.25%) above that rate which would otherwise be applicable for the ~~“modification~~next ~~agreement”~~calendar ~~and~~quarter ~~together~~retroactive ~~with~~to the ~~original~~beginning ~~credit~~of ~~agreement~~the calendar quarter in which the compensating balance is not maintained. At June 30, 2023, the ~~“credit~~interest ~~agreement~~rate ofwas ~~2022”~~eight and thirty eight one-hundredths percent (8.38%).

Under the terms of the credit agreement of 2022, RMI VIII can borrow up to a maximum principal of $10 million subject to a borrowing base calculation set forth in the credit agreement and the amounts advanced under the credit agreement are secured by a first priority security interest in the notes and deeds of trust of the pledged loans included in the borrowing base. The maturity date is March 13, 2024 when all amounts outstanding are then due. RMI VIII has the option at the maturity date to convert - for a fee of one-quarter of one percent (0.25%) – the then outstanding principal balance to a two-year term loan maturing in March 2026.

Prior to the modification agreement, interest on outstanding principal was payable monthly and accrued at the per annum rate of the greater of (i) five percent (5%) or (ii) the sum of the one-month LIBOR rate plus three and one-quarter percent (3.25%). The modification agreement replaced LIBOR as the reference rate under the credit agreement with the 30-day American Interbank Offered Rate Term -30 Index published for loans in United States Dollars by the American Financial Exchange ("Ameribor"). Following the modification agreement, interest on the outstanding principal under the credit line is payable monthly and accrues at the annual rate that is the greater of: (i) the Ameribor Rate plus three and one-quarter percent (3.25%); and (ii) five percent (5.0%). The fair value of the balance on the line of credit is deemed to approximate the recorded amount because the reference rate plus 3.25% and the other terms and conditions, including the two-year term, of the Revolving Line of Credit and Term Loan Agreement are reflective of market rate terms (Level 2 inputs).

If the partnership does not maintain the required compensating balance with a minimum daily average of $1.0 million for the calendar quarter, the interest rate automatically increases by one-quarter of one percent (0.25%) above that rate which would otherwise be applicable for the next calendar quarter retroactive to the beginning of the calendar quarter in which the compensating balance is not maintained. At March 31, 2023, the interest rate was eight and fourteen one-hundredths percent (8.14%).

For each calendar quarter during which the aggregate average daily outstanding principal is less than fifty percent (50%) of the maximum principal of $10 million, there is a quarterly unused line fee equal to one-half of one percent (0.50%) per annum of the average daily difference between the average principal outstanding and fifty percent (50%) of the maximum principal of $10 million.

Advances on the line of credit are to be used exclusively to fund secured loans. The credit agreement provides for customary financial and borrowing base reporting by RMI VIII to the lending bank and specifies that the partnership shall maintain (i) minimum tangible net worth of $50 million, net of amounts due from related companies; (ii) debt service coverage ratio at all times of not less than 2.00 to 1.00; and (iii) loan payment delinquency of less than ten percent (10.0%) at calendar quarter-end, calculated as the principal of loans with payments over 61-days past due as determined by the lending bank’s guidance, less loan loss allowances, divided by total principal of the partnership’s loans. The loan agreement provides that in the event the loan payment delinquency rate exceeds 10.0% as of the end of any quarter (10.05% at March 31, 2023), the bank will cease to make any further advances until compliant with the covenant but agrees not to accelerate repayment of the loan.

At March 31, 2023 and December 31, 2022, aggregate principal of pledged loans was approximately $21.1 million and $23.2 million, respectively, with a maximum allowed advance thereon of approximately $10 million, subject to the borrowing base calculation.

The debt issuance costs from the original credit agreement were fully amortized in March 2022. Debt issuance costs of approximately $57 thousand from the modification agreement are being amortized over its two-year term. Amortized debt issuance costs included in interest expense approximated $7 thousand and $14 thousand for the three months ended March 31, 2023 and 2022, respectively.

REDWOOD MORTGAGE INVESTORS VIII, L.P.

A California Limited Partnership

Notes to Consolidated Financial Statements

~~March~~June 3130, 2023 (unaudited)

Activity involving the line of credit for the six months ended June 30 is presented in the following table ($ in thousands).


	2023			2022
Balance, January 1	$	10,000		$	—
Draws		—			11,000
Repayments		(900	)		(1,000	)
Balance, June 30,	$	9,100		$	10,000
Line of credit - average daily balance	$	9,995		$	6,882

The credit agreement of 2022 provides for customary financial and borrowing base reporting by RMI VIII to the lending bank and specifies that the partnership shall maintain (i) minimum tangible net worth of $50 million, net of amounts due from related companies; (ii) debt service coverage ratio at all times of not less than 2.00 to 1.00; and (iii) loan payment delinquency of less than ten percent (10.0%) at calendar quarter-end, calculated as the principal of loans with payments over 61-days past due as determined by the lending bank’s guidance, less loan loss allowances, divided by total principal of the partnership’s loans. The loan agreement provided that in the event the loan payment delinquency rate exceeded 10.0% as of the end of any quarter (34.90% at June 30, 2023), the bank would cease to make any further advances until compliant with the covenant but agreed not to accelerate repayment of the loan.

On August 21, 2023 Western Alliance Bank and the partnership entered into a Second Loan Modification Agreement ("second modification agreement") to modify certain provisions of the credit agreement of 2022 effective as of June 30, 2023 as a result of the adoption of the Plan of Dissolution. Under the Plan of Dissolution, the Partnership Agreement and the California Uniform Limited Partnership Act of 2008, distributions to limited partners, if any, will not commence until all obligations and liabilities of the Partnership have been paid in full.

Under the second modification agreement, the parties agreed that the partnership shall maintain a minimum tangible net worth equal to at least $30 million, net of amounts due from related companies provided, in the event that: (i) the tangible net worth of the partnership is $45 million or greater, the partnership may borrow up to $9.1 million; (ii) the tangible net worth of the partnership is less than $45 million but is at least $35 million, the partnership may borrow up to $5.25 million; and (iii) the tangible net worth of the partnership is less than $35 million but is at least $30 million, the partnership may borrow up to $3.0 million.

The second modification agreement further provides that the Partnership shall maintain a debt service coverage ratio at all times of not less than 1.25 to 1.00; and loan payment delinquency rate of less than fifty percent (50.0%) at calendar quarter-end if the borrowings are greater than $5.0 million, calculated as the principal of loans with payments over 61-days past due as determined by the lending bank’s guidance, less loan loss allowances, divided by total principal of the partnership’s loans. The partnership has no obligation to maintain a loan payment delinquency rate upon the occurrence of the outstanding principal balance of borrowings having been reduced to below $5.0 million.

At June 30, 2023 and December 31, 2022, aggregate principal of pledged loans was approximately $27 million and $23.2 million, respectively, with a maximum allowed advance thereon of approximately $10 million, subject to the borrowing base calculation.

The fair value of the balance on the line of credit is deemed to approximate the recorded amount because the reference rate plus 3.25% and the other terms and conditions, including the two-year term, of the Revolving Line of Credit and Term Loan Agreement are reflective of market rate terms (Level 2 inputs).

Amortized debt issuance costs included in interest expense approximated $7 thousand for the three months ended June 30, 2023 and 2022 and approximately $14 thousand and $21 thousand for the six months ended June 30, 2023 and 2022, respectively. Debt issuance costs of approximately $57 thousand from the modification agreement (of which $21 thousand is not amortized at June 31, 2023) were being amortized over the original two-year term, and are now – beginning in the quarter ending September 30, 2023 – to be amortized over the remaining term of the agreement.

REDWOOD MORTGAGE INVESTORS VIII, L.P.

A California Limited Partnership

Notes to Consolidated Financial Statements

June 30, 2023 (unaudited)

NOTE 8 – COMMITMENTS AND CONTINGENCIES, OTHER THAN LOAN AND REO COMMITMENTS

Commitments

Note 31 (~~General~~Organization ~~Partners~~ and ~~Other Related Parties~~General) presents detailed discussion of the partnership’s contractual obligations to RMC ~~and~~under ~~detail~~the ofPartnership ~~scheduled~~Agreement ~~withdrawals~~and ofthe ~~limited~~Plan ~~partners’~~of ~~capital at March 31, 2023~~Dissolution.

Legal proceedings

As of ~~March~~June 3130, 2023, the partnership is not involved in any legal proceedings or governmental proceedings other than those that would be considered part of the normal course of business.

In the normal course of its business, the partnership may become involved in legal proceedings (such as assignment of rents, bankruptcy proceedings, appointment of receivers, unlawful detainers, judicial foreclosure, etc.) to collect the debt owed under the promissory notes, to enforce the provisions of the deeds of trust, to protect its interest in the real property subject to the deeds of trust and to resolve disputes with borrowers, lenders, lien holders and mechanics. None of these actions, in and of themselves, typically would be of any material financial impact to the partnership (i.e., exceeding ten percent of the partnership’s consolidated current assets).

NOTE 9 – SUBSEQUENT EVENTS

OnThe ~~May~~manager ~~19,~~evaluated ~~2023,~~events ~~the~~subsequent ~~partnership~~to ~~filed~~June a30, ~~Consent~~2023 ~~Solicitation~~and ~~Statement~~determined ~~pursuant~~that tothere ~~Section~~were ~~14(a)~~no ofevents ~~the~~or ~~Securities~~transactions ~~Exchange~~other ~~Act~~than ofthose ~~1934~~discussed ~~with the SEC~~ in ~~connection with a proposed solicitation of consents from~~ the ~~limited~~notes ~~partners~~above toregarding ~~dissolve~~ the ~~partnership,~~Dissolution ~~liquidate its assets~~ and ~~wind~~the upeffectiveness ~~its~~of ~~affairs~~the ~~pursuant to a~~ Plan of Dissolution ~~(the~~as ~~“Plan”). If approved by an affirmative majority~~ of ~~the~~August ~~limited partnership interests~~4, ~~the partnership will not be immediately terminated~~2023, ~~but~~occurring ~~will~~during ~~continue~~this ~~until~~reporting ~~its~~period ~~affairs~~that ~~have~~require ~~been~~recognition ~~wound up. The partnership will cease making new loans and will only engage in business activities necessary~~ or ~~convenient~~disclosure ~~to wind-up the partnership’s business and distribute partnership assets~~ in ~~accordance with~~ the ~~Plan,~~unaudited ~~the~~consolidated ~~Partnership~~financial ~~Agreement and applicable law~~statements. ~~RMC will continue as the manager of the partnership until the complete liquidation of the partnership’s assets and the termination of the partnership.~~ See ~~“Term of the partnership” in~~ Note 1 (~~Organizational~~Organization and General) for ~~detail~~a ondescription of the Dissolution and Plan. of Dissolution.

The manager evaluated events subsequent to March 31, 2023 and determined that there were no other events or transactions occurring during this reporting period that require recognition or disclosure in the unaudited consolidated financial statements. 28

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the unaudited financial statements and notes thereto, which are included in Item 1 of this report on Form 10-Q, as well as the audited financial statements and the notes thereto, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the partnership’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the U.S. Securities and Exchange Commission. The results of operations for the three and six months ended ~~March~~June 3130, 2023 are not necessarily indicative of the results to be expected for the full year.

Forward-Looking Statements

Certain statements in this Report on Form 10-Q which are not historical facts may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”), including statements regarding the ~~partnership’s~~anticipated ~~expectations,~~timing ~~hopes,~~of ~~intentions,~~the ~~beliefs~~wind-up of the partnership and ~~strategies~~capital ~~regarding~~distributions ~~the~~and ~~future~~execution of wind-up activities. Forward-looking statements, which are based on various assumptions (some of which are beyond our control), may be identified by reference to a future period or periods or by use of forward-looking terminology, such as “may,” “will,” “believe,” “expect,” “anticipate,” “continue,” “possible” or similar terms or variations on those terms or the negative of those terms. Forward-looking statements include statements regarding the execution of wind-up activities and timing to complete wind-up of the partnership, trends in the California real estate market, future interest rates and economic conditions and their effect on the partnership and its assets, estimates as to the allowance for credit losses, ~~estimates of future withdrawals of units, future funding of loans by the partnership,~~ and beliefs relating to how the partnership will be affected by current economic conditions and trends in the financial and credit markets. Actual results may be materially different from what is projected by such forward-looking statements, therefore, you should not place undue reliance on forward-looking statements which reflect our view only as of the date hereof.

Factors that might cause such a difference include, but are not limited to, the following:

•

changes in economic conditions, interest rates, and changes in California real estate markets;

•

the impact of competition and competitive pricing for mortgage loans;

•

the general partners’ ability to make and arrange for any loans ~~that~~sales ~~fit~~as ~~our~~part ~~investment~~of ~~criteria;~~the Plan of Dissolution;

•

ability to sell loans, the prices at which loans may be sold and timing of loan sales under the Plan of Dissolution;

•

whether we will have any future loan sales to unaffiliated third parties, and if we do, the gain, net of expenses, and the volume/timing of loan sales to unaffiliated third parties, which to date have provided only immaterial gains to us;

•

the concentration of credit risks to which we are exposed;

•

increases in payment delinquencies and defaults on our mortgage loans;

•

changes in government regulation and legislative actions affecting our business; and

•

the impact of global unrest and economic instability which has an adverse effect on US markets and economic conditions, including inflationary pressures on interest rates.

All forward-looking statements and reasons why results may differ included in this Form 10-Q are made as of the date hereof, and we assume no obligation to update any such forward-looking statement or reason why actual results may differ unless required by law.

Overview

Redwood Mortgage Investors VIII, L.P., a California Limited Partnership (“we”, “RMI VIII” or the “partnership”), was formed in 1993 to engage in business as a mortgage lender and investor by making and holding-for-investment mortgage loans secured by California real estate, primarily by first and second deeds of trust. The partnership is externally managed by Redwood Mortgage Corp. (“RMC” or “the manager”). See Note 3 (General Partners and Other Related Parties) to the consolidated financial statements included in Part I, Item 1 of this report for a detailed presentation of the partnership’s activities for which related parties are compensated and for other related party transactions.

~~Cash~~On ~~generated~~June ~~from~~6, ~~loan~~2023, ~~payoffs~~the ~~and~~partnership ~~borrower~~filed ~~payments~~a definitive Consent Solicitation Statement pursuant to Section 14(a) of ~~principal~~the ~~and~~Securities ~~interest~~Exchange isAct ~~used~~of ~~for~~1934, ~~operating~~as ~~expenses~~amended, ~~distributions~~with tothe SEC in connection with a solicitation of consents from the limited partners to approve the dissolution of the partnership (the “Dissolution”) and ~~withdrawals~~a Plan of Dissolution (the “Plan” or “Plan of Dissolution”). ~~The~~On ~~cash~~August ~~flow~~4, if2023 ~~any~~(the “Dissolution Date”), inholders ~~excess~~of a majority of ~~these~~the ~~uses~~limited ~~plus~~partnership interests of the ~~cash~~partnership ~~from~~as ~~advances~~of June 1, 2023, the record date for the consent solicitation, approved the Dissolution and Plan. As a result, the general partners entered into the Plan on August 4, 2023, and RMC, as manager of the ~~line~~partnership, will wind-up the affairs of ~~credit~~the ispartnership ~~reinvested~~until the complete liquidation of the partnership’s assets and the termination of the partnership in accordance with the Plan, the partnership’s Sixth Amended and Restated Limited Partnership Agreement dated July 28, 2005 (as amended, the “Partnership Agreement”) and the Uniform Limited Partnership Act of 2008. The partnership will cease making new loans and will only engage in business activities necessary or convenient to wind-up the partnership’s business and distribute partnership assets.

Per the Partnership Agreement, no more than 20% of the total limited partners’ capital account balances at the beginning of any year may be liquidated during any calendar year. Notwithstanding this 20% limitation, the general partners have the discretion to further limit the percentage of total limited partners’ capital accounts that may be withdrawn in order to comply with the safe harbor provisions of the regulations under Section 7704 of the Internal Revenue Code of 1986, as amended, to avoid the partnership being taxed as a corporation.29

OnRMC ~~May~~expects ~~19,~~to ~~2023,~~complete the ~~partnership~~wind-up ~~filed~~activities aapproximately ~~Consent~~12 ~~Solicitation Statement pursuant~~ to ~~Section~~18 ~~14(a)~~months ofafter the ~~Securities~~effective ~~Exchange~~date ~~Act~~ of ~~1934 with~~ the ~~SEC~~Plan inof ~~connection~~Dissolution. ~~with~~Dissolution, ahowever, ~~proposed~~can ~~solicitation~~be ofan ~~consents~~involved ~~from~~process ~~the~~which ~~limited~~may ~~partners~~depend toon ~~dissolve~~a ~~the~~number ~~partnership~~of factors, ~~liquidate~~and ~~its~~some ~~assets~~of ~~and~~these ~~wind~~factors upare ~~its~~beyond ~~affairs~~RMC’s ~~pursuant~~control. toSee a"Risk ~~Plan~~Factors" ofincluded ~~Dissolution~~in ~~(the~~Part ~~“Plan”).~~II IfItem ~~approved~~1A byof anthis ~~affirmative~~report ~~majority~~on ofForm ~~the~~10-Q ~~limited~~for ~~partnership~~a ~~interests,~~discussion ~~the~~of ~~partnership~~risks ~~will~~and ~~not~~uncertainties bethat ~~immediately~~could ~~terminated,~~materially ~~but~~affect ~~will~~the ~~continue~~wind-up ~~until~~of ~~its~~the partnership's affairs ~~have~~in ~~been~~connection ~~wound~~with ~~up.~~the Dissolution.

28In periods prior to the Dissolution Date, cash generated from loan payoffs and borrower payments of principal and interest was used for operating expenses, distributions to limited partners and withdrawals. The cash flow, if any, in excess of these uses plus the cash from advances on the line of credit was reinvested in new loans.

~~See~~Prior ~~Note~~to 1the ~~(Organization~~Dissolution ~~and~~Date, ~~General)~~no tomore than 20% of the ~~consolidated~~total ~~financial~~limited ~~statements~~partners’ ~~included~~capital inaccount ~~Part~~balances I,at ~~Item~~the 1beginning of any year could be liquidated during any calendar year. Notwithstanding this ~~report~~20% onlimitation, ~~Form~~the ~~10-Q~~general ~~for~~partners ~~additional~~had ~~detail~~the ondiscretion to further limit the ~~organization~~percentage ~~and~~of ~~operations~~total limited partners’ capital accounts that could have been withdrawn in order to comply with the safe harbor provisions of ~~RMI~~the ~~VIII.~~regulations under Section 7704 of the Internal Revenue Code of 1986, as amended, to avoid the partnership being taxed as a corporation.

Effective as of the Dissolution Date: (i) all limited partners, including limited partners who previously elected not to receive periodic distributions of partnership net income under the Partnership Agreement, will begin receiving quarterly distributions of the partnership’s net income (if any); and (ii) all scheduled withdrawals of limited partner capital made pursuant to the Partnership Agreement terminated in favor of quarterly pro rata withdrawals to all limited partners of cash received from the liquidation of partnership assets and available to fund capital distributions in accordance with the distribution provisions set forth in the Plan.

See Note 1 (Organization and General) to the consolidated financial statements included in Part I, Item 1 of this report on Form 10-Q for additional detail on the organization and operations of RMI VIII and the Plan of Dissolution.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions about the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities, at the dates 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 credit losses, including determining the fair value of the collateral, and the valuation of real estate owned. Actual results could differ significantly from these estimates.

Accounting policies are an integral part of our consolidated financial statements. For a summary of our critical accounting policies, see “Critical Accounting Policies” in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K for the year ended December 31, 2022.

Adoption of ASC 326 (CECL)

In conjunction with the adoption of CECL, the partnership changed its guidelines for non-accrual status and recognized a cumulative-effect adjustment with a net increase to partners’ capital of $168 thousand, consisting of an increase to the allowance for credit losses of $65 thousand to recognize lifetime expected credit losses for secured loans at December 31, 2022, and the recognition of $233 thousand of previously foregone interest for loans designated non-accrual at December 31, 2022. The limited number of loans (16) – aided by the fact that four (4) of the loans comprise a significant portion of loan principal (approximately $32.1 million of the $58 million of loan principal) and the short terms for which the loans are written - enabled the manager to do a loan-by-loan analysis to determine the risk of loss. 30

~~There~~In isconjunction nowith ~~future~~the ~~period~~adoption ~~covered~~of inCECL, the ~~analysis~~partnership -changed ~~nor~~its isguidelines ~~there~~for ~~any~~non-accrual ~~individual~~status ~~loan~~and recognized a cumulative-effect inadjustment ~~which~~with a ~~real~~net ~~estate~~increase ~~market~~to ~~decline~~partners’ incapital ~~values~~of ~~(likely~~$168 tothousand, ~~occur)~~consisting ~~would~~of bean ~~sufficient~~increase to ~~offset~~ the ~~substantial~~allowance ~~protective~~for ~~equity~~credit inlosses ~~the~~of $65 thousand to recognize lifetime expected credit losses for secured~~-loan~~ ~~portfolio~~loans ~~(and~~at inDecember 31, 2022, and the ~~individual~~recognition ~~loans)~~of ~~sufficient~~$233 tothousand ~~put~~of previously foregone interest for loans designated non-accrual at ~~risk~~December ~~collection~~31, 2022. The limited number of ~~amounts~~loans ~~owed~~and ~~under~~the short terms for which the ~~notes,~~loans ~~secured~~are written enabled the manager to do a loan-by-loan analysis to determine the ~~deeds~~risk of ~~trust~~loss. InBeginning ~~arriving~~in at2023, the ~~determination,~~analysis ~~the~~is ~~manager~~updated ~~consulted~~quarterly awith ~~range~~any ofchange ~~banking/industry~~to ~~and~~the ~~academic~~expected ~~studies~~credit ~~and~~losses ~~forecasts~~recognized in the period.

InThere ~~performing~~is ~~the~~no ~~analysis,~~future ~~the~~period ~~manager~~covered ~~considered the vintages~~ in ~~which~~ the ~~secured~~analysis ~~loans~~– ~~originated.~~nor ~~The~~is ~~ultimate~~there ~~collectability~~any ofindividual ~~the~~loan ~~amounts~~– ~~owed~~in iswhich ~~reliant~~a onreal ~~the~~estate ~~estimation~~market ofdecline ~~the~~in ~~fair~~values ~~value~~(likely ofto ~~the~~occur) ~~real~~would ~~property~~be ~~collateral~~sufficient ~~securing~~to offset the ~~loans. Such~~substantial ~~estimation~~protective isequity ~~not~~in ~~variant~~the bysecured-loan ~~vintage.~~portfolio ~~Further~~(and ~~there~~in isthe noindividual ~~evidence,~~loans) ~~nor~~sufficient ~~any~~to ~~indication~~put inat ~~the~~risk ~~analysis,~~collection ~~that the ultimate collectability~~ of ~~the~~ amounts owed ~~fluctuates~~under ~~with~~ the ~~time~~notes, onsecured ~~file~~by orthe ~~vintage~~deeds of trust. ~~Such~~In ~~considerations~~arriving ~~are~~at ~~consistent~~the ~~with~~determination, the ~~‘no-credit-losses’~~manager ~~experience~~consulted ofa ~~the~~range ~~partnership~~of ~~over~~banking/industry ~~the~~and ~~preceding~~academic 5+studies ~~years~~and forecasts.

In performing the analysis, the manager considered the vintages in which the secured loans originated. The ultimate collectability of the amounts owed is reliant on the estimation of the current fair value of the real property collateral and the time to maturity. Further there is no evidence, nor any indication in the analysis, that the ultimate collectability of the amounts owed fluctuates with the time on file or vintage. Such considerations are consistent with the ‘no-credit-losses’ experience of the partnership over the preceding 5+ years.

Loans on non-accrual status

Loans are placed on non-accrual status if management determines that the primary source of repayment will come from the foreclosure and subsequent sale of the collateral securing the loan (i.e., a notice of sale is filed and/or when the borrower files for bankruptcy) or when the loan is no longer considered well-secured (i.e., the LTV for the loan based on the estimated net realizable value of the collateral and the total owing of principal, advances and accrued interest (at the note rate) is at or greater than eighty percent (80%), seventy-five percent (75%) for lands outside of metropolitan areas).

In periods prior to January 1, 2023, loans were placed on non-accrual status if 180 days delinquent or earlier if management determined that the primary source of repayment would come from the foreclosure and subsequent sale of the collateral securing the loan (which usually occurs when a notice of sale is filed) or when the loan was no longer considered well-secured.

There were no other material changes to our critical accounting policies since our annual report on Form 10-K.

2931

Results of Operations

The following discussion describes our results of operations for the three and six months ended ~~March~~June 3130, 2023.

Key performance indicators

Key performance indicators as of and for the ~~three~~six months ended ~~March~~June ~~31,~~30 ~~2023 and 2022~~ are presented in the following table ($ in thousands).

	2023			2022
Limited partners’ capital – end of period	$	5552,~~090~~691		$	6663,~~348~~206
Limited partners’ capital – average balance	$	5655,~~353~~132		$	6766,~~952~~370
Limited partners’ capital – withdrawals(1)	$	24,~~551~~772		$	36,~~245~~586
Secured loans principal – end of period balance	$	57,~~979~~292		$	5763,~~205~~056
Secured loans principal – average daily balance	$	58,~~942~~411		$	6061,~~785~~281
Number of first trust deeds		1413			2328
Principal – first trust deeds	$	5554,~~230~~544		$	4261,~~398~~112
Weighted average LTV – first trust deeds(2)		54.79	%		6257.78	%
Number of second trust deeds		2			51
Principal – second trust deeds	$	2,~~749~~748		$	141,~~807~~944
Weighted average LTV – second trust deeds(2)		50.5	%		5360.97	%
Interest income	$	12,~~268~~572		$	12,~~320~~606
Portfolio interest rate(3)		8.67	%		8.6	%
Effective yield rate(4)		8.68	%		8.75	%
Line of credit – end of period	$	109,~~000~~100		$	910,~~800~~000
Line of credit – average daily balance(5)	$	109,~~000~~995		$	36,~~758~~882
Mortgages payable – end of period	$	1,~~347~~319		$	1,453
Mortgages payable – average daily balance (6)	$	1,347		$	1,453
Average interest rate – line of credit		7.8.0	%		5.0	%
Interest expense
Line of credit	$	~~201~~416		$	60196
Mortgages payable	$	1428		$	1530
Provision for (recovery of) loan losses	$	—		$	—
Operations expense	$	~~990~~2,116		$	~~899~~1,645
Net income	$	6618		$	~~350~~842
Percent(7)(8)		0.51	%		2.05	%

(1)

~~Scheduled~~Effective as of the Dissolution Date, all scheduled withdrawals of limited partner capital asterminated in favor of ~~March~~quarterly ~~31,~~pro ~~2023~~rata ~~were~~withdrawals ~~approximately~~to ~~$12.5~~all ~~million~~limited ~~(approximately~~partners ~~$20.5~~of ~~million~~cash asreceived from the liquidation of ~~December~~partnership ~~31,~~assets ~~2022)~~and available to fund capital distributions.

(2)

The LTVs use the appraisals at origination of the loans.

(3)

Stated note interest rate, weighted daily average (annualized)

(4)

Percent secured loans principal – average daily balance (annualized)

(5)

See Note 7 (Line of Credit) to the consolidated financial statements included in Part I, Item 1 of this report on Form 10-Q for a presentation of the activity and discussion of the terms and conditions of the ~~loan~~credit agreement of 2022.

(6)

In June 2020, the partnership acquired by foreclosure sale two adjoining properties subject to two first mortgages. See Note 5 (Real Estate Owned (REO) and Mortgages Payable) to the consolidated financial statements included in Part I, Item 1 of this report on Form 10-Q for a presentation of the activity and of the terms and conditions of the mortgages payable.

(7)

Percent of limited partners’ capital – average balance (annualized)

(8)

Percent based on the net income available to limited partners (excluding 1% of income and losses allocated to general partners)

3032

Key performance indicators as of and for the three months ended June 30 are presented in the following table ($ in thousands).


	2023			2022
Limited partners’ capital – end of period	$	52,691		$	63,206
Limited partners’ capital – average balance	$	53,891		$	64,777

Limited partners’ capital – withdrawals(1)	$	2,221		$	3,341

Secured loans principal – end of period balance	$	57,292		$	63,056
Secured loans principal – average daily balance	$	57,885		$	61,772

Number of first trust deeds		13			28
Principal – first trust deeds	$	54,544		$	61,112
Weighted average LTV – first trust deeds(2)		54.9	%		57.8	%

Number of second trust deeds		2			1
Principal – second trust deeds	$	2,748		$	1,944
Weighted average LTV – second trust deeds(2)		50.5	%		60.7	%

Interest income	$	1,304		$	1,286
Portfolio interest rate(3)		8.8	%		8.5	%
Effective yield rate(4)		9.0	%		8.3	%

Line of credit – end of period	$	9,100		$	10,000
Line of credit – average daily balance(5)	$	9,990		$	9,971

Mortgages payable – end of period	$	1,319		$	1,453
Mortgages payable – average daily balance (6)	$	1,347		$	1,453

Average interest rate – line of credit		8.2	%		5.0	%
Interest expense
Line of credit	$	215		$	136
Mortgages payable	$	14		$	15

Provision for (recovery of) loan losses	$	—		$	—

Operations expense	$	1,126		$	746

Net income	$	(48	)	$	492
Percent(7)(8)		-0.4	%		3.0	%

(1)

Effective as of the Dissolution Date, all scheduled withdrawals of limited partner capital terminated in favor of quarterly pro rata withdrawals to all limited partners of cash received from the liquidation of partnership assets and available to fund capital distributions.

(2)

The LTVs use the appraisals at origination of the loans.

(3)

Stated note interest rate, weighted daily average (annualized)

(4)

Percent secured loans principal – average daily balance (annualized)

(5)

(6)

(7)

Percent of limited partners’ capital – average balance (annualized)

(8)

Percent based on the net income available to limited partners (excluding 1% of income and losses allocated to general partners)

Limited partners’ capital and limited partners’ capital – withdrawals

Limited partners’ capital and capital available to lend are declining due to partner withdrawals exceeding the net income retained in limited partners’ capital accounts. Limited partners’ capital declined approximately $2.74 million and $5.1 million in the three and six months ended ~~March~~June 3130, 2023., respectively.

Withdrawals of limited partners’ capital for the three and six months ended ~~March~~June 3130, 2023 and 2022 are presented in the following table ($ in thousands).

Withdrawals	2023			2022
	Three Months Ended June 30,						Six Months Ended June 30,
Without penalty	$	2,170		$	2,890
Withdrawals	2023			2022			2023			2022
With penalty		381			355
Without penalty	$	2,113		$	2,952		$	4,283		$	5,842
Total	$	2,551		$	3,245
With penalty		108			389			489			744
Scheduled, at March 31,	$	12,485		$	20,487
Total	$	2,221		$	3,341		$	4,772		$	6,586
Percentage of scheduled withdrawals in end of period capital		22.7	%		30.9	%
Scheduled, at June 30,	$	11,311		$	18,201		$	11,311		$	18,201
Percentage of scheduled withdrawals in end of period capital		21.5	%		28.8	%		21.5	%		28.8	%

~~Scheduled~~Effective ~~withdrawals~~as of the Dissolution Date: (i) all limited partners, including limited partners who previously elected not to receive periodic distributions of partnership net income under the Partnership Agreement, will begin receiving quarterly distributions of the partnership’s net income (if any); and (ii) all scheduled withdrawals of limited partner capital made pursuant to the Partnership Agreement terminated in ~~periods~~favor asof quarterly pro rata withdrawals to all limited partners of ~~and~~cash ~~after~~received ~~March~~from ~~31,~~the ~~2023~~liquidation ~~are~~of ~~presented~~partnership assets and available to fund capital in accordance with the ~~following~~distribution ~~table~~provisions ($set forth in ~~thousands)~~the Plan.

2023	$	5,189
2024		4,083
2025		1,934
2026		952
2027		299
Thereafter		28
Total	$	12,485

Of the scheduled withdrawals of approximately $12.5 million, approximately $131 thousand are subject to early withdrawal penalties

as of March 31, 2023.

Secured loans

We have sought to exercise strong discipline in underwriting loan applications and lending against collateral at amounts that create a mortgage portfolio that has substantial protective equity (i.e., property value to outstanding debt) as indicated by our overall conservative weighted-average loan-to-value ratio (LTV) at time of origination which at ~~March~~June 3130, 2023 was 54.57%. Thus, based on the appraisal-based valuations at the time of loan inception, borrowers have, in the aggregate, equity of 45.53% in the property, and we as lenders have loaned in the aggregate 54.57% (including other senior liens on the property, for other than first-lien loans) against the properties we hold as collateral for the repayment of our loans.

Secured loans, principal by LTV and lien position at ~~March~~June 3130, 2023 are presented in the following table ($ in thousands). The LTVs shown in this table are updated for any appraisals ordered and received by the manager after origination of the loan.

	Secured loans, principal
LTV(1)	First trustdeeds		Percent			Second trustdeeds		Percent			Totalprincipal		Percent
<40%	$	13,~~019~~002		22.57	%	$	1,500		2.6	%	$	14,~~519~~502		25.13	%
40-49%		~~664~~—		10.10			—		0.0			~~664~~—		10.10
50-59%		7,~~115~~113		12.34			—		0.0			7,~~115~~113		12.34
60-69%		2218,~~597~~874		3932.09			1,~~249~~248		2.12			2320,~~846~~122		4135.1
Subtotal <70%		4338,~~395~~989		7468.90			2,~~749~~748		4.78			4641,~~144~~737		7972.68
70-79%		1115,~~835~~555		2027.42			—		0.0			1115,~~835~~555		2027.42
Subtotal <80%		5554,~~230~~544		95.32			2,~~749~~748		4.78			57,~~979~~292		100.0
≥80%		—		0.0			—		0.0			—		0.0
Total	$	5554,~~230~~544		95.32	%	$	2,~~749~~748		4.78	%	$	57,~~979~~292		100.0	%

(1)

LTV classifications in the table above are based on principal, advances and interest unpaid at ~~March~~June 3130, 2023.

3134

Loans with payments in arrears, principal by LTV and lien position at ~~March~~June 3130, 2023 are presented in the following table ($ in thousands). The LTVs shown in this table are updated for any appraisals ordered and received by the manager after origination of the loan.

	Secured loans with payments in arrears, principal
LTV(2)	First trustdeeds		Percent(3)			Second trustdeeds		Percent(3)			Total Principal		Percent(3)
<40%	$	—		0.0	%	$	—		0.0	%	$	—		0.0	%
40-49%		—		0.0			—		0.0			—		0.0
50-59%		~~3,565~~—		60.10			—		0.0			~~3,565~~—		60.10
60-69%		117,~~710~~990		2013.29			—		0.0			117,~~710~~990		2013.29
Subtotal <70%		157,~~275~~990		2613.39			—		0.0			157,~~275~~990		2613.39
70-79%		212,~~105~~125		321.62			—		0.0			212,~~105~~125		321.62
Subtotal <80%		1720,~~380~~115		2935.91			—		0.0			1720,~~380~~115		2935.91
≥80%		—		0.0			—		0.0			—		0.0
Total	$	1720,~~380~~115		2935.91	%	$	—		0.0	%	$	1720,~~380~~115		2935.91	%

(2)

LTV classifications in the table above are based on principal, advances and interest unpaid at ~~March~~June 3130, 2023.

(3)

Percent of secured loan principal, end of period balance.

Payments in arrears for non-performing secured loans (i.e., principal and interest payments past due 30 or more days) at ~~March~~June 3130, 2023, totaled approximately $519.30 million of which $418.70 million was principal, and approximately $~~661~~1.0 ~~thousand~~million was accrued interest. Almost the entire principal in arrears was loans past maturity, all of which were in first lien position.

See Note 4 (Loans) to the consolidated financial statements included in Part I, Item 1 of this report for detail of the secured loan portfolio, including loan characteristics, scheduled maturities, delinquency and payments in arrears, loans in non-accrual status and the allowance for credit losses.

Performance overview/net income 2023 v. 2022

Net income available to limited partners as a percent of limited partners’ capital – average ~~daily~~ balance (annualized) was 0.51% and 2.05% for the ~~three~~six months ended ~~March~~June 3130, 2023 and 2022, respectively. Net income decreased approximately $~~284~~824 thousand (8197.19%) for the ~~three~~six months ended ~~March~~June 3130, 2023 as compared to the same period in 2022, primarily due to an increase in operations expense of approximately $471 thousand (28.6%) mostly attributable to the Dissolution Consent Solicitation, the reduction in net interest income of approximately $~~192~~252 thousand (1510.46%) and ana ~~increase~~decrease in ~~operations~~late ~~expense~~fees and gain on sale of ~~approximately~~loans of $91101 thousand (1094.14%).

3235

Analysis and discussion of income from operations 2023 v. 2022 (six months ended)

Significant changes to net income for the six months ended June 30, 2023 compared to the same period in 2022 are summarized in the following table ($ in thousands).


				Provision for
	Net interest			(recovery of)		Operations			Net
	income			loan losses		expense			income
Six months ended
June 30, 2023	$	2,128		$	—	$	2,116		$	18
June 30, 2022		2,380			—		1,645			842
Change	$	(252	)	$	—	$	471		$	(824	)

Change
Decrease secured loans principal - average daily balance		(127	)		—		(22	)		(105	)
Effective yield rate		92			—		—			92
Amortization of debt issuance costs		7			—		—			7
Interest on line of credit and promissory note from related party		(226	)		—		—			(226	)
Interest on mortgages payable assumed at foreclosure		2			—		—			2
Decrease limited partners' capital - average balance		—			—		(47	)		47
Increase in allocable expenses from the manager		—			—		32			(32	)
Legal, audit and consulting		—			—		385			(385	)
Timing of services rendered		—			—		70			(70	)
REO holding costs		—			—		(10	)		10
Late fees		—			—		—			(20	)
Gain on sale, loans		—			—		—			(81	)
Other		—			—		63			(63	)
Change	$	(252	)	$	—	$	471		$	(824	)

The table above displays only significant changes to net income for the period and is not intended to cross foot.

Net interest income

Net interest income decreased approximately $252 thousand (10.6%) for the six months ended June 30, 2023 compared to the same period in 2022. The decrease in net interest income is due primarily to (i) an increase in interest expense due to an increase in the line of credit – average daily balance and a rapid increase in interest rates and (ii) a decrease in interest income of approximately $34 thousand (1.3%) resulting from the decrease in the secured loans principal – average daily balance of approximately $2.9 million (4.7%). The line of credit – average daily balance increased approximately $3.1 million (44.9%) for the six months ended June 30, 2023 compared to the same period in 2022, and the average interest rate on the line of credit increased 3.0 percent (60.8%) over the same period, resulting in an increase of approximately $230 thousand (133.7%) in interest expenses on the line of credit. See Key performance indicators table included above in Item 2 of this report for specific details of average interest rate on the line of credit.

Provision (recovery)/allowance for credit losses

In conjunction with the adoption of ASC 326 (CECL), the partnership recognized a cumulative-effect adjustment to partners’ capital of $65 thousand to recognize lifetime expected credit losses for secured loans at December 31, 2022. The limited number of loan and the short terms for which the loans are written enabled the manager to do a loan-by-loan analysis to determine the risk of loss. Beginning in 2023, the analysis is updated quarterly with any change to the expected credit losses recognized in the period. The analysis included projecting the outstanding principal for loans – individually and in total, by lien position – until maturity to determine the count, amount and weighted average LTV of the loans for future quarter and year ends.

See Note 4 (Loans) to the consolidated financial statements included in Part I, Item 1 of this report for a detailed presentation of allowance for credit losses.

Operations expense

Significant changes to operations expense for the six months ended June 30, 2023 compared to the same period in 2022 are summarized in the following table ($ in thousands).


	Mortgage			Asset			Costs					Dissolution
	servicing			management			from			Professional		Consent		REO,
	fees			fees			RMC			services		expense		net			Other			Total
Six months ended
June 30, 2023	$	438			106			345			729		353		132			13		$	2,116
June 30, 2022		460			127			339			558		—		142			19			1,645
Change	$	(22	)		(21	)		6			171		353		(10	)		(6	)	$	471

Change
Decrease secured loans principal - average daily balance		(22	)		—			—			—		—		—			—			(22	)
Decrease limited partners' capital - average balance		—			(21	)		(26	)		—		—		—			—			(47	)
Increase in allocable expenses from the manager		—			—			32			—		—		—			—			32
Legal, audit and consulting		—			—			—			78		307		—			—			385
Timing of services rendered		—			—			—			70		—		—			—			70
REO holding costs		—			—			—			—		—		(10	)		—			(10	)
Other		—			—			—			23		46		—			(6	)		63
Change	$	(22	)		(21	)		6			171		353		(10	)		(6	)	$	471

Mortgage servicing fees

The decrease in mortgage servicing fees of approximately $22 thousand for the six months ended June 30, 2023 as compared to the same period in 2022, was due to a decrease in the secured loans principal – average daily balance to approximately $58.4 million from approximately $61.3 million. Fees are charged by RMC at the annual rate of 1.5%.

Asset management fees

For the management of the partnership’s loan portfolio, the general partners are entitled to an Asset Management Fee in an amount up to 1/32 of 1% of the “net asset value” of the partnership (3/8 of 1% annually). The decrease in asset management fees for the six months ended June 30, 2023, as compared to the same period in 2022, was due to the decrease in limited partners’ capital – average balance to approximately $55.1 million from $66.4 million.

Costs from RMC

RMC is entitled to request reimbursement for operations expense incurred on behalf of RMI VIII, including without limitation, RMC’s personnel and non-personnel costs incurred for qualifying business activities, including investor services, accounting, tax and data processing, postage and out-of-pocket general and administration expenses. The increase in costs from RMC of approximately $6 thousand for the six months ended June 30, 2023 as compared to the same period in 2022 was due to an increase in allocable payroll and professional services of approximately $32 thousand, which was offset by a reduction of the partnership’s limited partners’ capital as a percent of the total capital of the related mortgaged funds managed by RMC of approximately $26 thousand.

Professional services

Professional services consist primarily of information technology, legal, audit and tax compliance, and consulting expenses.

The increase in professional services of approximately $171 thousand for the six months ended June 30, 2023 compared to the same period in 2022 was due to timing differences of services rendered and an increase in legal, audit and consulting fees due to increased activities related to CECL adoption.

Dissolution Consent Solicitation

On May 19, 2023, the partnership filed a Consent Solicitation Statement pursuant to Section 14(a) of the Securities Exchange Act of 1934 with the SEC in connection with the Dissolution Consent Solicitation.

The expense related to the Dissolution Consent Solicitation was approximately $353 thousand in the six months ended June 30, 2023. On August 4, 2023, the partnership entered into the Plan of Dissolution following the receipt of required consents of limited partners approving the Dissolution and the Plan of Dissolution. Costs related to the Dissolution Consent Solicitation for July 2023 totaled approximately $65 thousand.

REO, net

The REO balance was approximately $5.9 million and $8.3 million at June 30, 2023 and 2022, respectively. There were no REO acquisitions in the six months ended June 30, 2023 and 2022.

The decrease in holding costs, net of other income when comparing the six months ended June 30, 2023 to the six months ended June 30, 2022 is due to a decrease in REO operating expenses of approximately $10 thousand due to the sale of REO in Stanislaus and San Francisco County during 2022. Holding costs, net of other income includes month-to-month rents received of approximately $3 thousand and $9 thousand for the six months ended June 30, 2023 and 2022, respectively for the unit-storage lockers and signage in San Francisco County.

See Note 5 (Real Estate Owned (REO) and Mortgages Payable) to the consolidated financial statements included in Part I, Item 1 of this report for detailed presentations of REO activity during the period.

Analysis and discussion of income from operations 2023 v. 2022 (three months ended)

Significant changes to net income for the three months ended ~~March~~June 3130, 2023 compared to the same period in 2022 are summarized in the following table ($ in thousands).

				Provision for
	Net interest			(recovery of)		Operations			Net
	income			credit losses		expense			income
Three months ended
March 31, 2023	$	1,053			—		990		$	66
June 30, 2023	$	1,075			—		1,126		$	(48	)
March 31, 2022		1,245			—		899			350
June 30, 2022		1,135			—		746			492
Change	$	(~~192~~60	)		—		91380		$	(~~284~~540	)
Change
Decrease secured loans principal - average daily balance		(4087	)		—		(220	)		(3867	)
Effective yield rate		~~(13~~105	)		—		—			~~(13~~105	)
Amortization of debt issuance costs		7			—		—			7
Interest on line of credit and promissory note from related party		(79	)		—		—			(79	)
Interest on line of credit		(147	)		—		—			(147	)
Interest on mortgages payable assumed at foreclosure		1			—		—			1
Decrease limited partners' capital - average balance		—			—		(2522	)		2522
Increase in allocable expenses from the manager		—			—		1715			(1715	)
Legal, audit and consulting		—			—		78307			(78307	)
Timing of services rendered		—			—		2149			(2149	)
REO sales, net		—			—		—			—
REO holding costs		—			—		20			(20	)
REO holding costs		—			—		(30	)		30
Late fees		—			—		—			(19	)
Late fees		—			—		—			(1	)
Gain on sale, loans		—			—		—			(81	)
Other		—			—		3231			(3231	)
Change	$	(~~192~~60	)		—		91380		$	(~~284~~540	)

The table above displays only significant changes to net income for the period and is not intended to cross foot.

Net interest income

Net interest income decreased approximately $~~192~~60 thousand (155.43%) for the three months ended ~~March~~June 3130, 2023 compared to the same period in 2022. The decrease in net interest income is due ~~primarily~~ to ~~(i)~~ an increase in interest expense due to an increase in the line of credit – average daily balance and a rapid increase in interest rates, offset ~~in part~~ by aan ~~decrease~~increase in ~~amortized debt issuance costs and (ii) due to a decrease in~~ interest income of approximately $5218 thousand (~~3.9%) resulting from the decrease in the secured loans principal – average daily balance of approximately $~~1.~~8 million (3~~4%). The line of credit -– average daily balance increased approximately $~~6.2~~19 ~~million~~thousand (~~163~~0.162%) for the three months ended ~~March~~June 3130, 2023 compared to the same period in 2022, and the average interest rate on the line of credit increased 23.832 percent (5664.6%) over the same period, resulting in an increase of approximately $~~147~~82 thousand (~~312~~65.81%) in interest expenses on the line of credit. See Key performance indicators table included above in Item 2 of this report for specific details of average interest rate on the line of credit.

Provision (recovery)/allowance for credit losses

In conjunction with the adoption of ASC 326 (CECL), the partnership recognized a cumulative-effect adjustment to partners’ capital of $65 thousand to recognize lifetime expected credit losses for secured loans at December 31, 2022. The limited number of loans ~~(16) – aided by the fact that four (4) of the loans comprise a significant portion of loan principal (approximately $31 million of the $55 million of loan principal)~~ and the short terms for which the loans are written - enabled the manager to do a loan-by-loan analysis to determine the risk of loss. Beginning in 2023, the analysis is updated quarterly with any change to the expected credit losses recognized in the period. The analysis included projecting the outstanding principal for loans – individually and in total, by lien position – until maturity to determine the count, amount and weighted average LTV of the loans for future quarter and year ends.

See Note 4 (Loans) to the consolidated financial statements included in Part I, Item 1 of this report for a detailed presentation of allowance for credit losses.

Operations expense

Significant changes to operations expense for the three months ended ~~March~~June 3130, 2023 compared to the same period in 2022 are summarized in the following table ($ in thousands).

Mortgage

Asset

Costs

Dissolution

servicing

management

from

Professional

Filing Compare · REDWOOD MORTGAGE INVESTORS VIII