Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2017 | Nov. 02, 2017 | |
Document And Entity Information | ||
Entity Registrant Name | Shepherd's Finance, LLC | |
Entity Central Index Key | 1,544,190 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 0 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,017 |
Interim Condensed Consolidated
Interim Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Assets | ||
Cash and cash equivalents | $ 2,471 | $ 1,566 |
Accrued interest receivable | 435 | 280 |
Loans receivable, net | 29,626 | 20,091 |
Foreclosed assets | 1,079 | 2,798 |
Property, plant and equipment | 767 | 69 |
Other assets | 125 | 82 |
Total assets | 34,503 | 24,886 |
Liabilities | ||
Customer interest escrow | 851 | 812 |
Accounts payable and accrued expenses | 462 | 377 |
Accrued interest payable | 1,117 | 986 |
Notes payable secured | 12,168 | 7,322 |
Notes payable unsecured, net of deferred financing costs | 14,993 | 11,962 |
Due to preferred equity member | 29 | 28 |
Total liabilities | 29,620 | 21,487 |
Commitments and Contingencies (Notes 3 and 10) | ||
Redeemable Preferred Equity | ||
Series C preferred equity | 1,065 | |
Members' Capital | ||
Series B preferred equity | 1,220 | 1,150 |
Class A common equity | 2,598 | 2,249 |
Members' capital | 3,818 | 3,399 |
Total liabilities, redeemable preferred equity and members' capital | $ 34,503 | $ 24,886 |
Interim Condensed Consolidated3
Interim Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Interest Income | ||||
Interest and fee income on loans | $ 1,673 | $ 909 | $ 4,203 | $ 2,656 |
Interest expense: | ||||
Interest related to secured borrowings | 324 | 148 | 718 | 409 |
Interest related to unsecured borrowings | 424 | 315 | 1,192 | 852 |
Interest expense | 748 | 463 | 1,910 | 1,261 |
Net interest income | 925 | 446 | 2,293 | 1,395 |
Less: Loan loss provision | 8 | 4 | 34 | 10 |
Net interest income after loan loss provision | 917 | 442 | 2,259 | 1,385 |
Non-Interest Income | ||||
Gain from foreclosure of assets | 44 | |||
Gain from sale of foreclosed assets | 77 | |||
Total non-interest income | 77 | 44 | ||
Income | 917 | 442 | 2,336 | 1,429 |
Non-Interest Expense | ||||
Selling, general and administrative | 537 | 297 | 1,447 | 952 |
Impairment loss on foreclosed assets | 47 | 202 | ||
Total non-interest expense | 584 | 297 | 1,649 | 952 |
Net Income | 333 | 145 | 687 | 477 |
Earned distribution to preferred equity holders | 61 | 27 | 149 | 79 |
Net income attributable to common equity holders | $ 272 | $ 118 | $ 538 | $ 398 |
Interim Condensed Consolidated4
Interim Condensed Consolidated Statements of Changes in Members' Capital (Unaudited) $ in Thousands | 9 Months Ended |
Sep. 30, 2017USD ($) | |
Statement of Stockholders' Equity [Abstract] | |
Members' capital, beginning balance | $ 3,399 |
Net income | 687 |
Contributions from members (preferred) | 70 |
Earned distributions to preferred equity holders | (149) |
Distributions to common equity holders | (189) |
Members' capital, ending balance | $ 3,818 |
Interim Condensed Consolidated5
Interim Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Cash flows from operations | ||
Net income | $ 687 | $ 477 |
Adjustments to reconcile net income to net cash provided by (used in) operating activities | ||
Amortization of deferred financing costs | 165 | 204 |
Provision for loan losses | 34 | 10 |
Net loan origination fees deferred (earned) | 120 | (133) |
Change in deferred origination expense | (26) | (30) |
Impairment of foreclosed assets | 202 | |
Gain from foreclosure of assets | (44) | |
Gain from sale of foreclosed assets | (77) | |
Net change in operating assets and liabilities | ||
Other assets | (43) | (75) |
Accrued interest receivable | (155) | (192) |
Customer interest escrow | 39 | (109) |
Accounts payable and accrued expenses | 217 | 626 |
Net cash provided by operating activities | 1,163 | 734 |
Cash flows from investing activities | ||
Loan originations and principal collections, net | (9,663) | (5,091) |
Investment in foreclosed assets | (296) | (459) |
Proceeds from sale of foreclosed assets | 1,890 | |
Property plant and equipment additions | (698) | |
Net cash provided by (used in) investing activities | (8,767) | (5,550) |
Cash flows from financing activities | ||
Contributions from redeemable preferred equity | 1,004 | |
Contributions from members (preferred) | 70 | 90 |
Distributions to preferred equity holders | (88) | (78) |
Distributions to common equity holders | (189) | (355) |
Proceeds from secured note payable | 11,760 | 6,544 |
Repayments of secured note payable | (6,914) | (4,405) |
Proceeds from unsecured notes payable | 9,412 | 3,629 |
Redemptions/repayments of unsecured notes payable | (6,481) | (1,336) |
Deferred financing costs paid | (65) | (53) |
Net cash provided by financing activities | 8,509 | 4,036 |
Net increase (decrease) in cash and cash equivalents | 905 | (780) |
Cash and cash equivalents | ||
Beginning of period | 1,566 | 1,341 |
End of period | 2,471 | 561 |
Supplemental disclosure of cash flow information | ||
Cash paid for interest | 1,616 | 671 |
Non-cash investing and financing activities | ||
Earned but not paid distribution of preferred equity holders | 29 | 27 |
Foreclosure of assets | 1,813 | |
Accrued interest reduction due to foreclosure | 130 | |
Net loan origination fees (earned) due to foreclosure | $ (55) |
Description of Business and Bas
Description of Business and Basis of Presentation | 9 Months Ended |
Sep. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Description of Business and Basis of Presentation | 1. Description of Business and Basis of Presentation Description of Business Description of Business Shepherd’s Finance, LLC and subsidiary (the “Company”, “we”, or “our”) was originally formed as a Pennsylvania limited liability company on May 10, 2007. We are the sole member of a consolidating subsidiary, 84 REPA, LLC. The Company operated pursuant to an operating agreement by and among Daniel M. Wallach and the members of the Company from its inception through March 29, 2012, at which time it adopted an amended and restated operating agreement. As of September 30, 2017, the Company extends commercial loans to residential homebuilders (in 16 states) to: ● construct single family homes, ● develop undeveloped land into residential building lots, and ● purchase and improve for sale older homes. Basis of Presentation The accompanying (a) condensed consolidated balance sheet as of December 31, 2016, which has been derived from audited consolidated financial statements, and (b) unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. While certain information and disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), management believes that the disclosures herein are adequate to make the unaudited interim condensed consolidated information presented not misleading. In the opinion of management, the unaudited interim condensed consolidated financial statements reflect all adjustments necessary for a fair presentation of the consolidated financial position, results of operations, and cash flows for the periods presented. Such adjustments are of a normal, recurring nature. The consolidated results of operations for any interim period are not necessarily indicative of results expected for the fiscal year ending December 31, 2017. These unaudited interim condensed consolidated financial statements should be read in conjunction with the 2016 consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K as of and for the year ended December 31, 2016 (the “2016 Statements”). The accounting policies followed by the Company are set forth in Note 2 - Summary of Significant Accounting Policies |
Fair Value
Fair Value | 9 Months Ended |
Sep. 30, 2017 | |
Fair Value Disclosures [Abstract] | |
Fair Value | 2. Fair Value There has been no change in our fair value policy during 2017. The following tables present the balances of non-financial instruments measured at fair value on a non-recurring basis as of September 30, 2017 and December 31, 2016. September 30, 2017 Quoted Prices in Active Markets Significant for Other Significant Identical Observable Unobservable Carrying Estimated Assets Inputs Inputs Amount Fair Value Level 1 Level 2 Level 3 Foreclosed assets $ 1,079 $ 1,079 $ – $ – $ 1,079 December 31, 2016 Quoted Prices in Active Markets for Significant Other Significant Identical Observable Unobservable Carrying Estimated Assets Inputs Inputs Amount Fair Value Level 1 Level 2 Level 3 Foreclosed assets $ 2,798 $ 2,798 $ – $ – $ 2,798 The table below is a summary of fair value estimates for financial instruments and the level of the fair value hierarchy within which the fair value measurements are categorized at the periods indicated: September 30, 2017 Quoted Prices in Active Markets for Significant Other Significant Identical Observable Unobservable Carrying Estimated Assets Inputs Inputs Amount Fair Value Level 1 Level 2 Level 3 Financial Assets Cash and cash equivalents $ 2,471 $ 2,471 $ 2,471 $ – $ – Loans receivable, net 29,626 29,626 – – 29,626 Accrued interest receivable 435 435 – – 435 Financial Liabilities Customer interest escrow 851 851 – – 851 Notes payable secured 12,168 12,168 – – 12,168 Notes payable unsecured, net 14,993 14,993 – – 14,993 Accrued interest payable 1,117 1,117 – – 1,117 December 31, 2016 Quoted Prices in Active Markets for Significant Other Significant Identical Observable Unobservable Carrying Estimated Assets Inputs Inputs Amount Fair Value Level 1 Level 2 Level 3 Financial Assets Cash and cash equivalents $ 1,566 $ 1,566 $ 1,566 $ – $ – Loans receivable, net 20,091 20,091 – – 20,091 Accrued interest receivable 280 280 – – 280 Financial Liabilities Customer interest escrow 812 812 – – 812 Notes payable secured 7,322 7,322 – – 7,322 Notes payable unsecured, net 11,962 11,962 – – 11,962 Accrued interest payable 993 993 – – 993 |
Financing Receivables
Financing Receivables | 9 Months Ended |
Sep. 30, 2017 | |
Receivables [Abstract] | |
Financing Receivables | 3. Financing Receivables Financing receivables are comprised of the following as of September 30, 2017 and December 31, 2016: September 30, 2017 December 31, 2016 Loans receivable, gross $ 31,858 $ 21,569 Less: Deferred loan fees (738 ) (618 ) Less: Deposits (1,487 ) (861 ) Plus: Deferred origination expense 81 55 Less: Allowance for loan losses (88 ) (54 ) Loans receivable, net $ 29,626 $ 20,091 Commercial Construction and Development Loans Commercial Loans – Construction Loan Portfolio Summary As of September 30, 2017, we have 48 borrowers, all of whom, including our one development loan customer (the “Hoskins Group”), borrow money for the purpose of building new homes. The following is a summary of our loan portfolio to builders for home construction loans as of September 30, 2017 and December 31, 2016. Year Number of States Number of Borrowers Number of Loans Value of Collateral (1) Commitment Amount Gross Amount Outstanding Loan to Value Ratio (2) Loan Fee 2017 16 48 148 $ 71,305 $ 43,748 $ 28,404 61 % (3) 5 % 2016 15 30 69 46,187 27,141 17,487 59 % (3) 5 % (1) The value is determined by the appraised value. (2) The loan to value ratio is calculated by taking the commitment amount and dividing by the appraised value. (3) Represents the weighted average loan to value ratio of the loans. Commercial Loans – Real Estate Development Loan Portfolio Summary The following is a summary of our loan portfolio to builders for land development as of September 30, 2017 and December 31, 2016. These loans are referred to as the Pennsylvania Loans. Year State Number of Borrowers Number of Loans Value of Collateral (1) Commitment Amount Gross Amount Outstanding Loan to Value Ratio (2) Loan Fee 2017 Pennsylvania 1 3 $ 5,339 $ 4,600 (3) $ 3,454 65 % $ 1,000 2016 Pennsylvania 1 3 6,586 5,931 (3) 4,082 62 % 1,000 (1) The value is determined by the appraised value adjusted for remaining costs to be paid and third party mortgage balances. Part of this collateral is $1,220 in 2017 and $1,150 in 2016 of preferred equity in our Company. In the event of a foreclosure on the property securing these loans, the portion of our collateral that is preferred equity in our Company might be difficult to sell, which could impact our ability to eliminate the loan balance. (2) The loan to value ratio is calculated by taking the outstanding amount and dividing by the appraised value calculated as described above. (3) The commitment amount does not include letters of credit and cash bonds, as the sum of the total balance outstanding including the cash bonds plus the letters of credit and remaining to fund for construction is less than the $4,600 commitment amount. Credit Quality Information The following table presents credit-related information at the “class” level in accordance with Financial Accounting Standards Board Accounting Standards Codification 310-10-50, Disclosures about the Credit Quality of Finance Receivables and the Allowance for Credit Losses Gross finance Receivables – By risk rating: September 30, 2017 December 31, 2016 Pass $ 26,931 $ 18,275 Special mention 4,927 3,294 Classified – accruing – – Classified – nonaccrual – – Total $ 31,858 $ 21,569 Gross finance Receivables – Method of impairment calculation: September 30, 2017 December 31, 2016 Performing loans evaluated individually $ 9,367 $ 12,424 Performing loans evaluated collectively 22,491 9,145 Non-performing loans without a specific reserve – – Non-performing loans with a specific reserve – – Total $ 31,858 $ 21,569 At September 30, 2017 and December 31, 2016, there were no loans acquired with deteriorated credit quality. Concentrations Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of loans receivable. Our concentration risks for individual borrowers are summarized in the table below: September 30, 2017 December 31, 2016 Percent of Percent of Borrower Loan Borrower Loan City Commitments City Commitments Highest concentration risk Pittsburgh, PA 25 % Pittsburgh, PA 37 % Second highest concentration risk Sarasota, FL 7 % Sarasota, FL 11 % Third highest concentration risk Orlando, FL 5 % Savannah, GA 6 % |
Foreclosed Assets
Foreclosed Assets | 9 Months Ended |
Sep. 30, 2017 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Foreclosed Assets | 4. Foreclosed Assets Roll forward of foreclosed assets: Nine Months Ended Year Ended Nine Months Ended Beginning balance $ 2,798 $ 965 $ 965 Additions from loans – 1,813 1,813 Additions for construction/development 296 566 459 Sale proceeds (1,890 ) (463 ) – Gain on sale 77 28 – Impairment loss on foreclosed assets (202 ) (111 ) – Ending balance $ 1,079 $ 2,798 $ 3,237 |
Property, Plant, Equipment and
Property, Plant, Equipment and Long Lived Assets | 9 Months Ended |
Sep. 30, 2017 | |
Property, Plant and Equipment [Abstract] | |
Property, Plant, Equipment and Long Lived Assets | 5. Property, Plant, Equipment and Long Lived Assets In the first quarter of 2017, we purchased, for $625, a partially completed building. It is our intent to complete the building for operating purposes. As such, we invested $142 in related improvements to the building for the nine months ended September 30, 2017. No depreciation has been recorded as the building has not been placed in service. We are developing operations software and invested $41 in this project for the nine months ended September 30, 2017. We purchased loan document software in 2016 for $71. Total depreciation of that software has been $25, of which $19 has been recognized in 2017. |
Borrowings
Borrowings | 9 Months Ended |
Sep. 30, 2017 | |
Debt Disclosure [Abstract] | |
Borrowings | 6. Borrowings The following table displays our borrowings and a ranking of priority: Priority Rank September 30, 2017 December 31, 2016 Borrowing Source Purchase and sale agreements and other secured borrowings 1 $ 12,168 $ 7,322 Secured line of credit from affiliates 2 – – Unsecured line of credit (senior) 3 – – Other unsecured debt (senior subordinated) 4 279 279 Unsecured Notes through our public offering, gross 5 14,139 11,221 Other unsecured debt (subordinated) 5 713 700 Other unsecured debt (junior subordinated) 6 173 173 Total $ 27,472 $ 19,695 The following table shows the maturity of outstanding debt as of September 30, 2017. Year Maturing Total Amount Maturing Public Offering Other Unsecured Purchase and Sale Agreements and other secured borrowings 2017 $ 12,247 $ 79 $ – $ 12,168 2018 5,133 4,633 500 – 2019 3,754 3,641 113 – 2020 2,494 1,942 552 – 2021 3,844 3,844 – – Total $ 27,472 $ 14,139 $ 1,165 $ 12,168 Secured Borrowings Purchase and Sale Agreements In July 2017, we entered into the Sixth Amendment (the “Sixth Amendment”) to our Loan Purchase and Sale Agreement (the “Agreement”) with S.K. Funding, LLC (the “S.K. Funding”). The Agreement was originally entered into between the Company and Seven Kings Holdings, Inc. (“7Kings”). However, on or about May 7, 2015, 7Kings assigned its right and interest in the Agreement to S.K. Funding. The purpose of the Sixth Amendment was to allow S.K. Funding to purchase portions of the Pennsylvania Loans for a purchase price of $3,000 under parameters different from those specified in the Agreement. The Pennsylvania Loans purchased pursuant to the Sixth Amendment consist of a portion of the loans to the Hoskins Group. We will continue to service the loans. The timing of the Company’s principal and interest payments to S.K. Funding under the Sixth Amendment, and S.K. Funding’s obligation to fund the Pennsylvania Loans, vary depending on the total principal amount of the Pennsylvania Loans outstanding at any time. The Pennsylvania Loans had a principal amount in excess of $4,000 as of the effective date of the Sixth Amendment. While the total principal amount of the Pennsylvania Loans exceeds $1,000, S.K. Funding must fund (by paying the Company) the amount by which the total principal amount of the Pennsylvania Loans exceeds $1,000, with such total amount funded not exceeding $3,000. The interest rate accruing to S.K. Funding under the Sixth Amendment is 10.5% calculated on a 365/366 day basis. When the total principal amount of the Pennsylvania Loans is less than $4,000, the Company will also repay S.K. Funding’s principal as principal payments are received on the Pennsylvania Loans from the underlying borrowers in the amount by which the total principal amount of the Pennsylvania Loans is less than $4,000 until S.K. Funding’s principal has been repaid in full. S.K. Funding will continue to be obligated, as described in this paragraph, to fund (by paying the Company) the Pennsylvania Loans for any increases in the outstanding balance of the Pennsylvania Loans up to no more than a total outstanding amount of $4,000. The Sixth Amendment has a term of 24 months from the effective date and will automatically renew for additional six month terms unless either party gives written notice of its intent not to renew the Sixth Amendment at least six months prior to the end of a term. Further, no Protective Advances (as such term is defined in the Agreement) will be required with respect to the Pennsylvania Loans. S.K. Funding will have a priority position as compared to the Company in the case of a default by any of the borrowers. Line of Credit Also in July 2017, we entered into a line of credit agreement with a group of lenders (“Shuman”). The line is secured with assignments of certain notes and mortgages and carries a total cost of funds to us of 10%. The maximum amount we can draw on the line is $1,325, which was fully borrowed as of September 30, 2017. It is due in July 2018. Summary The secured borrowings are detailed below: September 30, 2017 December 31, 2016 Due From Due From Book Value of Shepherd’s Book Value of Shepherd’s Loans which Finance to Loan Loans which Finance to Loan Served as Collateral Purchaser or Lender Served as Collateral Purchaser or Lender Loan purchaser 1st Financial Bank, USA/Builder Finance, Inc. $ 9,482 $ 4,830 $ 5,779 $ 2,517 S.K. Funding, LLC 11,169 6,013 7,770 4,805 Shuman 2,147 1,325 – – Total $ 22,798 $ 12,168 $ 13,549 $ 7,322 Unsecured Borrowings Other Unsecured Loans In August 2015, we entered into an unsecured note with 7Kings, under which we are the borrower. The note has a maximum amount outstanding of $500, of which $500 was outstanding as of both September 30, 2017 and December 31, 2016. The note was due on February 19, 2016 and was renewed several times. The maturity date is now February 19, 2018 and may be prepaid at any time without penalty. This note is separate from the purchase and sale agreement with 7Kings mentioned above. In January 2017, we entered into an unsecured line of credit with Builder’s Finance, Inc., under which we are the borrower. The note has a maximum amount outstanding of $500, of which $0 was outstanding as of September 30, 2017. Interest on the loan accrues annually at a rate of 10%. The maturity date is January 28, 2018 and may be prepaid at any time without penalty. Unsecured Notes through the Public Offering (Notes Program) The effective interest rate on the notes offered pursuant to our public offering (“Notes”) at September 30, 2017 and December 31, 2016 was 9.15% and 8.26%, respectively, not including the amortization of deferred financing costs. There are limited rights of early redemption. The following table shows the roll forward of our Notes program: Nine Months 2017 Year Ended 2016 Nine Months 2016 Gross Notes outstanding, beginning of period $ 11,221 $ 8,496 $ 8,496 Notes issued 8,299 4,972 3,529 Note repayments / redemptions (5,381 ) (2,247 ) (1,336 ) Gross Notes outstanding, end of period $ 14,139 $ 11,221 $ 10,689 Less deferred financing costs, net 311 411 448 Notes outstanding, net $ 13,828 $ 10,810 $ 10,241 The following is a roll forward of deferred financing costs: Nine Months Year Nine Months Ended Ended Ended September 30, 2017 December 31, 2016 September 30, 2016 Deferred financing costs, beginning balance $ 1,014 $ 935 $ 935 Additions 65 79 53 Deferred financing costs, ending balance $ 1,079 $ 1,014 $ 988 Less accumulated amortization (768 ) (603 ) (540 ) Deferred financing costs, net $ 311 $ 411 $ 448 The following is a roll forward of the accumulated amortization of deferred financing costs: Nine Months Year Nine Months Ended Ended Ended September 30, 2017 December 31, 2016 September 30, 2016 Accumulated amortization, beginning balance $ 603 $ 336 $ 336 Additions 165 267 204 Accumulated amortization, ending balance $ 768 $ 603 $ 540 |
Redeemable Preferred Equity
Redeemable Preferred Equity | 9 Months Ended |
Sep. 30, 2017 | |
Equity [Abstract] | |
Redeemable Preferred Equity | 7. Redeemable Preferred Equity Series C cumulative preferred units (“Series C Preferred Units”) were issued to Margaret Rauscher IRA LLC (Margaret Rauscher is the wife of one of our independent managers, Eric A. Rauscher) in March 2017 and to an IRA owned by William Myrick, another one of our independent managers, in April 2017. They are redeemable by the Company at any time, upon a change of control or liquidation, or by the investor any time after 6 years from the initial date of purchase. The Series C Preferred Units have a fixed value which is their purchase price and preferred liquidation and distribution rights. Yearly distributions of 12% of the Series C Preferred Units’ value (provided profits are available) will be made quarterly. This rate can increase if any interest rate on our public Notes offering rises above 12%. Dividends can be reinvested monthly into additional Series C Preferred Units. Roll forward of redeemable preferred equity: Nine Months Ended 2017 Year Ended 2016 Nine Months Ended 2016 Beginning balance $ – $ – $ – Additions from new investment 1,004 – – Additions from reinvestment 61 – – Ending balance $ 1,065 $ – $ – The following table shows the earliest redemption options for investors in Series C Preferred Units as of September 30, 2017. Year Maturing Total Amount Redeemable 2023 $ 1,065 Total $ 1,065 |
Members' Capital
Members' Capital | 9 Months Ended |
Sep. 30, 2017 | |
Equity [Abstract] | |
Members' Capital | 8. Members’ Capital There are currently two classes of units outstanding: Class A common units and Series B cumulative preferred units (“Series B Preferred Units”). The Class A common units are held by eight members, all of whom have no personal liability. All Class A common members have voting rights in proportion to their capital account. There were 2,629 Class A common units outstanding at both September 30, 2017 and December 31, 2016. On December 31, 2015, an affiliate of 7Kings, S.K. Funding, purchased 4% of our common equity from the Wallach family. In March 2017, S.K. Funding sold its 4% interest in our common equity in equal 1% portions to each of our three independent managers and our Executive Vice President of Operations. The Series B Preferred Units were issued to the Hoskins Group through a reduction in a loan issued by the Hoskins Group to the Company. In December 2015, the Hoskins Group agreed to purchase 0.1 Series B Preferred Units for $10 at each closing of a lot to a third party in the Hamlets and Tuscany subdivision. As of September 30, 2017, the Hoskins Group owns a total of 12.2 Series B Preferred Units, which were issued for a total of $1,220. |
Related Party Transactions
Related Party Transactions | 9 Months Ended |
Sep. 30, 2017 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | 9. Related Party Transactions An IRA owned by the wife of Eric A. Rauscher, one of our independent managers, and an IRA owned by William Myrick, also one of our independent managers, each own Series C Preferred Units, as more fully described in Note 7. Each of our three independent managers and our Executive Vice President of Operations own 1% of our Class A common units. Our independent manager Kenneth Summers and his son are minor participants in the Shuman line of credit, which is more fully described in Note 6. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 10. Commitments and Contingencies Unfunded commitments to extend credit, which have similar collateral, credit risk and market risk to our outstanding loans, were $16,489 and $11,503 at September 30, 2017 and December 31, 2016, respectively. |
Selected Quarterly Condensed Co
Selected Quarterly Condensed Consolidated Financial Data (Unaudited) | 9 Months Ended |
Sep. 30, 2017 | |
Quarterly Financial Information Disclosure [Abstract] | |
Selected Quarterly Condensed Consolidated Financial Data (Unaudited) | 11. Selected Quarterly Condensed Consolidated Financial Data (Unaudited) Summarized unaudited quarterly condensed consolidated financial data for the quarters of 2017 and 2016 are as follows (in thousands): Quarter 4 Quarter 3 Quarter 2 Quarter 1 Quarter 4 Quarter 3 Quarter 2 Quarter 1 2017 2017 2017 2017 2016 2016 2016 2016 Net Interest Income after Loan Loss Provision $ – $ 917 $ 725 $ 617 $ 491 $ 442 $ 464 $ 479 Non-Interest Income – – – 77 28 – 44 – SG&A expense – 537 456 454 367 297 305 350 Impairment loss on foreclosed assets – 47 106 49 111 – – – Net Income $ – $ 333 $ 163 $ 191 $ 41 $ 145 $ 203 $ 129 |
Non-Interest Expense Detail
Non-Interest Expense Detail | 9 Months Ended |
Sep. 30, 2017 | |
Non-interest Expense Detail | |
Non-Interest Expense Detail | 12. Non-Interest expense detail The following table displays our selling, general and administrative (“SG&A”) expenses: For the Nine Months Ended September 30, 2017 2016 Selling, general and administrative expenses Legal and accounting $ 164 $ 139 Salaries and related expenses 976 593 Board related expenses 82 84 Advertising 42 31 Rent and utilities 22 15 Loan and foreclosed asset expenses 30 17 Travel 45 26 Other 86 47 Total SG&A $ 1,447 $ 952 |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Events | 13. Subsequent Events On October 23, 2017, we entered into a Line of Credit Agreement (the “LOC Agreement”) with Paul Swanson (the “Lender”). Pursuant to the LOC Agreement, the Lender will provide us with a revolving line of credit (the “Line of Credit”) not to exceed $4,000. The LOC Agreement is effective as of October 23, 2017 and will terminate 15 months after that date unless extended by the Lender for one or more additional 15 month periods. We may terminate the LOC Agreement by providing the Lender with notice at least 60 days in advance of the original termination or any renewal termination date. The Line of Credit requires monthly payments of interest only during the term of the Line of Credit, with the principal balance due upon termination. The unpaid principal amounts advanced on the Line of Credit bear interest for each day until due at a fixed rate per annum (computed on the basis of a year of 360 days for actual days elapsed) for each day at 9%. We may, at our option, choose to prepay the principal, interest, or other amounts due from us under the Line of Credit in whole or in part at any time. We are pledging, and will continue to pledge in the future, certain of our commercial loans as collateral for the Line of Credit (the “Collateral Loans”) pursuant to the Collateral Assignment of Notes and Documents dated as of October 23, 2017. The amount outstanding under the Line of Credit may not exceed 67% of the aggregate amount outstanding on the Collateral Loans then pledged to secure the Line of Credit. Our obligation to repay the Line of Credit is evidenced by two Promissory Notes from us dated October 23, 2017 (the “Promissory Notes”), one evidencing a promise to repay the secured portion of the Line of Credit and one evidencing a promise to repay the unsecured portion of the Line of Credit. R. Scott Summers, P.L.L.C., a West Virginia professional limited liability company (the “Custodian”) will serve as the custodian to hold the Collateral Loans for the benefit of the Lender pursuant to the Custodial Agreement dated as of October 23, 2017 between us, the Lender, and the Custodian. The Custodian is owned by R. Scott Summers, an investor in our public Notes offering and the son of Kenneth R. Summers, one of our independent managers. The Custodian is responsible for certifying to the Lender that it has received the relevant Collateral Loan assignment documentation from us. We are responsible for paying the Custodian’s monthly fee, which is equal to 1% interest on the amount of the Collateral Loans outstanding in the Custodian’s custody. |
Fair Value (Tables)
Fair Value (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Fair Value Disclosures [Abstract] | |
Schedule of Non-financial Instruments Measured at Fair Value on Non-recurring Basis | The following tables present the balances of non-financial instruments measured at fair value on a non-recurring basis as of September 30, 2017 and December 31, 2016. September 30, 2017 Quoted Prices in Active Markets Significant for Other Significant Identical Observable Unobservable Carrying Estimated Assets Inputs Inputs Amount Fair Value Level 1 Level 2 Level 3 Foreclosed assets $ 1,079 $ 1,079 $ – $ – $ 1,079 December 31, 2016 Quoted Prices in Active Markets for Significant Other Significant Identical Observable Unobservable Carrying Estimated Assets Inputs Inputs Amount Fair Value Level 1 Level 2 Level 3 Foreclosed assets $ 2,798 $ 2,798 $ – $ – $ 2,798 |
Schedule of Fair Value Measurements, Recurring and Nonrecurring | The table below is a summary of fair value estimates for financial instruments and the level of the fair value hierarchy within which the fair value measurements are categorized at the periods indicated: September 30, 2017 Quoted Prices in Active Markets for Significant Other Significant Identical Observable Unobservable Carrying Estimated Assets Inputs Inputs Amount Fair Value Level 1 Level 2 Level 3 Financial Assets Cash and cash equivalents $ 2,471 $ 2,471 $ 2,471 $ – $ – Loans receivable, net 29,626 29,626 – – 29,626 Accrued interest receivable 435 435 – – 435 Financial Liabilities Customer interest escrow 851 851 – – 851 Notes payable secured 12,168 12,168 – – 12,168 Notes payable unsecured, net 14,993 14,993 – – 14,993 Accrued interest payable 1,117 1,117 – – 1,117 December 31, 2016 Quoted Prices in Active Markets for Significant Other Significant Identical Observable Unobservable Carrying Estimated Assets Inputs Inputs Amount Fair Value Level 1 Level 2 Level 3 Financial Assets Cash and cash equivalents $ 1,566 $ 1,566 $ 1,566 $ – $ – Loans receivable, net 20,091 20,091 – – 20,091 Accrued interest receivable 280 280 – – 280 Financial Liabilities Customer interest escrow 812 812 – – 812 Notes payable secured 7,322 7,322 – – 7,322 Notes payable unsecured, net 11,962 11,962 – – 11,962 Accrued interest payable 993 993 – – 993 |
Financing Receivables (Tables)
Financing Receivables (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Receivables [Abstract] | |
Schedule of Financing Receivables | Financing receivables are comprised of the following as of September 30, 2017 and December 31, 2016: September 30, 2017 December 31, 2016 Loans receivable, gross $ 31,858 $ 21,569 Less: Deferred loan fees (738 ) (618 ) Less: Deposits (1,487 ) (861 ) Plus: Deferred origination expense 81 55 Less: Allowance for loan losses (88 ) (54 ) Loans receivable, net $ 29,626 $ 20,091 |
Commercial Loans - Construction Loan Portfolio Summary | The following is a summary of our loan portfolio to builders for home construction loans as of September 30, 2017 and December 31, 2016. Year Number of States Number of Borrowers Number of Loans Value of Collateral (1) Commitment Amount Gross Amount Outstanding Loan to Value Ratio (2) Loan Fee 2017 16 48 148 $ 71,305 $ 43,748 $ 28,404 61 % (3) 5 % 2016 15 30 69 46,187 27,141 17,487 59 % (3) 5 % (1) The value is determined by the appraised value. (2) The loan to value ratio is calculated by taking the commitment amount and dividing by the appraised value. (3) Represents the weighted average loan to value ratio of the loans. |
Commercial Loans - Real Estate Development Loan Portfolio Summary | The following is a summary of our loan portfolio to builders for land development as of September 30, 2017 and December 31, 2016. These loans are referred to as the Pennsylvania Loans. Year State Number of Borrowers Number of Loans Value of Collateral (1) Commitment Amount Gross Amount Outstanding Loan to Value Ratio (2) Loan Fee 2017 Pennsylvania 1 3 $ 5,339 $ 4,600 (3) $ 3,454 65 % $ 1,000 2016 Pennsylvania 1 3 6,586 5,931 (3) 4,082 62 % 1,000 (1) The value is determined by the appraised value adjusted for remaining costs to be paid and third party mortgage balances. Part of this collateral is $1,220 in 2017 and $1,150 in 2016 of preferred equity in our Company. In the event of a foreclosure on the property securing these loans, the portion of our collateral that is preferred equity in our Company might be difficult to sell, which could impact our ability to eliminate the loan balance. (2) The loan to value ratio is calculated by taking the outstanding amount and dividing by the appraised value calculated as described above. (3) The commitment amount does not include letters of credit and cash bonds, as the sum of the total balance outstanding including the cash bonds plus the letters of credit and remaining to fund for construction is less than the $4,600 commitment amount. |
Summary of Finance Receivables by Classification | Gross finance Receivables – By risk rating: September 30, 2017 December 31, 2016 Pass $ 26,931 $ 18,275 Special mention 4,927 3,294 Classified – accruing – – Classified – nonaccrual – – Total $ 31,858 $ 21,569 |
Schedule of Impairment Calculation Method | Gross finance Receivables – Method of impairment calculation: September 30, 2017 December 31, 2016 Performing loans evaluated individually $ 9,367 $ 12,424 Performing loans evaluated collectively 22,491 9,145 Non-performing loans without a specific reserve – – Non-performing loans with a specific reserve – – Total $ 31,858 $ 21,569 |
Schedule of Concentration Risk for Individual Borrowers | Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of loans receivable. Our concentration risks for individual borrowers are summarized in the table below: September 30, 2017 December 31, 2016 Percent of Percent of Borrower Loan Borrower Loan City Commitments City Commitments Highest concentration risk Pittsburgh, PA 25 % Pittsburgh, PA 37 % Second highest concentration risk Sarasota, FL 7 % Sarasota, FL 11 % Third highest concentration risk Orlando, FL 5 % Savannah, GA 6 % |
Foreclosed Assets (Tables)
Foreclosed Assets (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Schedule of Roll Forward of Foreclosed Assets | Roll forward of foreclosed assets: Nine Months Ended Year Ended Nine Months Ended Beginning balance $ 2,798 $ 965 $ 965 Additions from loans – 1,813 1,813 Additions for construction/development 296 566 459 Sale proceeds (1,890 ) (463 ) – Gain on sale 77 28 – Impairment loss on foreclosed assets (202 ) (111 ) – Ending balance $ 1,079 $ 2,798 $ 3,237 |
Borrowings (Tables)
Borrowings (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Debt Disclosure [Abstract] | |
Schedule of Borrowings | The following table displays our borrowings and a ranking of priority: Priority Rank September 30, 2017 December 31, 2016 Borrowing Source Purchase and sale agreements and other secured borrowings 1 $ 12,168 $ 7,322 Secured line of credit from affiliates 2 – – Unsecured line of credit (senior) 3 – – Other unsecured debt (senior subordinated) 4 279 279 Unsecured Notes through our public offering, gross 5 14,139 11,221 Other unsecured debt (subordinated) 5 713 700 Other unsecured debt (junior subordinated) 6 173 173 Total $ 27,472 $ 19,695 |
Schedule of Maturities of Long-term Debt | The following table shows the maturity of outstanding debt as of September 30, 2017. Year Maturing Total Amount Maturing Public Offering Other Unsecured Purchase and Sale Agreements and other secured borrowings 2017 $ 12,247 $ 79 $ – $ 12,168 2018 5,133 4,633 500 – 2019 3,754 3,641 113 – 2020 2,494 1,942 552 – 2021 3,844 3,844 – – Total $ 27,472 $ 14,139 $ 1,165 $ 12,168 |
Schedule of Purchase and Sale Agreements | The secured borrowings are detailed below: September 30, 2017 December 31, 2016 Due From Due From Book Value of Shepherd’s Book Value of Shepherd’s Loans which Finance to Loan Loans which Finance to Loan Served as Collateral Purchaser or Lender Served as Collateral Purchaser or Lender Loan purchaser 1st Financial Bank, USA/Builder Finance, Inc. $ 9,482 $ 4,830 $ 5,779 $ 2,517 S.K. Funding, LLC 11,169 6,013 7,770 4,805 Shuman 2,147 1,325 – – Total $ 22,798 $ 12,168 $ 13,549 $ 7,322 |
Schedule of Roll Forward of Notes Outstanding | The following table shows the roll forward of our Notes program: Nine Months 2017 Year Ended 2016 Nine Months 2016 Gross Notes outstanding, beginning of period $ 11,221 $ 8,496 $ 8,496 Notes issued 8,299 4,972 3,529 Note repayments / redemptions (5,381 ) (2,247 ) (1,336 ) Gross Notes outstanding, end of period $ 14,139 $ 11,221 $ 10,689 Less deferred financing costs, net 311 411 448 Notes outstanding, net $ 13,828 $ 10,810 $ 10,241 |
Schedule of Roll Forward of Deferred Financing Cost | The following is a roll forward of deferred financing costs: Nine Months Year Nine Months Ended Ended Ended September 30, 2017 December 31, 2016 September 30, 2016 Deferred financing costs, beginning balance $ 1,014 $ 935 $ 935 Additions 65 79 53 Deferred financing costs, ending balance $ 1,079 $ 1,014 $ 988 Less accumulated amortization (768 ) (603 ) (540 ) Deferred financing costs, net $ 311 $ 411 $ 448 |
Schedule of Roll Forward of Accumulated Amortization of Deferred Financing Costs | The following is a roll forward of the accumulated amortization of deferred financing costs: Nine Months Year Nine Months Ended Ended Ended September 30, 2017 December 31, 2016 September 30, 2016 Accumulated amortization, beginning balance $ 603 $ 336 $ 336 Additions 165 267 204 Accumulated amortization, ending balance $ 768 $ 603 $ 540 |
Redeemable Preferred Equity (Ta
Redeemable Preferred Equity (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Equity [Abstract] | |
Schedule of Roll Forward of Redeemable Preferred Equity | Roll forward of redeemable preferred equity: Nine Months Ended 2017 Year Ended 2016 Nine Months Ended 2016 Beginning balance $ – $ – $ – Additions from new investment 1,004 – – Additions from reinvestment 61 – – Ending balance $ 1,065 $ – $ – |
Schedule of Redemption Option for Investors | The following table shows the earliest redemption options for investors in Series C Preferred Units as of September 30, 2017. Year Maturing Total Amount Redeemable 2023 $ 1,065 Total $ 1,065 |
Selected Quarterly Condensed 24
Selected Quarterly Condensed Consolidated Financial Data (Unaudited) (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Quarterly Financial Information Disclosure [Abstract] | |
Summarized Unaudited Quarterly Condensed Consolidated Financial Data | Summarized unaudited quarterly condensed consolidated financial data for the quarters of 2017 and 2016 are as follows (in thousands): Quarter 4 Quarter 3 Quarter 2 Quarter 1 Quarter 4 Quarter 3 Quarter 2 Quarter 1 2017 2017 2017 2017 2016 2016 2016 2016 Net Interest Income after Loan Loss Provision $ – $ 917 $ 725 $ 617 $ 491 $ 442 $ 464 $ 479 Non-Interest Income – – – 77 28 – 44 – SG&A expense – 537 456 454 367 297 305 350 Impairment loss on foreclosed assets – 47 106 49 111 – – – Net Income $ – $ 333 $ 163 $ 191 $ 41 $ 145 $ 203 $ 129 |
Non-Interest Expense Detail (Ta
Non-Interest Expense Detail (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Non-interest Expense Detail | |
Schedule of Selling General and Administrative Expenses | The following table displays our selling, general and administrative (“SG&A”) expenses: For the Nine Months Ended September 30, 2017 2016 Selling, general and administrative expenses Legal and accounting $ 164 $ 139 Salaries and related expenses 976 593 Board related expenses 82 84 Advertising 42 31 Rent and utilities 22 15 Loan and foreclosed asset expenses 30 17 Travel 45 26 Other 86 47 Total SG&A $ 1,447 $ 952 |
Fair Value - Schedule of Non-fi
Fair Value - Schedule of Non-financial Instruments Measured at Fair Value on Non-recurring Basis (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Dec. 31, 2015 |
Foreclosed assets | $ 1,079 | $ 2,798 | $ 3,237 | $ 965 |
Carrying Amount [Member] | ||||
Foreclosed assets | 1,079 | 2,798 | ||
Estimated Fair Value [Member] | ||||
Foreclosed assets | 1,079 | 2,798 | ||
Fair Value, Inputs, Level 1 [Member] | ||||
Foreclosed assets | ||||
Fair Value, Inputs, Level 2 [Member] | ||||
Foreclosed assets | ||||
Fair Value, Inputs, Level 3 [Member] | ||||
Foreclosed assets | $ 1,079 | $ 2,798 |
Fair Value - Schedule of Fair V
Fair Value - Schedule of Fair Value Measurements, Recurring and Nonrecurring (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Dec. 31, 2015 |
Financial Assets, Cash and cash equivalents | $ 2,471 | $ 1,566 | $ 561 | $ 1,341 |
Financial Assets, Loans receivable, net | 29,626 | 20,091 | ||
Financial Liabilities, Customer interest escrow | 851 | 812 | ||
Financial Liabilities, Notes payable unsecured, net | 14,139 | 11,221 | $ 10,689 | $ 8,496 |
Carrying Amount [Member] | ||||
Financial Assets, Cash and cash equivalents | 2,471 | 1,566 | ||
Financial Assets, Loans receivable, net | 29,626 | 20,091 | ||
Financial Assets, Accrued interest receivable | 435 | 280 | ||
Financial Liabilities, Customer interest escrow | 851 | 812 | ||
Financial Liabilities, Notes payable secured | 12,168 | 7,322 | ||
Financial Liabilities, Notes payable unsecured, net | 14,993 | 11,962 | ||
Financial Liabilities, Accrued interest payable | 1,117 | 993 | ||
Estimated Fair Value [Member] | ||||
Financial Assets, Cash and cash equivalents | 2,471 | 1,566 | ||
Financial Assets, Loans receivable, net | 29,626 | 20,091 | ||
Financial Assets, Accrued interest receivable | 435 | 280 | ||
Financial Liabilities, Customer interest escrow | 851 | 812 | ||
Financial Liabilities, Notes payable secured | 12,168 | 7,322 | ||
Financial Liabilities, Notes payable unsecured, net | 14,993 | 11,962 | ||
Financial Liabilities, Accrued interest payable | 1,117 | 993 | ||
Fair Value, Inputs, Level 1 [Member] | ||||
Financial Assets, Cash and cash equivalents | 2,471 | 1,566 | ||
Financial Assets, Loans receivable, net | ||||
Financial Assets, Accrued interest receivable | ||||
Financial Liabilities, Customer interest escrow | ||||
Financial Liabilities, Notes payable secured | ||||
Financial Liabilities, Notes payable unsecured, net | ||||
Financial Liabilities, Accrued interest payable | ||||
Fair Value, Inputs, Level 2 [Member] | ||||
Financial Assets, Cash and cash equivalents | ||||
Financial Assets, Loans receivable, net | ||||
Financial Assets, Accrued interest receivable | ||||
Financial Liabilities, Customer interest escrow | ||||
Financial Liabilities, Notes payable secured | ||||
Financial Liabilities, Notes payable unsecured, net | ||||
Financial Liabilities, Accrued interest payable | ||||
Fair Value, Inputs, Level 3 [Member] | ||||
Financial Assets, Cash and cash equivalents | ||||
Financial Assets, Loans receivable, net | 29,626 | 20,091 | ||
Financial Assets, Accrued interest receivable | 435 | 280 | ||
Financial Liabilities, Customer interest escrow | 851 | 812 | ||
Financial Liabilities, Notes payable secured | 12,168 | 7,322 | ||
Financial Liabilities, Notes payable unsecured, net | 14,993 | 11,962 | ||
Financial Liabilities, Accrued interest payable | $ 1,117 | $ 993 |
Financing Receivables - Schedul
Financing Receivables - Schedule of Financing Receivables (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Receivables [Abstract] | ||
Loans receivable, gross | $ 31,858 | $ 21,569 |
Less: Deferred loan fees | (738) | (618) |
Less: Deposits | (1,487) | (861) |
Plus: Deferred origination expense | 81 | 55 |
Less: Allowance for loan losses | (88) | (54) |
Loans receivable, net | $ 29,626 | $ 20,091 |
Financing Receivables - Commerc
Financing Receivables - Commercial Loans - Construction Loan Portfolio Summary (Details) $ in Thousands | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2017USD ($)Integer | Dec. 31, 2016USD ($)Integer | ||
Summary Of Loan Portfolio To Builders For Home Construction [Line Items] | |||
Commitment Amount | $ 4,600 | ||
Gross Amount Outstanding | $ 31,858 | $ 21,569 | |
Home Construction Loans [Member] | |||
Summary Of Loan Portfolio To Builders For Home Construction [Line Items] | |||
Number of States | Integer | 16 | 15 | |
Number of Borrowers | Integer | 48 | 30 | |
Number of Loans | Integer | 148 | 69 | |
Value of Collateral | [1] | $ 71,305 | $ 46,187 |
Commitment Amount | 43,748 | 27,141 | |
Gross Amount Outstanding | $ 28,404 | $ 17,487 | |
Loan to Value Ratio | [2],[3] | 61.00% | 59.00% |
Loan Fee | 5.00% | 5.00% | |
[1] | The value is determined by the appraised value. | ||
[2] | Represents the weighted average loan to value ratio of the loans. | ||
[3] | The loan to value ratio is calculated by taking the commitment amount and dividing by the appraised value. |
Financing Receivables - Comme30
Financing Receivables - Commercial Loans - Real Estate Development Loan Portfolio Summary (Details) $ in Thousands | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2017USD ($)Loan | Dec. 31, 2016USD ($)Loan | ||
Real Estate Development Loan Portfolio [Line Items] | |||
Commitment Amount | $ 4,600 | ||
Gross Amount Outstanding | $ 31,858 | $ 21,569 | |
Real Estate Development [Member] | Pennsylvania [Member] | |||
Real Estate Development Loan Portfolio [Line Items] | |||
Number of Borrowers | Loan | 1 | 1 | |
Number of Loans | Loan | 3 | 3 | |
Value of Collateral | [1] | $ 5,339 | $ 6,586 |
Commitment Amount | [2] | 4,600 | 5,931 |
Gross Amount Outstanding | $ 3,454 | $ 4,082 | |
Loan to Value Ratio | [3] | 65.00% | 62.00% |
Loan Fee | $ 1,000 | $ 1,000 | |
[1] | The value is determined by the appraised value adjusted for remaining costs to be paid and third party mortgage balances. Part of this collateral is $1,220 in 2017 and $1,150 in 2016 of preferred equity in our Company. In the event of a foreclosure on the property securing these loans, the portion of our collateral that is preferred equity in our Company might be difficult to sell, which could impact our ability to eliminate the loan balance. | ||
[2] | The commitment amount does not include letters of credit and cash bonds, as the sum of the total balance outstanding including the cash bonds plus the letters of credit and remaining to fund for construction is less than the $4,600 commitment amount. | ||
[3] | The loan to value ratio is calculated by taking the outstanding amount and dividing by the appraised value calculated as described above. |
Financing Receivables - Comme31
Financing Receivables - Commercial Loans - Real Estate Development Loan Portfolio Summary (Details) (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Receivables [Abstract] | ||
Collateral of preferred equity | $ 1,220 | $ 1,150 |
Commitment amount | $ 4,600 |
Financing Receivables - Summary
Financing Receivables - Summary of Finance Receivables by Classification (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Loans receivable, gross | $ 31,858 | $ 21,569 |
Pass [Member] | ||
Loans receivable, gross | 26,931 | 18,275 |
Special Mention [Member] | ||
Loans receivable, gross | 4,927 | 3,294 |
Classified - Accruing [Member] | ||
Loans receivable, gross | ||
Classified - Nonaccrual [Member] | ||
Loans receivable, gross |
Financing Receivables - Sched33
Financing Receivables - Schedule of Impairment Calculation Method (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Total | $ 31,858 | $ 21,569 |
Performing Financial Instruments [Member] | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Individually evaluated | 9,367 | 12,424 |
Collectively evaluated | 22,491 | 9,145 |
Non-performing Financial Instruments [Member] | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Individually evaluated | ||
Collectively evaluated |
Financing Receivables - Sched34
Financing Receivables - Schedule of Concentration Risk for Individual Borrowers (Details) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Highest Concentration Risk [Member] | ||
Borrower City | Pittsburgh, PA | Pittsburgh, PA |
Percent of Loan Commitments | 25.00% | 37.00% |
Second Highest Concentration Risk [Member] | ||
Borrower City | Sarasota, FL | Sarasota, FL |
Percent of Loan Commitments | 7.00% | 11.00% |
Third Highest Concentration Risk [Member] | ||
Borrower City | Orlando, FL | Savannah, GA |
Percent of Loan Commitments | 5.00% | 6.00% |
Foreclosed Assets - Schedule of
Foreclosed Assets - Schedule of Roll Forward of Foreclosed Assets (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||||||
Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||||||||||
Beginning balance | $ 2,798 | $ 3,237 | $ 965 | $ 2,798 | $ 965 | $ 965 | ||||
Additions from loans | 1,813 | 1,813 | ||||||||
Additions for construction/development | 296 | 459 | 566 | |||||||
Sale proceeds | (1,890) | (463) | ||||||||
Gain on sale | 77 | 28 | ||||||||
Impairment loss on foreclosed assets | $ (47) | $ (106) | $ (49) | (111) | (202) | (111) | ||||
Ending balance | $ 1,079 | $ 2,798 | $ 3,237 | $ 1,079 | $ 3,237 | $ 2,798 |
Property, Plant, Equipment an36
Property, Plant, Equipment and Long Lived Assets (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Sep. 30, 2017 | Dec. 31, 2016 | |
Purchased, a partially completed building | $ 625 | ||
Improvements to building | $ 142 | ||
Developing operations software and invested | 41 | $ 71 | |
Software [Member] | |||
Depreciation of software | 25 | ||
Depreciation recognized | $ 19 |
Borrowings (Details Narrative)
Borrowings (Details Narrative) - USD ($) $ in Thousands | 1 Months Ended | 9 Months Ended | 12 Months Ended | ||
Jul. 31, 2017 | Jan. 31, 2017 | Aug. 31, 2015 | Sep. 30, 2017 | Dec. 31, 2016 | |
Notes Program [Member] | |||||
Debt instrument interest rate stated percentage | 9.15% | 8.26% | |||
Pennsylvania Loans [Member] | Maximum [Member] | |||||
Debt face amount | $ 4,000 | ||||
Sixth Amendment [Member] | |||||
Debt term | 24 months | ||||
Pennsylvania [Member] | |||||
Secured borrowings outstanding amount | $ 4,000 | ||||
Pennsylvania [Member] | Maximum [Member] | |||||
Debt face amount | $ 4,000 | ||||
S.K. Funding, LLC [Member] | Sixth Amendment [Member] | |||||
Debt instrument interest rate stated percentage | 10.50% | ||||
Shuman [Member] | |||||
Cost of funds percentage | 10.00% | ||||
Line of credit | $ 1,325 | ||||
Line of credit maturity date | Jul. 31, 2018 | ||||
7 Kings [Member] | |||||
Short-term debt, maximum amount outstanding during period | 500 | $ 500 | |||
Short-term debt, average outstanding amount | $ 500 | $ 500 | |||
Other Unsecured Loans [Member] | |||||
Debt instrument interest rate stated percentage | 10.00% | ||||
Debt instrument, maturity date | Jan. 28, 2018 | Feb. 19, 2016 | Feb. 19, 2018 | ||
Builder's Finance, Inc [Member] | |||||
Short-term debt, maximum amount outstanding during period | $ 500 | ||||
Short-term debt, average outstanding amount | $ 0 | ||||
Loan Purchase and Sale Agreement [Member] | S.K. Funding, LLC [Member] | |||||
Purchase price of loan | $ 3,000 | ||||
Loan Purchase and Sale Agreement [Member] | S.K. Funding, LLC [Member] | Maximum [Member] | |||||
Debt face amount | 3,000 | ||||
Loan Purchase and Sale Agreement [Member] | S.K. Funding, LLC [Member] | Minimum [Member] | |||||
Debt face amount | $ 1,000 |
Borrowings - Schedule of Borrow
Borrowings - Schedule of Borrowings (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Debt Disclosure [Abstract] | ||
Purchase and sale agreements and other secured borrowings | $ 12,168 | $ 7,322 |
Secured line of credit from affiliates | ||
Unsecured line of credit (senior) | ||
Other unsecured debt (senior subordinated) | 279 | 279 |
Unsecured Notes through our public offering, gross | 14,139 | 11,221 |
Other unsecured debt (subordinated) | 713 | 700 |
Other unsecured debt (junior subordinated) | 173 | 173 |
Total | $ 27,472 | $ 19,695 |
Borrowings - Schedule of Maturi
Borrowings - Schedule of Maturities of Long-term Debt (Details) $ in Thousands | Sep. 30, 2017USD ($) |
Total Amount Maturing [Member] | |
2,017 | $ 12,247 |
2,018 | 5,133 |
2,019 | 3,754 |
2,020 | 2,494 |
2,021 | 3,844 |
Total | 27,472 |
Public Offering [Member] | |
2,017 | 79 |
2,018 | 4,633 |
2,019 | 3,641 |
2,020 | 1,942 |
2,021 | 3,844 |
Total | 14,139 |
Other Unsecured [Member] | |
2,017 | |
2,018 | 500 |
2,019 | 113 |
2,020 | 552 |
2,021 | |
Total | 1,165 |
Purchase and Sale Agreements and Other Secured Borrowings [Member] | |
2,017 | 12,168 |
2,018 | |
2,019 | |
2,020 | |
2,021 | |
Total | $ 12,168 |
Borrowings - Schedule of Purcha
Borrowings - Schedule of Purchase and Sale Agreements (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Book Value of Loans which Served as Collateral | $ 22,798 | $ 13,549 |
Due From Shepherd's Finance to Loan Purchaser or Lender | 12,168 | 7,322 |
1st Financial Bank, USA/Builder Finance, Inc. [Member] | ||
Book Value of Loans which Served as Collateral | 9,482 | 5,779 |
Due From Shepherd's Finance to Loan Purchaser or Lender | 4,830 | 2,517 |
S.K. Funding, LLC [Member] | ||
Book Value of Loans which Served as Collateral | 11,169 | 7,770 |
Due From Shepherd's Finance to Loan Purchaser or Lender | 6,013 | 4,805 |
Shuman [Member] | ||
Book Value of Loans which Served as Collateral | 2,147 | |
Due From Shepherd's Finance to Loan Purchaser or Lender | $ 1,325 |
Borrowings - Schedule of Roll F
Borrowings - Schedule of Roll Forward of Notes Outstanding (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Debt Disclosure [Abstract] | |||
Gross notes outstanding, beginning of period | $ 11,221 | $ 8,496 | $ 8,496 |
Notes issued | 8,299 | 3,529 | 4,972 |
Note repayments / redemptions | (5,381) | (1,336) | (2,247) |
Gross notes outstanding, end of period | 14,139 | 10,689 | 11,221 |
Less deferred financing costs, net | 311 | 448 | 411 |
Notes outstanding, net | $ 13,828 | $ 10,241 | $ 10,810 |
Borrowings - Schedule of Roll42
Borrowings - Schedule of Roll Forward of Deferred Financing Cost (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | |
Debt Disclosure [Abstract] | ||||
Deferred financing costs, beginning balance | $ 1,014 | $ 935 | $ 935 | |
Additions | 65 | 53 | 79 | |
Deferred financing costs, ending balance | 1,079 | 988 | 1,014 | |
Less accumulated amortization | (768) | (540) | (603) | $ (336) |
Deferred financing costs, net | $ 311 | $ 448 | $ 411 |
Borrowings - Schedule of Roll43
Borrowings - Schedule of Roll Forward of Accumulated Amortization of Deferred Financing Costs (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Debt Disclosure [Abstract] | |||
Accumulated amortization, beginning balance | $ 603 | $ 336 | $ 336 |
Additions | 165 | 204 | 267 |
Accumulated amortization, ending balance | $ 768 | $ 540 | $ 603 |
Redeemable Preferred Equity (De
Redeemable Preferred Equity (Details Narrative) | 9 Months Ended |
Sep. 30, 2017 | |
Change in rate of note interest | 12.00% |
Series C Preferred Units [Member] | |
Unit distribution percentage | 12.00% |
Redeemable Preferred Equity - S
Redeemable Preferred Equity - Schedule of Roll Forward of Redeemable Preferred Equity (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Equity [Abstract] | |||
Redeemable preferred equity beginning balance | |||
Additions from new investment | 1,004 | ||
Additions from reinvestment | 61 | ||
Redeemable preferred equity ending balance | $ 1,065 |
Redeemable Preferred Equity -46
Redeemable Preferred Equity - Schedule of Redemption Option for Investors (Details) - USD ($) $ in Thousands | 9 Months Ended | |||
Sep. 30, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Dec. 31, 2015 | |
Equity [Abstract] | ||||
Year Maturing | 2,023 | |||
Total Amount Redeemable | $ 1,065 |
Members' Capital (Details Narra
Members' Capital (Details Narrative) - USD ($) $ in Thousands | 1 Months Ended | |||
Dec. 31, 2015 | Sep. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | |
Independent Manager 1 [Member] | ||||
Percentage of common equity sold | 1.00% | |||
Independent Manager 2 [Member] | ||||
Percentage of common equity sold | 1.00% | |||
Independent Manager 3 [Member] | ||||
Percentage of common equity sold | 1.00% | |||
Executive Vice President [Member] | ||||
Percentage of common equity sold | 1.00% | |||
Class A Common Units [Member] | ||||
Common stock, unit outstanding | 2,629 | 2,629 | ||
Class A Common Units [Member] | Seven Kings Holdings, Inc and S.K. Funding, LLC [Member] | Wallach Family [Member] | ||||
Percentage of common equity purchased | 4.00% | |||
Series B Preferred Units [Member] | ||||
Preferred units issued | 12.2 | |||
Preferred stock value | $ 1,220 | |||
Series B Preferred Units [Member] | Hoskins Group [Member] | ||||
Number of preferred units to purchase during the period | 0.1 | |||
Number of preferred units value to purchase during the period | $ 10 |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) - Class A Common Units [Member] | Sep. 30, 2017 |
Independent Manager 1 [Member] | |
Percentage of ownership interest | 1.00% |
Independent Manager 2 [Member] | |
Percentage of ownership interest | 1.00% |
Independent Manager 3 [Member] | |
Percentage of ownership interest | 1.00% |
Executive Vice President [Member] | |
Percentage of ownership interest | 1.00% |
Commitments and Contingencies (
Commitments and Contingencies (Details Narrative) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Commitments and Contingencies Disclosure [Abstract] | ||
Letter of credit, amount outstanding | $ 16,489 | $ 11,503 |
Selected Quarterly Condensed 50
Selected Quarterly Condensed Consolidated Financial Data (Unaudited) - Summarized Unaudited Quarterly Condensed Consolidated Financial Data (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||||||
Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Net Interest Income after Loan Loss Provision | $ 917 | $ 725 | $ 617 | $ 491 | $ 442 | $ 464 | $ 479 | |||
Non-Interest Income | 77 | 28 | 44 | $ 77 | $ 44 | |||||
SG&A expense | 537 | 456 | 454 | 367 | 297 | 305 | 350 | 1,447 | 952 | |
Impairment loss on foreclosed assets | 47 | 106 | 49 | 111 | 202 | $ 111 | ||||
Net Income | 333 | $ 163 | $ 191 | $ 41 | $ 145 | $ 203 | $ 129 | $ 687 | $ 477 | |
Dec 31, 2017 [Member] | ||||||||||
Net Interest Income after Loan Loss Provision | ||||||||||
Non-Interest Income | ||||||||||
SG&A expense | ||||||||||
Impairment loss on foreclosed assets | ||||||||||
Net Income |
Non-Interest Expense Detail - S
Non-Interest Expense Detail - Schedule of Selling General and Administrative Expenses (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||||||
Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Non-interest Expense Detail | |||||||||
Legal and accounting | $ 164 | $ 139 | |||||||
Salaries and related expenses | 976 | 593 | |||||||
Board related expenses | 82 | 84 | |||||||
Advertising | 42 | 31 | |||||||
Rent and utilities | 22 | 15 | |||||||
Loan and foreclosed asset expenses | 30 | 17 | |||||||
Travel | 45 | 26 | |||||||
Other | 86 | 47 | |||||||
Total SG&A | $ 537 | $ 456 | $ 454 | $ 367 | $ 297 | $ 305 | $ 350 | $ 1,447 | $ 952 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - Subsequent Event [Member] $ in Thousands | Oct. 23, 2017USD ($) |
Custodian [Member] | |
Percentage of custodian's monthly fee | 1.00% |
Line of Credit Agreement [Member] | Paul Swanson [Member] | |
Line of credit maximum borrowing capacity | $ 4,000 |
Line of credit expiration date description | The LOC Agreement is effective as of October 23, 2017 and will terminate 15 months after that date unless extended by the Lender for one or more additional 15 month periods. We may terminate the LOC Agreement by providing the Lender with notice at least 60 days in advance of the original termination or any renewal termination date. |
Line of credit interest percentage | 9.00% |
Line of Credit Agreement [Member] | Paul Swanson [Member] | Maximum [Member] | |
Line of credit pledged to secure percentage | 67.00% |