Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2020 | Nov. 05, 2020 | |
Cover [Abstract] | ||
Entity Registrant Name | Shepherd's Finance, LLC | |
Entity Central Index Key | 0001544190 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2020 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business Flag | true | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | true | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 0 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2020 |
Interim Condensed Consolidated
Interim Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Assets | ||
Cash and cash equivalents | $ 3,150 | $ 1,883 |
Accrued interest receivable | 748 | 1,031 |
Loans receivable, net | 47,984 | 55,369 |
Real estate investments | 1,154 | |
Foreclosed assets | 3,690 | 4,916 |
Premises and equipment | 911 | 936 |
Other assets | 462 | 202 |
Total assets | 58,099 | 64,337 |
Liabilities and Members' Capital | ||
Customer interest escrow | 447 | 643 |
Accounts payable and accrued expenses | 234 | 466 |
Accrued interest payable | 3,047 | 2,533 |
Notes payable secured, net of deferred financing costs | 22,753 | 26,991 |
Notes payable unsecured, net of deferred financing costs | 26,484 | 26,520 |
PPP Loan and EIDL Advance | 371 | |
Due to preferred equity member | 10 | 37 |
Total liabilities | 53,346 | 57,190 |
Commitments and Contingencies (Note 10) | ||
Series C preferred equity | 3,197 | 2,959 |
Members' Capital | ||
Series B preferred equity | 1,550 | 1,470 |
Class A common equity | 6 | 2,718 |
Members' capital | 1,556 | 4,188 |
Total liabilities, redeemable preferred equity and members' capital | $ 58,099 | $ 64,337 |
Interim Condensed Consolidate_2
Interim Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Interest Income | ||||
Interest and fee income on loans | $ 1,909 | $ 2,600 | $ 5,841 | $ 7,486 |
Interest expense: | ||||
Interest related to secured borrowings | 727 | 746 | 2,354 | 2,196 |
Interest related to unsecured borrowings | 793 | 736 | 2,335 | 2,077 |
Interest expense | 1,520 | 1,482 | 4,689 | 4,273 |
Net interest income | 389 | 1,118 | 1,152 | 3,213 |
Less: Loan loss provision | 70 | 3 | 1,665 | 201 |
Net interest income after loan loss provision | 319 | 1,115 | (513) | 3,012 |
Non-Interest Income | ||||
Gain on sale of foreclosed assets | 135 | 138 | ||
Gain on foreclosure of assets | 86 | 181 | ||
Impairment gain on foreclosed assets | 95 | 95 | ||
Total non-interest income | 230 | 86 | 233 | 181 |
Income | 549 | 1,201 | (280) | 3,193 |
Non-Interest Expense | ||||
Selling, general and administrative | 367 | 703 | 1,536 | 1,947 |
Depreciation and amortization | 21 | 21 | 64 | 66 |
Loss on sale of foreclosed assets | 51 | 274 | 86 | 274 |
Loss on foreclosure of assets | 2 | 2 | 169 | |
Impairment loss on foreclosed assets | 4 | 205 | 107 | |
Total non-interest expense | 445 | 998 | 1,893 | 2,563 |
Net Income | 104 | 203 | (2,173) | 630 |
Earned distribution to preferred equity holders | 104 | 118 | 322 | 333 |
Net income attributable to common equity holders | $ 85 | $ (2,495) | $ 297 |
Interim Condensed Consolidate_3
Interim Condensed Consolidated Statements of Changes in Members' Capital (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Statement of Stockholders' Equity [Abstract] | ||||
Members' capital, beginning balance | $ 1,526 | $ 3,844 | $ 4,188 | $ 3,697 |
Net income less distributions to Series C preferred equity holders | 10 | 118 | (2,448) | 410 |
Contributions from Series B preferred equity holders | 30 | 30 | 80 | 130 |
Earned distributions to Series B preferred equity holders | (10) | (34) | (47) | (104) |
Distributions to common equity holders | (217) | (166) | ||
Members' capital, ending balance | $ 1,556 | $ 3,958 | $ 1,556 | $ 3,958 |
Interim Condensed Consolidate_4
Interim Condensed Consolidated Statements of Changes in Members' Capital (Unaudited) (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Statement of Stockholders' Equity [Abstract] | ||||
Series C preferred equity holders | $ 94 | $ 85 | $ 275 | $ 229 |
Interim Condensed Consolidate_5
Interim Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Cash flows from operations | |||||
Net (loss) income | $ 104 | $ 203 | $ (2,173) | $ 630 | |
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities | |||||
Amortization of deferred financing costs | 112 | 197 | |||
Provision for loan losses | 1,665 | 201 | |||
Change in loan origination fees, net | 89 | 440 | |||
Depreciation and amortization | 64 | 66 | |||
Impairment of foreclosed assets, net | 110 | 107 | |||
Gain on sale of foreclosed assets, net | (138) | (181) | |||
Loss on foreclosed assets | 2 | 169 | |||
Loss on sale of foreclosed assets | 51 | 274 | 86 | 274 | |
Net change in operating assets and liabilities: | |||||
Other assets | (313) | (107) | |||
Accrued interest receivable | 283 | (116) | |||
Customer interest escrow | (270) | (125) | |||
Accrued interest payable | 514 | 244 | |||
Accounts payable and accrued expenses | (232) | (312) | |||
Net cash (used in) provided by operating activities | (201) | 1,487 | |||
Cash flows from investing activities | |||||
Loan originations and principal collections, net | 4,212 | (8,491) | |||
Investment in foreclosed assets | (801) | (608) | |||
Proceeds from sale of foreclosed assets | 2,246 | 4,543 | $ 4,543 | ||
Premises and equipment additions | (4) | ||||
Net cash provided by (used in) investing activities | 5,657 | (4,560) | |||
Cash flows from financing activities | |||||
Contributions from preferred equity holders | 80 | 330 | |||
Distributions to redeemable preferred equity holders | (37) | (30) | |||
Distributions to common equity holders | (217) | (166) | |||
Proceeds from secured note payable | 9,739 | 13,954 | |||
Repayments of secured note payable | (14,010) | (13,137) | |||
Proceeds from unsecured notes payable | 7,391 | 9,570 | |||
Redemptions/repayments of unsecured notes payable | (7,369) | (6,356) | |||
Proceeds from PPP Loan and EIDL Advance | 371 | ||||
Deferred financing costs paid | (137) | (5) | |||
Net cash (used in) provided by financing activities | (4,189) | 4,160 | |||
Net change in cash and cash equivalents | 1,267 | 1,087 | |||
Cash and cash equivalents | |||||
Beginning of period | 1,883 | 1,401 | 1,401 | ||
End of period | $ 3,150 | $ 2,488 | 3,150 | 2,488 | $ 1,883 |
Supplemental disclosure of cash flow information | |||||
Cash paid for interest | 4,175 | 4,029 | |||
Non-cash investing and financing activities | |||||
Earned by Series B preferred equity holders but not distributed to customer interest escrow | 10 | 36 | |||
Earned by Series B preferred equity holders and distributed to customer interest escrow | 74 | 100 | |||
Foreclosure of assets transferred from loans receivable, net | 279 | 2,006 | |||
Earned but not paid distributions of Series C preferred equity holders | 275 | 229 | |||
Unsecured transferred to secured notes payable | 38 | 1,014 | |||
Construction loans repaid through the reduction of Secured LOC Principal Balance | 410 | ||||
Reclassification of deferred financing costs from other assets | 330 | ||||
Transfer of loan receivables to real estate investments | $ 1,140 |
Description of Business and Bas
Description of Business and Basis of Presentation | 9 Months Ended |
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
Description of Business and Basis of Presentation | 1. Description of Business and Basis of Presentation Description of Business Shepherd’s Finance, LLC and subsidiary (the “Company”) was originally formed as a Pennsylvania limited liability company on May 10, 2007. The Company is the sole member of a consolidating subsidiary, 84 REPA, LLC. The Company operates pursuant to its Second Amended and Restated Operating Agreement, as amended, by and among Daniel M. Wallach and the other members of the Company effective as of March 16, 2017. As of September 30, 2020, the Company extends commercial loans to residential homebuilders (in 21 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) interim condensed consolidated balance sheet as of September 30, 2020, 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, the instructions to Form 10-Q and Article 8 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, 2020. These unaudited interim condensed consolidated financial statements should be read in conjunction with the 2019 consolidated financial statements and notes thereto (the “2019 Financial Statements”) included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 (the “2019 Form 10-K”). The accounting policies followed by the Company are set forth in Note 2 – Summary of Significant Accounting Policies Accounting Standards to be Adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2016-13, “ Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments Codification Improvements to Topic 326, Financial Instruments—Credit Losses |
Fair Value
Fair Value | 9 Months Ended |
Sep. 30, 2020 | |
Fair Value Disclosures [Abstract] | |
Fair Value | 2. Fair Value The Company had no financial instruments measured at fair value on a recurring basis as of September 30, 2020 or December 31, 2019. The following tables present the balances of non-financial instruments measured at fair value on a non-recurring basis as of September 30, 2020 and December 31, 2019. September 30, 2020 Quoted Prices in Active Markets for Identical Significant Other Observable Significant Unobservable Carrying Estimated Assets Inputs Inputs Amount Fair Value Level 1 Level 2 Level 3 Foreclosed assets $ 3,690 $ 3,690 $ - $ - $ 3,690 Impaired loans due to COVID-19, net 9,107 9,107 - - 9,107 Other impaired loans, net 1,625 1,625 - - 1,625 Total $ 14,422 $ 14,422 $ - $ - $ 14,422 December 31, 2019 Quoted Prices in Active Markets for Identical Significant Other Observable Significant Unobservable Carrying Estimated Assets Inputs Inputs Amount Fair Value Level 1 Level 2 Level 3 Foreclosed assets $ 4,916 $ 4,916 $ - $ - $ 4,916 Impaired assets, net 1,487 1,487 - - 1,487 Total $ 6,403 $ 6,403 $ - $ - $ 6,403 The table below is a summary of fair value estimates for financial instruments: September 30, 2020 December 31, 2019 Carrying Estimated Carrying Estimated Amount Fair Value Amount Fair Value Financial Assets Cash and cash equivalents $ 3,150 $ 3,150 $ 1,883 $ 1,883 Loans receivable, net 47,984 47,984 55,369 55,369 Accrued interest on loans 748 748 1,031 1,031 Financial Liabilities Customer interest escrow 447 447 643 643 Notes payable secured, net 22,753 22,753 26,991 26,991 Notes payable unsecured, net 26,484 26,484 26,520 26,520 PPP Loan and EIDL Advance 371 371 - - Accrued interest payable 3,047 3,047 2,533 2,533 |
Financing Receivables
Financing Receivables | 9 Months Ended |
Sep. 30, 2020 | |
Receivables [Abstract] | |
Financing Receivables | 3. Financing Receivables Financing receivables are comprised of the following as of September 30, 2020 and December 31, 2019: September 30, 2020 December 31, 2019 Loans receivable, gross $ 51,521 $ 57,608 Less: Deferred loan fees (1,116 ) (856 ) Less: Deposits (1,400 ) (1,352 ) Plus: Deferred origination costs 375 204 Less: Allowance for loan losses (1,396 ) (235 ) Loans receivable, net $ 47,984 $ 55,369 The allowance for loan losses at September 30, 2020 was $1,396, of which $163 is related to loans without specific reserves. The Company recorded specific reserves for loans impaired due to impacts from COVID-19 of $1,041, special mention loans of $120 and impaired loans not due to impacts from COVID-19 of $72. As of December 31, 2019, the allowance was $235, of which $230 related to loans without specific reserves. During the nine months ended September 30, 2020, we incurred $504 in direct charge-offs compared to $173 for the year ended December 31, 2019. Commercial Construction and Development Loans Commercial Loans – Construction Loan Portfolio Summary The following is a summary of the loan portfolio to builders for home construction loans as of September 30, 2020 and December 31, 2019: 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 2020 21 67 235 $ 88,860 $ 63,928 $ 42,368 72 % (3) 5 % 2019 21 70 241 93,211 65,273 48,611 70 % (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, 2020 and December 31, 2019: Year Number of States Number of Borrowers Number of Loans Gross Value of Collateral (1) Commitment Amount (2) Gross Amount Outstanding Loan to Value Ratio (3) Interest Spread 2020 4 5 8 $ 10,748 $ 10,608 $ 9,153 86 % 7 % 2019 4 5 9 13,007 9,866 8,997 69 % 7 % (1) The value is determined by the appraised value adjusted for remaining costs to be paid. A portion of this collateral is $1,550 and $1,470 as of September 30, 2020 and December 31, 2019, respectively, 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 might be difficult to sell, which may impact our ability to recover the loan balance. In addition, a portion of the collateral value is estimated based on the selling prices anticipated for the homes. (2) The commitment amount does not include letters of credit and cash bonds. (3) The loan to value ratio is calculated by taking the outstanding amount and dividing by the appraised value calculated as described above. Credit Quality Information The following tables present credit-related information at the “class” level in accordance with FASB ASC 310-10-50, “ Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses Finance receivables – By risk rating: September 30, 2020 December 31, 2019 Pass $ 37,314 $ 53,542 Special mention 2,353 2,571 Classified – accruing - - Classified – nonaccrual 11,854 1,495 Total $ 51,521 $ 57,608 Finance receivables – Method of impairment calculation: September 30, 2020 December 31, 2019 Performing loans evaluated individually $ 16,954 $ 26,233 Performing loans evaluated collectively 22,713 29,880 Non-performing loans without a specific reserve 4,120 1,467 Non-performing loans with a specific reserve to COVID-19 7,015 - Non-performing loans with a specific reserve 719 28 Total evaluated collectively for loan losses $ 51,521 $ 57,608 As September 30, 2020 and December 31, 2019, there were no loans acquired with deteriorated credit quality. Impaired Loans The following is a summary of our impaired nonaccrual commercial construction loans as of September 30, 2020 and December 31, 2019. September 30, 2020 December 31, 2019 Unpaid principal balance (contractual obligation from customer) $ 11,875 $ 1,495 Charge-offs and payments applied (21 ) - Gross value before related allowance 11,854 1,495 Related allowance (1,122 ) (8 ) Value after allowance $ 10,732 $ 1,487 Concentrations Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of loans receivable. Our concentration risks for our top three customers listed by geographic real estate market are summarized in the table below: September 30, 2020 December 31, 2019 Percent of Percent of Borrower Loan Borrower Loan City Commitments City Commitments Highest concentration risk Pittsburgh, PA 26 % Pittsburgh, PA 25 % Second highest concentration risk Orlando, FL 13 % Orlando, FL 15 % Third highest concentration risk Cape Coral, FL 7 % Cape Coral, FL 3 % |
Real Estate Investment Assets
Real Estate Investment Assets | 9 Months Ended |
Sep. 30, 2020 | |
Receivables [Abstract] | |
Real Estate Investment Assets | 4. Real Estate Investment Assets During June 2020, the Company acquired two lots from a borrower in exchange for the transfer of loans secured by those lots. The Company extinguished the principal balance for the loans on the lots in the amount of $640 and in addition, paid a $500 management fee for the development of homes on certain of the Company’s lots that were previously carried as loan receivables. The management fee was paid through reducing the principal balance on a current loan receivable with the borrower. The following table is a roll forward of real estate investment assets: Nine Months Ended September 30, 2020 Year Ended December 31, 2019 Nine Months Ended September 30, 2019 Beginning balance $ – $ – $ – Transfers from loans 1,140 – – Additions for construction/development 14 – – Ending balance $ 1,154 $ – $ – |
Foreclosed Assets
Foreclosed Assets | 9 Months Ended |
Sep. 30, 2020 | |
Repossessed Assets [Abstract] | |
Foreclosed Assets | 5. Foreclosed Assets The following table is a roll forward of foreclosed assets: Nine Months Ended September 30, 2020 Year Ended December 31, 2019 Nine Months Ended September 30, 2019 Beginning balance $ 4,916 $ 5,973 $ 5,973 Additions from loans 279 3,352 2,006 Additions for construction/development 801 763 608 Sale proceeds (2,246 ) (4,543 ) (4,543 ) Loss on sale (86 ) (274 ) (274 ) Gain on foreclosure - 203 181 Gain on sale of foreclosed assets 138 - - Impairment gain on foreclosed assets 68 - - Impairment gain on foreclosed assets due to COVID-19 27 - - Loss on foreclosure (2 ) - (169 ) Impairment loss on foreclosed assets (114 ) - (107 ) Impairment loss on foreclosed assets due to COVID-19 (91 ) (558 ) - Ending balance $ 3,690 $ 4,916 $ 3,675 |
Borrowings
Borrowings | 9 Months Ended |
Sep. 30, 2020 | |
Debt Disclosure [Abstract] | |
Borrowings | 6. Borrowings The following table displays our borrowings and a ranking of priority: Priority Rank September 30, 2020 December 31, 2019 Borrowing Source Purchase and sale agreements and other secured borrowings 1 $ 22,762 $ 26,806 Secured lines of credit from affiliates 2 1 189 Unsecured line of credit (senior) 3 - 500 PPP Loan and EIDL Advance 3 371 - Other unsecured debt (senior subordinated) 4 1,377 1,407 Unsecured Notes through our public offering, gross 5 21,319 20,308 Other unsecured debt (subordinated) 5 3,633 4,131 Other unsecured debt (junior subordinated) 6 590 590 Total $ 50,053 $ 53,931 The following table shows the maturity of outstanding debt as of September 30, 2020: Year Maturing Total Amount Maturing Public Offering Other Unsecured (1) Secured Borrowings 2020 $ 25,431 $ 974 $ 2,676 $ 21,781 2021 13,257 12,073 1,168 16 2022 5,541 3,706 1,819 16 2023 1,119 824 189 106 2024 and thereafter 4,705 3,742 120 843 Total $ 50,053 $ 21,319 $ 5,972 $ 22,762 (1) Other Unsecured includes our PPP Loan of $361 and EIDL Advance of $10 (each described below) of which $21, $247, and $103, collectively, matures during 2020, 2021 and 2022, respectively. All or a portion of the PPP Loan may be forgiven. Secured Borrowings New Lines of Credit During September 2020, we entered into an amended line of credit agreement (the “Eppinger LOC Agreement”) with Jeffrey Eppinger. The original line of credit from Mr. Eppinger was one of the New LOC Agreements described in the 2019 Form 10-K. Pursuant to the Eppinger LOC Agreement, Mr. Eppinger will provide us with a revolving line of credit of $1,500, an increase of $500. Principal for the New LOC Agreements, as amended, will not exceed $5,500. All other terms were unchanged. Lines of Credit from Affiliates As of September 30, 2020, the Company had borrowed $1 on its lines of credit from affiliates, which have a total limit of $2,500. Secured Deferred Financing Costs The Company had secured deferred financing costs of $9 and $5 as of September 30, 2020 and December 31, 2019, respectively. Summary Borrowings secured by loan assets are summarized below: September 30, 2020 December 31, 2019 Book Value of Loans which Served as Collateral Due from Shepherd’s Finance to Loan Purchaser or Lender Book Value of Loans which Served as Collateral Due from Shepherd’s Finance to Loan Purchaser or Lender Loan Purchaser Builder Finance, Inc. $ 8,860 $ 6,202 $ 13,711 $ 9,375 S.K. Funding, LLC 7,063 4,791 10,394 6,771 Lender Stephen K. Shuman 1,722 1,325 1,785 1,325 Jeffrey Eppinger 3,170 1,500 1,821 1,000 Hardy Enterprises, Inc. 1,726 1,000 1,684 1,000 Gary Zentner 389 250 472 250 R. Scott Summers 1,416 847 841 628 Paul Swanson 8,304 5,862 8,377 5,824 Total $ 32,650 $ 21,777 $ 39,085 $ 26,173 Unsecured Borrowings Unsecured Notes through the Public Offering (“Notes Program”) On March 22, 2019, the Company terminated its second public offering and commenced its third public offering of fixed rate subordinated notes (the “Notes”). The effective interest rate on borrowings through our Notes Program at September 30, 2020 and December 31, 2019 was 10.31% and 10.56%, respectively, not including the amortization of deferred financing costs. We generally offer four durations at any given time, ranging from 12 to 48 months from the date of issuance. There are limited rights of early redemption. Our 36-month Note has a mandatory early redemption option, subject to certain conditions. The following table shows the roll forward of our Notes Program: Nine Months Ended September 30, 2020 Year Ended December 31, 2019 Nine Months Ended September 30, 2019 Gross Notes outstanding, beginning of period $ 20,308 $ 17,348 $ 17,348 Notes issued 6,454 11,127 9,201 Note repayments / redemptions (5,443 ) (8,167 ) (5,793 ) Gross Notes outstanding, end of period $ 21,319 $ 20,308 $ 20,756 Less deferred financing costs, net 435 416 425 Notes outstanding, net $ 20,884 $ 19,892 $ 20,331 The following is a roll forward of deferred financing costs: Nine Months Ended September 30, 2020 Year Ended December 31, 2019 Nine Months Ended September 30, 2019 Deferred financing costs, beginning balance $ 786 $ 1,212 $ 1,212 Additions 131 365 336 Disposals - (791 ) - Deferred financing costs, ending balance 917 786 1,548 Less accumulated amortization (482 ) (370 ) (1,123 ) Deferred financing costs, net $ 435 $ 416 $ 425 The following is a roll forward of the accumulated amortization of deferred financing costs: Nine Months Ended September 30, 2020 Year Ended December 31, 2019 Nine Months Ended September 30, 2019 Accumulated amortization, beginning balance $ 370 $ 1,000 $ 1,000 Additions 112 161 123 Disposals - (791 ) - Accumulated amortization, ending balance $ 482 $ 370 $ 1,123 Other Unsecured Debts Our other unsecured debts are detailed below: Principal Amount Outstanding as of Loan Maturity Date Interest Rate (1) September 30, 2020 December 31, 2019 Unsecured Note with Seven Kings Holdings, Inc. Demand (2) 9.5 % $ 500 $ 500 Unsecured Line of Credit from Paul Swanson October 2020 (6) 10.0 % 1,138 1,176 Subordinated Promissory Note October 2020 9.5 % 563 563 Subordinated Promissory Note December 2021 10.5 % 146 146 Subordinated Promissory Note April 2024 10.0 % 100 100 Subordinated Promissory Note April 2021 10.0 % 174 174 Subordinated Promissory Note August 2022 11.0 % 200 200 Subordinated Promissory Note March 2023 11.0 % 169 169 Subordinated Promissory Note April 2020 6.5 % - 500 Subordinated Promissory Note February 2021 11.0 % 600 600 Subordinated Promissory Note Demand 5.0 % - 500 Subordinated Promissory Note December 2020 5.0 % 3 3 Subordinated Promissory Note December 2023 11.0 % 20 - Subordinated Promissory Note February 2024 11.0 % 20 - Senior Subordinated Promissory Note March 2022 (3) 10.0 % 370 400 Senior Subordinated Promissory Note March 2022 (4) 1.0 % 728 728 Junior Subordinated Promissory Note March 2022 (4) 22.5 % 417 417 Senior Subordinated Promissory Note October 2020 (5) 1.0 % 279 279 Junior Subordinated Promissory Note October 2020 (5) 20.0 % 173 173 $ 5,600 $ 6,628 (1) (2) (3) (4) (5) (6) In May 2020, the Company entered into a loan agreement (the “PPP Loan”) with LCA Bank Corporation to borrow $361 pursuant to the Paycheck Protection Program (“PPP”), created under the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act. All or a portion of the loan may be forgivable, as provided by the terms of the PPP. During April 2020, the Company received a grant under the Economic Injury Disaster Loan Emergency Advance (the “EIDL Advance”) which may be used for payroll and other certain operating expenses. The EIDL Advance will reduce the forgiveness of the PPP Loan depending on certain parameters required by the CARES Act. |
Redeemable Preferred Equity
Redeemable Preferred Equity | 9 Months Ended |
Sep. 30, 2020 | |
Equity [Abstract] | |
Redeemable Preferred Equity | 7. Redeemable Preferred Equity The following is a roll forward of our Series C cumulative preferred equity (“Series C Preferred Units”): Nine Months Ended September 30, 2020 Year Ended December 31, 2019 Nine Months Ended September 30, 2019 Beginning balance $ 2,959 $ 2,385 $ 2,385 Additions from new investment - 300 200 Redemptions (37 ) (42 ) (30 ) Additions from reinvestment 275 316 229 Ending balance $ 3,197 $ 2,959 $ 2,784 The following table shows the earliest redemption options for investors in our Series C Preferred Units as of September 30, 2020: Year of Available Redemption Total Amount Redeemable 2024 $ 2,963 2025 234 Total $ 3,197 |
Members' Capital
Members' Capital | 9 Months Ended |
Sep. 30, 2020 | |
Equity [Abstract] | |
Members' Capital | 8. Members’ Capital There are currently two classes of equity units outstanding that the Company classifies as Members’ Capital: Class A common units (“Class A Common Units”) and Series B cumulative preferred units (“Series B Preferred Units”). As of September 30, 2020, 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, 2020 and December 31, 2019. Series B Preferred Units were initially issued to the Hoskins Group (consisting of Benjamin Marcus Homes, LLC, Investor’s Mark Acquisitions, LLC, and Mark L. Hoskins) 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 subdivisions. As of September 30, 2020, the Hoskins Group owns a total of 15.5 Series B Preferred Units, which were issued for a total of $1,550. Earned but unpaid distributions on the Series B cumulative preferred units for the second and third quarters of 2020 total approximately $37 and $28, respectively, and have been rolled forward to be paid in a subsequent quarter. |
Related Party Transactions
Related Party Transactions | 9 Months Ended |
Sep. 30, 2020 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | 9. Related Party Transactions As of September 30, 2020, the Company had $1,249, $250, and $1,000 available to borrow against the line of credit from Daniel M. Wallach (our Chief Executive Officer and chairman of the board of managers) and his wife, the line of credit from the 2007 Daniel M. Wallach Legacy Trust, and the line of credit from William Myrick (our Executive Vice President of Sales), respectively. A more detailed description is included in Note 6 of our 2019 Financial Statements. These borrowings are in notes payable secured, net of deferred financing costs on the interim condensed consolidated balance sheet. In July 2020, the Company purchased two loans at cost from Daniel M. Wallach (the Company’s CEO and Chairman of the board of managers) for approximately $198. Those loans had previously been purchased from the Company by Mr. Wallach. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2020 | |
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 $21,560 and $16,662 at September 30, 2020 and December 31, 2019, respectively |
Selected Quarterly Condensed Co
Selected Quarterly Condensed Consolidated Financial Data (Unaudited) | 9 Months Ended |
Sep. 30, 2020 | |
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 2020 and 2019 are as follows: Quarter 3 Quarter 2 Quarter 1 Quarter 4 Quarter 3 Quarter 2 Quarter 1 2020 2020 (1) 2020 2019 2019 2019 2019 Net Interest Income (loss) $ 389 $ (228 ) $ 990 $ 1,138 $ 1,118 $ 969 $ 1,126 Loan loss provision 70 1,560 35 21 3 151 47 Net (Loss) Interest Income after Loan Loss Provision 319 (1,788 ) 955 1,117 1,115 818 1,079 Gain on sale of foreclosed assets 135 3 – – – – – Gain on foreclosure of assets – – – 22 86 95 – Impairment gain on foreclosed assets 95 – – – – – SG&A Expense 367 462 708 447 703 620 624 Depreciation and Amortization 21 21 21 26 21 22 23 Loss on Sale of Foreclosed Assets 51 – 35 – 274 – – Loss on Foreclosure of Assets 2 – – – – 169 – Impairment Loss on Foreclosed Assets 4 91 109 282 – 27 80 Net (Loss) Income $ 104 $ (2,359 ) $ 82 $ 384 $ 203 $ 75 $ 352 (1) During the quarter ended June 30, 2020, net interest income after loan loss provision was reduced due to COVID-19 by $1,492. In addition, the Company wrote off $469 of interest income directly related to COVID-19. During the quarter ended June 30, 2020, impairment loss on foreclosed assets of $91 was due to the impact of COVID-19. |
Non-Interest Expense Detail
Non-Interest Expense Detail | 9 Months Ended |
Sep. 30, 2020 | |
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, 2020 2019 Selling, general and administrative expenses Legal and accounting $ 202 $ 211 Salaries and related expenses 684 1,143 Board related expenses 74 66 Advertising 54 102 Rent and utilities 36 36 Loan and foreclosed asset expenses 303 179 Travel 105 101 Other 78 109 Total SG&A $ 1,536 $ 1,947 |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2020 | |
Subsequent Events [Abstract] | |
Subsequent Events | 13. Subsequent Events Management of the Company has evaluated subsequent events through November 5, 2020, the date these interim condensed consolidated financial statements were issued. |
Description of Business and B_2
Description of Business and Basis of Presentation (Policies) | 9 Months Ended |
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
Description of Business | Description of Business Shepherd’s Finance, LLC and subsidiary (the “Company”) was originally formed as a Pennsylvania limited liability company on May 10, 2007. The Company is the sole member of a consolidating subsidiary, 84 REPA, LLC. The Company operates pursuant to its Second Amended and Restated Operating Agreement, as amended, by and among Daniel M. Wallach and the other members of the Company effective as of March 16, 2017. As of September 30, 2020, the Company extends commercial loans to residential homebuilders (in 21 states) to: ● construct single family homes, ● develop undeveloped land into residential building lots, and ● purchase and improve for sale older homes. |
Basis of Presentation | Basis of Presentation The accompanying (a) interim condensed consolidated balance sheet as of September 30, 2020, 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, the instructions to Form 10-Q and Article 8 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, 2020. These unaudited interim condensed consolidated financial statements should be read in conjunction with the 2019 consolidated financial statements and notes thereto (the “2019 Financial Statements”) included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 (the “2019 Form 10-K”). The accounting policies followed by the Company are set forth in Note 2 – Summary of Significant Accounting Policies |
Accounting Standards to be Adopted | Accounting Standards to be Adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2016-13, “ Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments Codification Improvements to Topic 326, Financial Instruments—Credit Losses |
Fair Value (Tables)
Fair Value (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
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, 2020 and December 31, 2019. September 30, 2020 Quoted Prices in Active Markets for Identical Significant Other Observable Significant Unobservable Carrying Estimated Assets Inputs Inputs Amount Fair Value Level 1 Level 2 Level 3 Foreclosed assets $ 3,690 $ 3,690 $ - $ - $ 3,690 Impaired loans due to COVID-19, net 9,107 9,107 - - 9,107 Other impaired loans, net 1,625 1,625 - - 1,625 Total $ 14,422 $ 14,422 $ - $ - $ 14,422 December 31, 2019 Quoted Prices in Active Markets for Identical Significant Other Observable Significant Unobservable Carrying Estimated Assets Inputs Inputs Amount Fair Value Level 1 Level 2 Level 3 Foreclosed assets $ 4,916 $ 4,916 $ - $ - $ 4,916 Impaired assets, net 1,487 1,487 - - 1,487 Total $ 6,403 $ 6,403 $ - $ - $ 6,403 |
Schedule of Fair Value Estimates for Financial Instruments | The table below is a summary of fair value estimates for financial instruments: September 30, 2020 December 31, 2019 Carrying Estimated Carrying Estimated Amount Fair Value Amount Fair Value Financial Assets Cash and cash equivalents $ 3,150 $ 3,150 $ 1,883 $ 1,883 Loans receivable, net 47,984 47,984 55,369 55,369 Accrued interest on loans 748 748 1,031 1,031 Financial Liabilities Customer interest escrow 447 447 643 643 Notes payable secured, net 22,753 22,753 26,991 26,991 Notes payable unsecured, net 26,484 26,484 26,520 26,520 PPP Loan and EIDL Advance 371 371 - - Accrued interest payable 3,047 3,047 2,533 2,533 |
Financing Receivables (Tables)
Financing Receivables (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Receivables [Abstract] | |
Schedule of Financing Receivables | Financing receivables are comprised of the following as of September 30, 2020 and December 31, 2019: September 30, 2020 December 31, 2019 Loans receivable, gross $ 51,521 $ 57,608 Less: Deferred loan fees (1,116 ) (856 ) Less: Deposits (1,400 ) (1,352 ) Plus: Deferred origination costs 375 204 Less: Allowance for loan losses (1,396 ) (235 ) Loans receivable, net $ 47,984 $ 55,369 |
Schedule of Commercial Loans - Construction Loan Portfolio Summary | The following is a summary of the loan portfolio to builders for home construction loans as of September 30, 2020 and December 31, 2019: 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 2020 21 67 235 $ 88,860 $ 63,928 $ 42,368 72 % (3) 5 % 2019 21 70 241 93,211 65,273 48,611 70 % (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. |
Schedule of 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, 2020 and December 31, 2019: Year Number of States Number of Borrowers Number of Loans Gross Value of Collateral (1) Commitment Amount (2) Gross Amount Outstanding Loan to Value Ratio (3) Interest Spread 2020 4 5 8 $ 10,748 $ 10,608 $ 9,153 86 % 7 % 2019 4 5 9 13,007 9,866 8,997 69 % 7 % (1) The value is determined by the appraised value adjusted for remaining costs to be paid. A portion of this collateral is $1,550 and $1,470 as of September 30, 2020 and December 31, 2019, respectively, 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 might be difficult to sell, which may impact our ability to recover the loan balance. In addition, a portion of the collateral value is estimated based on the selling prices anticipated for the homes. (2) The commitment amount does not include letters of credit and cash bonds. (3) The loan to value ratio is calculated by taking the outstanding amount and dividing by the appraised value calculated as described above. |
Summary of Finance Receivables by Classification | Finance receivables – By risk rating: September 30, 2020 December 31, 2019 Pass $ 37,314 $ 53,542 Special mention 2,353 2,571 Classified – accruing - - Classified – nonaccrual 11,854 1,495 Total $ 51,521 $ 57,608 |
Schedule of Finance Receivables Impairment Calculation Method | Finance receivables – Method of impairment calculation: September 30, 2020 December 31, 2019 Performing loans evaluated individually $ 16,954 $ 26,233 Performing loans evaluated collectively 22,713 29,880 Non-performing loans without a specific reserve 4,120 1,467 Non-performing loans with a specific reserve to COVID-19 7,015 - Non-performing loans with a specific reserve 719 28 Total evaluated collectively for loan losses $ 51,521 $ 57,608 |
Schedule of Impaired Loans | The following is a summary of our impaired nonaccrual commercial construction loans as of September 30, 2020 and December 31, 2019. September 30, 2020 December 31, 2019 Unpaid principal balance (contractual obligation from customer) $ 11,875 $ 1,495 Charge-offs and payments applied (21 ) - Gross value before related allowance 11,854 1,495 Related allowance (1,122 ) (8 ) Value after allowance $ 10,732 $ 1,487 |
Summary of Concentration Risks | Our concentration risks for our top three customers listed by geographic real estate market are summarized in the table below: September 30, 2020 December 31, 2019 Percent of Percent of Borrower Loan Borrower Loan City Commitments City Commitments Highest concentration risk Pittsburgh, PA 26 % Pittsburgh, PA 25 % Second highest concentration risk Orlando, FL 13 % Orlando, FL 15 % Third highest concentration risk Cape Coral, FL 7 % Cape Coral, FL 3 % |
Real Estate Investment Assets (
Real Estate Investment Assets (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Receivables [Abstract] | |
Schedule of Roll Forward of Real Estate Investment Assets | The following table is a roll forward of real estate investment assets: Nine Months Ended September 30, 2020 Year Ended December 31, 2019 Nine Months Ended September 30, 2019 Beginning balance $ – $ – $ – Transfers from loans 1,140 – – Additions for construction/development 14 – – Ending balance $ 1,154 $ – $ – |
Foreclosed Assets (Tables)
Foreclosed Assets (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Repossessed Assets [Abstract] | |
Schedule of Roll Forward of Foreclosed Assets | The following table is a roll forward of foreclosed assets: Nine Months Ended September 30, 2020 Year Ended December 31, 2019 Nine Months Ended September 30, 2019 Beginning balance $ 4,916 $ 5,973 $ 5,973 Additions from loans 279 3,352 2,006 Additions for construction/development 801 763 608 Sale proceeds (2,246 ) (4,543 ) (4,543 ) Loss on sale (86 ) (274 ) (274 ) Gain on foreclosure - 203 181 Gain on sale of foreclosed assets 138 - - Impairment gain on foreclosed assets 68 - - Impairment gain on foreclosed assets due to COVID-19 27 - - Loss on foreclosure (2 ) - (169 ) Impairment loss on foreclosed assets (114 ) - (107 ) Impairment loss on foreclosed assets due to COVID-19 (91 ) (558 ) - Ending balance $ 3,690 $ 4,916 $ 3,675 |
Borrowings (Tables)
Borrowings (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Debt Disclosure [Abstract] | |
Schedule of Borrowings | The following table displays our borrowings and a ranking of priority: Priority Rank September 30, 2020 December 31, 2019 Borrowing Source Purchase and sale agreements and other secured borrowings 1 $ 22,762 $ 26,806 Secured lines of credit from affiliates 2 1 189 Unsecured line of credit (senior) 3 - 500 PPP Loan and EIDL Advance 3 371 - Other unsecured debt (senior subordinated) 4 1,377 1,407 Unsecured Notes through our public offering, gross 5 21,319 20,308 Other unsecured debt (subordinated) 5 3,633 4,131 Other unsecured debt (junior subordinated) 6 590 590 Total $ 50,053 $ 53,931 |
Schedule of Maturities of Debt | The following table shows the maturity of outstanding debt as of September 30, 2020: Year Maturing Total Amount Maturing Public Offering Other Unsecured (1) Secured Borrowings 2020 $ 25,431 $ 974 $ 2,676 $ 21,781 2021 13,257 12,073 1,168 16 2022 5,541 3,706 1,819 16 2023 1,119 824 189 106 2024 and thereafter 4,705 3,742 120 843 Total $ 50,053 $ 21,319 $ 5,972 $ 22,762 (1) Other Unsecured includes our PPP Loan of $361 and EIDL Advance of $10 (each described below) of which $21, $247, and $103, collectively, matures during 2020, 2021 and 2022, respectively. All or a portion of the PPP Loan may be forgiven. |
Schedule of Secured Borrowings | Borrowings secured by loan assets are summarized below: September 30, 2020 December 31, 2019 Book Value of Loans which Served as Collateral Due from Shepherd’s Finance to Loan Purchaser or Lender Book Value of Loans which Served as Collateral Due from Shepherd’s Finance to Loan Purchaser or Lender Loan Purchaser Builder Finance, Inc. $ 8,860 $ 6,202 $ 13,711 $ 9,375 S.K. Funding, LLC 7,063 4,791 10,394 6,771 Lender Stephen K. Shuman 1,722 1,325 1,785 1,325 Jeffrey Eppinger 3,170 1,500 1,821 1,000 Hardy Enterprises, Inc. 1,726 1,000 1,684 1,000 Gary Zentner 389 250 472 250 R. Scott Summers 1,416 847 841 628 Paul Swanson 8,304 5,862 8,377 5,824 Total $ 32,650 $ 21,777 $ 39,085 $ 26,173 |
Schedule of Roll Forward of Notes Outstanding | The following table shows the roll forward of our Notes Program: Nine Months Ended September 30, 2020 Year Ended December 31, 2019 Nine Months Ended September 30, 2019 Gross Notes outstanding, beginning of period $ 20,308 $ 17,348 $ 17,348 Notes issued 6,454 11,127 9,201 Note repayments / redemptions (5,443 ) (8,167 ) (5,793 ) Gross Notes outstanding, end of period $ 21,319 $ 20,308 $ 20,756 Less deferred financing costs, net 435 416 425 Notes outstanding, net $ 20,884 $ 19,892 $ 20,331 |
Schedule of Roll Forward of Deferred Financing Costs | The following is a roll forward of deferred financing costs: Nine Months Ended September 30, 2020 Year Ended December 31, 2019 Nine Months Ended September 30, 2019 Deferred financing costs, beginning balance $ 786 $ 1,212 $ 1,212 Additions 131 365 336 Disposals - (791 ) - Deferred financing costs, ending balance 917 786 1,548 Less accumulated amortization (482 ) (370 ) (1,123 ) Deferred financing costs, net $ 435 $ 416 $ 425 |
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 Ended September 30, 2020 Year Ended December 31, 2019 Nine Months Ended September 30, 2019 Accumulated amortization, beginning balance $ 370 $ 1,000 $ 1,000 Additions 112 161 123 Disposals - (791 ) - Accumulated amortization, ending balance $ 482 $ 370 $ 1,123 |
Schedule of Other Unsecured Loans | Our other unsecured debts are detailed below: Principal Amount Outstanding as of Loan Maturity Date Interest Rate (1) September 30, 2020 December 31, 2019 Unsecured Note with Seven Kings Holdings, Inc. Demand (2) 9.5 % $ 500 $ 500 Unsecured Line of Credit from Paul Swanson October 2020 (6) 10.0 % 1,138 1,176 Subordinated Promissory Note October 2020 9.5 % 563 563 Subordinated Promissory Note December 2021 10.5 % 146 146 Subordinated Promissory Note April 2024 10.0 % 100 100 Subordinated Promissory Note April 2021 10.0 % 174 174 Subordinated Promissory Note August 2022 11.0 % 200 200 Subordinated Promissory Note March 2023 11.0 % 169 169 Subordinated Promissory Note April 2020 6.5 % - 500 Subordinated Promissory Note February 2021 11.0 % 600 600 Subordinated Promissory Note Demand 5.0 % - 500 Subordinated Promissory Note December 2020 5.0 % 3 3 Subordinated Promissory Note December 2023 11.0 % 20 - Subordinated Promissory Note February 2024 11.0 % 20 - Senior Subordinated Promissory Note March 2022 (3) 10.0 % 370 400 Senior Subordinated Promissory Note March 2022 (4) 1.0 % 728 728 Junior Subordinated Promissory Note March 2022 (4) 22.5 % 417 417 Senior Subordinated Promissory Note October 2020 (5) 1.0 % 279 279 Junior Subordinated Promissory Note October 2020 (5) 20.0 % 173 173 $ 5,600 $ 6,628 (1) (2) (3) (4) (5) (6) |
Redeemable Preferred Equity (Ta
Redeemable Preferred Equity (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Equity [Abstract] | |
Schedule of Roll Forward of Redeemable Preferred Equity | The following is a roll forward of our Series C cumulative preferred equity (“Series C Preferred Units”): Nine Months Ended September 30, 2020 Year Ended December 31, 2019 Nine Months Ended September 30, 2019 Beginning balance $ 2,959 $ 2,385 $ 2,385 Additions from new investment - 300 200 Redemptions (37 ) (42 ) (30 ) Additions from reinvestment 275 316 229 Ending balance $ 3,197 $ 2,959 $ 2,784 |
Schedule of Redemption Option for Investors | The following table shows the earliest redemption options for investors in our Series C Preferred Units as of September 30, 2020: Year of Available Redemption Total Amount Redeemable 2024 $ 2,963 2025 234 Total $ 3,197 |
Selected Quarterly Condensed _2
Selected Quarterly Condensed Consolidated Financial Data (Unaudited) (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Quarterly Financial Information Disclosure [Abstract] | |
Schedule of Unaudited Quarterly Condensed Consolidated Financial Data | Summarized unaudited quarterly condensed consolidated financial data for the quarters of 2020 and 2019 are as follows: Quarter 3 Quarter 2 Quarter 1 Quarter 4 Quarter 3 Quarter 2 Quarter 1 2020 2020 (1) 2020 2019 2019 2019 2019 Net Interest Income (loss) $ 389 $ (228 ) $ 990 $ 1,138 $ 1,118 $ 969 $ 1,126 Loan loss provision 70 1,560 35 21 3 151 47 Net (Loss) Interest Income after Loan Loss Provision 319 (1,788 ) 955 1,117 1,115 818 1,079 Gain on sale of foreclosed assets 135 3 – – – – – Gain on foreclosure of assets – – – 22 86 95 – Impairment gain on foreclosed assets 95 – – – – – SG&A Expense 367 462 708 447 703 620 624 Depreciation and Amortization 21 21 21 26 21 22 23 Loss on Sale of Foreclosed Assets 51 – 35 – 274 – – Loss on Foreclosure of Assets 2 – – – – 169 – Impairment Loss on Foreclosed Assets 4 91 109 282 – 27 80 Net (Loss) Income $ 104 $ (2,359 ) $ 82 $ 384 $ 203 $ 75 $ 352 (1) During the quarter ended June 30, 2020, net interest income after loan loss provision was reduced due to COVID-19 by $1,492. In addition, the Company wrote off $469 of interest income directly related to COVID-19. During the quarter ended June 30, 2020, impairment loss on foreclosed assets of $91 was due to the impact of COVID-19. |
Non-Interest Expense Detail (Ta
Non-Interest Expense Detail (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
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, 2020 2019 Selling, general and administrative expenses Legal and accounting $ 202 $ 211 Salaries and related expenses 684 1,143 Board related expenses 74 66 Advertising 54 102 Rent and utilities 36 36 Loan and foreclosed asset expenses 303 179 Travel 105 101 Other 78 109 Total SG&A $ 1,536 $ 1,947 |
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, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Dec. 31, 2018 |
Foreclosed assets | $ 3,690 | $ 4,916 | $ 3,675 | $ 5,973 |
Carrying Amount [Member] | ||||
Foreclosed assets | 3,690 | 4,916 | ||
Impaired loans due to COVID-19, net | 9,107 | |||
Other impaired loans, net | 1,625 | |||
Impaired assets, net | 1,487 | |||
Total | 14,422 | 6,403 | ||
Estimated Fair Value [Member] | ||||
Foreclosed assets | 3,690 | 4,916 | ||
Impaired loans due to COVID-19, net | 9,107 | |||
Other impaired loans, net | 1,625 | |||
Impaired assets, net | 1,487 | |||
Total | 14,422 | 6,403 | ||
Quoted Prices in Active Markets for Identical Assets Level 1 [Member] | ||||
Foreclosed assets | ||||
Impaired loans due to COVID-19, net | ||||
Other impaired loans, net | ||||
Impaired assets, net | ||||
Total | ||||
Significant Other Observable Inputs Level 2 [Member] | ||||
Foreclosed assets | ||||
Impaired loans due to COVID-19, net | ||||
Other impaired loans, net | ||||
Impaired assets, net | ||||
Total | ||||
Significant Unobservable Inputs Level 3 [Member] | ||||
Foreclosed assets | 3,690 | 4,916 | ||
Impaired loans due to COVID-19, net | 9,107 | |||
Other impaired loans, net | 1,625 | |||
Impaired assets, net | 1,487 | |||
Total | $ 14,422 | $ 6,403 |
Fair Value - Schedule of Fair V
Fair Value - Schedule of Fair Value Estimates for Financial Instruments (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Carrying Amount [Member] | ||
Financial Assets, Cash and cash equivalents | $ 3,150 | $ 1,883 |
Financial Assets, Loans receivable, net | 47,984 | 55,369 |
Financial Assets, Accrued interest on loans | 748 | 1,031 |
Financial Liabilities, Customer interest escrow | 447 | 643 |
Financial Liabilities, Notes payable secured, net | 22,753 | 26,991 |
Financial Liabilities, Notes payable unsecured, net | 26,484 | 26,520 |
Financial Liabilities, PPP Loan and EIDL Advance | 371 | |
Financial Liabilities, Accrued interest payable | 3,047 | 2,533 |
Estimated Fair Value [Member] | ||
Financial Assets, Cash and cash equivalents | 3,150 | 1,883 |
Financial Assets, Loans receivable, net | 47,984 | 55,369 |
Financial Assets, Accrued interest on loans | 778 | 1,031 |
Financial Liabilities, Customer interest escrow | 447 | 643 |
Financial Liabilities, Notes payable secured, net | 22,753 | 26,991 |
Financial Liabilities, Notes payable unsecured, net | 26,484 | 26,520 |
Financial Liabilities, PPP Loan and EIDL Advance | 371 | |
Financial Liabilities, Accrued interest payable | $ 3,047 | $ 2,533 |
Financing Receivables (Details
Financing Receivables (Details Narrative) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Allowance for loan losses | $ 1,396 | $ 235 |
Related to loans without specific reserves | 163 | 230 |
Reserve for loans impairment | 1,041 | |
Loans payable | 120 | |
Impairment of loans | 72 | |
Loans charge offs | 504 | 173 |
Loans Acquired with Deteriorated Credit Quality [Member] | ||
Finance receivable |
Financing Receivables - Schedul
Financing Receivables - Schedule of Financing Receivables (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Receivables [Abstract] | ||
Loans receivable, gross | $ 51,521 | $ 57,608 |
Less: Deferred loan fees | (1,116) | (856) |
Less: Deposits | (1,400) | (1,352) |
Plus: Deferred origination costs | 375 | 204 |
Less: Allowance for loan losses | (1,396) | (235) |
Loans receivable, net | $ 47,984 | $ 55,369 |
Financing Receivables - Sched_2
Financing Receivables - Schedule of Commercial Loans - Construction Loan Portfolio Summary (Details) $ in Thousands | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2020USD ($)Integer | Dec. 31, 2019USD ($)Integer | ||
Summary Of Loan Portfolio To Builders For Home Construction [Line Items] | |||
Gross Amount Outstanding | $ 51,521 | $ 57,608 | |
Home Construction Loans [Member] | |||
Summary Of Loan Portfolio To Builders For Home Construction [Line Items] | |||
Number of States | Integer | 21 | 21 | |
Number of Borrowers | Integer | 67 | 70 | |
Number of Loans | Integer | 235 | 241 | |
Value of Collateral | [1] | $ 88,860 | $ 93,211 |
Commitment Amount | 63,928 | 65,273 | |
Gross Amount Outstanding | $ 42,368 | $ 48,611 | |
Loan to Value Ratio | [2],[3] | 72.00% | 70.00% |
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 - Sched_3
Financing Receivables - Schedule of Commercial Loans - Real Estate Development Loan Portfolio Summary (Details) $ in Thousands | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2020USD ($)Integer | Dec. 31, 2019USD ($)Integer | ||
Real Estate Development Loan Portfolio [Line Items] | |||
Gross Amount Outstanding | $ 51,521 | $ 57,608 | |
Real Estate Development [Member] | |||
Real Estate Development Loan Portfolio [Line Items] | |||
Number of States | Integer | 4 | 4 | |
Number of Borrowers | Integer | 5 | 5 | |
Number of Loans | Integer | 8 | 9 | |
Gross Value of Collateral | [1] | $ 10,748 | $ 13,007 |
Commitment Amount | [2] | 10,608 | 9,866 |
Gross Amount Outstanding | $ 9,153 | $ 8,997 | |
Loan to Value Ratio | [3] | 86.00% | 69.00% |
Interest Spread | 7.00% | 7.00% | |
[1] | The value is determined by the appraised value adjusted for remaining costs to be paid. A portion of this collateral is $1,550 and $1,470 as of September 30, 2020 and December 31, 2019, respectively, of preferred equity in our Company. In the event of a foreclosure on the property securing these loans, the portion of our collateral that is preferred equity might be difficult to sell, which may impact our ability to recover the loan balance. In addition, a portion of the collateral value is estimated based on the selling prices anticipated for the homes. | ||
[2] | The commitment amount does not include letters of credit and cash bonds. | ||
[3] | The loan to value ratio is calculated by taking the outstanding amount and dividing by the appraised value calculated as described above. |
Financing Receivables - Sched_4
Financing Receivables - Schedule of Commercial Loans - Real Estate Development Loan Portfolio Summary (Details) (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Receivables [Abstract] | ||
Collateral of preferred equity | $ 1,550 | $ 1,470 |
Financing Receivables - Summary
Financing Receivables - Summary of Finance Receivables by Classification (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Loans receivable, gross | $ 51,521 | $ 57,608 |
Financing Receivable [Member] | ||
Loans receivable, gross | 51,521 | 57,608 |
Financing Receivable [Member] | Pass [Member] | ||
Loans receivable, gross | 37,314 | 53,542 |
Financing Receivable [Member] | Special Mention [Member] | ||
Loans receivable, gross | 2,353 | 2,571 |
Financing Receivable [Member] | Classified - Accruing [Member] | ||
Loans receivable, gross | ||
Financing Receivable [Member] | Classified - Nonaccrual [Member] | ||
Loans receivable, gross | $ 11,854 | $ 1,495 |
Financing Receivables - Sched_5
Financing Receivables - Schedule of Finance Receivables Impairment Calculation Method (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Loans receivable, gross | $ 51,521 | $ 57,608 |
Financing Receivable [Member] | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Loans receivable, gross | 51,521 | 57,608 |
Financing Receivable [Member] | Performing Loans Evaluated Individually [Member] | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Loans receivable, gross | 16,954 | 26,233 |
Financing Receivable [Member] | Performing Loans Evaluated Collectively [Member] | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Loans receivable, gross | 22,713 | 29,880 |
Financing Receivable [Member] | Non-Performing Loans Without a Specific Reserve [Member] | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Loans receivable, gross | 4,120 | 1,467 |
Financing Receivable [Member] | Non-performing Loans with a Specific Reserve to COVID-19 [Member] | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Loans receivable, gross | 7,015 | |
Financing Receivable [Member] | Non-performing Loans with a Specific Reserve [ Member] | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Loans receivable, gross | $ 719 | $ 28 |
Financing Receivables - Sched_6
Financing Receivables - Schedule of Impaired Loans (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Receivables [Abstract] | ||
Unpaid principal balance (contractual obligation from customer) | $ 11,875 | $ 1,495 |
Charge-offs and payments applied | (21) | |
Gross value before related allowance | 11,854 | 1,495 |
Related allowance | (1,122) | (8) |
Value after allowance | $ 10,732 | $ 1,487 |
Financing Receivables - Summa_2
Financing Receivables - Summary of Concentration Risks (Details) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Highest Concentration Risk [Member] | ||
Borrower City | Pittsburgh, PA | Pittsburgh, PA |
Percent of Loan Commitments | 26.00% | 25.00% |
Second Highest Concentration Risk [Member] | ||
Borrower City | Orlando, FL | Orlando, FL |
Percent of Loan Commitments | 13.00% | 15.00% |
Third Highest Concentration Risk [Member] | ||
Borrower City | Cape Coral, FL | Cape Coral, FL |
Percent of Loan Commitments | 7.00% | 3.00% |
Real Estate Investment Assets_2
Real Estate Investment Assets (Details Narrative) $ in Thousands | 9 Months Ended |
Sep. 30, 2020USD ($) | |
Real Estate Investment Assets Details Narrative Abstract | |
Extinguishing of the loans | $ 640 |
Payment of a management fee | $ 500 |
Real Estate Investment Assets -
Real Estate Investment Assets - Schedule of Roll Forward of Real Estate Investment Assets (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Real Estate Investment Assets - Schedule Of Roll Forward Of Real Estate Investment Assets | |||
Beginning balance | |||
Transfers from loans | 1,140 | ||
Additions for construction/development | 14 | ||
Ending balance | $ 1,154 |
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, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Repossessed Assets [Abstract] | ||||||||||
Beginning balance | $ 4,916 | $ 3,675 | $ 5,973 | $ 4,916 | $ 5,973 | $ 5,973 | ||||
Additions from loans | 279 | 2,006 | 3,352 | |||||||
Additions for construction/development | 801 | 608 | 763 | |||||||
Sale proceeds | (2,246) | (4,543) | (4,543) | |||||||
Loss on sale | (86) | (274) | (274) | |||||||
Gain on foreclosure | 181 | 203 | ||||||||
Gain on sale of foreclosed assets | 138 | |||||||||
Impairment gain on foreclosed assets | $ 95 | 95 | ||||||||
Impairment gain on foreclosed assets due to COVID-19 | 27 | |||||||||
Loss on foreclosure | (2) | (169) | ||||||||
Impairment loss on foreclosed assets | 4 | $ 91 | $ 109 | 282 | $ 27 | $ 80 | (114) | (107) | ||
Impairment loss on foreclosed assets due to COVID-19 | (91) | (558) | ||||||||
Ending balance | $ 3,690 | $ 4,916 | $ 3,675 | $ 3,690 | $ 3,675 | $ 4,916 |
Borrowings (Details Narrative)
Borrowings (Details Narrative) - USD ($) $ in Thousands | 1 Months Ended | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2020 | Dec. 31, 2019 | |
Secured deferred financing costs | $ 9 | $ 9 | $ 5 |
Unsecured Borrowings [Member] | Minimum [Member] | |||
Notes offering period | 12 months | ||
Unsecured Borrowings [Member] | Maximum [Member] | |||
Notes offering period | 48 months | ||
Secured Borrowings [Member] | |||
Borrowings under line of credit | 1 | $ 1 | |
Line of credit maximum borrowing capacity | $ 2,500 | $ 2,500 | |
Notes Program [Member] | |||
Debt instrument effective interest rate | 10.31% | 10.31% | 10.56% |
Paycheck Protection Program [Member] | |||
Company loan agreement to borrow | $ 361 | $ 361 | |
Eppinger LOC Agreement [Member] | Jeffrey Eppinger [Member] | |||
Revolving line of credit | During September 2020, we entered into an amended line of credit agreement (the "Eppinger LOC Agreement") with Jeffrey Eppinger. The original line of credit from Mr. Eppinger was one of the New LOC Agreements described in the 2019 Form 10-K. Pursuant to the Eppinger LOC Agreement, Mr. Eppinger will provide us with a revolving line of credit of $1,500, an increase of $500. Principal for the New LOC Agreements, as amended, will not exceed $5,500. All other terms were unchanged. | ||
Borrowings under line of credit | $ 1,500 | 1,500 | |
Increase in lines of credit principal | 500 | ||
Line of credit maximum borrowing capacity | $ 5,500 | $ 5,500 |
Borrowings - Schedule of Borrow
Borrowings - Schedule of Borrowings (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Debt Disclosure [Abstract] | ||
Purchase and sale agreements and other secured borrowings | $ 22,762 | $ 26,806 |
Secured lines of credit from affiliates | 1 | 189 |
Unsecured line of credit (senior) | 500 | |
PPP Loan and EIDL Advance | 371 | |
Other unsecured debt (senior subordinated) | 1,377 | 1,407 |
Unsecured Notes through our public offering, gross | 21,319 | 20,308 |
Other unsecured debt (subordinated) | 3,633 | 4,131 |
Other unsecured debt (junior subordinated) | 590 | 590 |
Total | $ 50,053 | $ 53,931 |
Borrowings - Schedule of Maturi
Borrowings - Schedule of Maturities of Debt (Details) $ in Thousands | Sep. 30, 2020USD ($) | |
Total Amount Maturing [Member] | ||
2020 | $ 25,431 | |
2021 | 13,257 | |
2022 | 5,541 | |
2023 | 1,119 | |
2024 and thereafter | 4,705 | |
Total | 50,053 | |
Public Offering [Member] | ||
2020 | 974 | |
2021 | 12,073 | |
2022 | 3,706 | |
2023 | 824 | |
2024 and thereafter | 3,742 | |
Total | 21,319 | |
Other Unsecured [Member] | ||
2020 | 2,676 | [1] |
2021 | 1,168 | [1] |
2022 | 1,819 | [1] |
2023 | 189 | [1] |
2024 and thereafter | 120 | [1] |
Total | 5,972 | [1] |
Secured Borrowings [Member] | ||
2020 | 21,781 | |
2021 | 16 | |
2022 | 16 | |
2023 | 106 | |
2024 and thereafter | 843 | |
Total | $ 22,762 | |
[1] | Other Unsecured includes our PPP Loan of $361 and EIDL Advance of $10 (each described below) of which $21, $247, and $103, collectively, matures during 2020, 2021 and 2022, respectively. All or a portion of the PPP Loan may be forgiven. |
Borrowings - Schedule of Matu_2
Borrowings - Schedule of Maturities of Debt (Details) (Parenthetical) - Paycheck Protection Program [Member] $ in Thousands | 9 Months Ended |
Sep. 30, 2020USD ($) | |
Company loan agreement to borrow | $ 361 |
Advance loan emergency grant for companies | 10 |
2020 | 21 |
2021 | 247 |
2022 | $ 103 |
Borrowings - Schedule of Secure
Borrowings - Schedule of Secured Borrowings (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Book Value of Loans which Served as Collateral | $ 32,650 | $ 39,085 |
Due from Shepherd's Finance to Loan Purchaser or Lender | 21,777 | 26,173 |
Stephen K Shuman [Member] | ||
Book Value of Loans which Served as Collateral | 1,722 | 1,785 |
Due from Shepherd's Finance to Loan Purchaser or Lender | 1,325 | 1,325 |
Jeffrey Eppinger [Member] | ||
Book Value of Loans which Served as Collateral | 3,170 | 1,821 |
Due from Shepherd's Finance to Loan Purchaser or Lender | 1,500 | 1,000 |
Gary Zentner [Member] | ||
Book Value of Loans which Served as Collateral | 389 | 472 |
Due from Shepherd's Finance to Loan Purchaser or Lender | 250 | 250 |
R. Scott Summers [Member] | ||
Book Value of Loans which Served as Collateral | 1,416 | 841 |
Due from Shepherd's Finance to Loan Purchaser or Lender | 847 | 628 |
Paul Swanson [Member] | ||
Book Value of Loans which Served as Collateral | 8,304 | 8,377 |
Due from Shepherd's Finance to Loan Purchaser or Lender | 5,862 | 5,824 |
Builder Finance, Inc. [Member] | ||
Book Value of Loans which Served as Collateral | 8,860 | 13,711 |
Due from Shepherd's Finance to Loan Purchaser or Lender | 6,202 | 9,375 |
S.K. Funding, LLC [Member] | ||
Book Value of Loans which Served as Collateral | 7,063 | 10,394 |
Due from Shepherd's Finance to Loan Purchaser or Lender | 4,791 | 6,771 |
Hardy Enterprises, Inc. [Member] | ||
Book Value of Loans which Served as Collateral | 1,726 | 1,684 |
Due from Shepherd's Finance to Loan Purchaser or Lender | $ 1,000 | $ 1,000 |
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, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Debt Disclosure [Abstract] | |||
Gross notes outstanding, beginning of period | $ 20,308 | $ 17,348 | $ 17,348 |
Notes issued | 6,454 | 9,201 | 11,127 |
Note repayments / redemptions | (5,443) | (5,793) | (8,167) |
Gross Notes outstanding, end of period | 21,319 | 20,756 | 20,308 |
Less deferred financing costs, net | 435 | 425 | 416 |
Notes outstanding, net | $ 20,884 | $ 20,331 | $ 19,892 |
Borrowings - Schedule of Roll_2
Borrowings - Schedule of Roll Forward of Deferred Financing Costs (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | |
Debt Disclosure [Abstract] | ||||
Deferred financing costs, beginning balance | $ 786 | $ 1,212 | $ 1,212 | |
Additions | 131 | 336 | 365 | |
Disposals | (791) | |||
Deferred financing costs, ending balance | 917 | 1,548 | 786 | |
Less accumulated amortization | (482) | (1,123) | (370) | $ (1,000) |
Deferred financing costs, net | $ 435 | $ 425 | $ 416 |
Borrowings - Schedule of Roll_3
Borrowings - Schedule of Roll Forward of Accumulated Amortization of Deferred Financing Costs (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Debt Disclosure [Abstract] | |||
Accumulated amortization, beginning balance | $ 370 | $ 1,000 | $ 1,000 |
Additions | 112 | 123 | 161 |
Disposals | (791) | ||
Accumulated amortization, ending balance | $ 482 | $ 1,123 | $ 370 |
Borrowings - Schedule of Other
Borrowings - Schedule of Other Unsecured Loans (Details) - USD ($) $ in Thousands | 9 Months Ended | ||
Sep. 30, 2020 | Dec. 31, 2019 | ||
Unsecured Note with Seven Kings Holdings, Inc. [Member] | |||
Maturity Date | [1] | Demand | |
Interest Rate | [2] | 9.50% | |
Other Unsecured Loans | $ 500 | $ 500 | |
Unsecured Line of Credit from Paul Swanson [Member] | |||
Maturity Date | [3] | October 2020 | |
Interest Rate | [2] | 10.00% | |
Other Unsecured Loans | $ 1,138 | 1,176 | |
Subordinated Promissory Note [Member] | |||
Maturity Date | October 2020 | ||
Interest Rate | [2] | 9.50% | |
Other Unsecured Loans | $ 563 | 563 | |
Subordinated Promissory Note One [Member] | |||
Maturity Date | December 2021 | ||
Interest Rate | [2] | 10.50% | |
Other Unsecured Loans | $ 146 | 146 | |
Subordinated Promissory Note Two [Member] | |||
Maturity Date | April 2024 | ||
Interest Rate | [2] | 10.00% | |
Other Unsecured Loans | $ 100 | 100 | |
Subordinated Promissory Notes Three [Member] | |||
Maturity Date | April 2021 | ||
Interest Rate | [2] | 10.00% | |
Other Unsecured Loans | $ 174 | 174 | |
Subordinated Promissory Note Four [Member] | |||
Maturity Date | August 2022 | ||
Interest Rate | [2] | 11.00% | |
Other Unsecured Loans | $ 200 | 200 | |
Subordinated Promissory Note Five [Member] | |||
Maturity Date | March 2023 | ||
Interest Rate | [2] | 11.00% | |
Other Unsecured Loans | $ 169 | 169 | |
Subordinated Promissory Note Six [Member] | |||
Maturity Date | April 2020 | ||
Interest Rate | [2] | 6.50% | |
Other Unsecured Loans | 500 | ||
Subordinated Promissory Note Seven [Member] | |||
Maturity Date | February 2021 | ||
Interest Rate | [2] | 11.00% | |
Other Unsecured Loans | $ 600 | 600 | |
Subordinated Promissory Note Eight [Member] | |||
Maturity Date | Demand | ||
Interest Rate | [2] | 5.00% | |
Other Unsecured Loans | 500 | ||
Subordinated Promissory Note Nine [Member] | |||
Maturity Date | December 2020 | ||
Interest Rate | [2] | 5.00% | |
Other Unsecured Loans | $ 3 | 3 | |
Subordinated Promissory Note Ten [Member] | |||
Maturity Date | December 2023 | ||
Interest Rate | [2] | 11.00% | |
Other Unsecured Loans | $ 20 | ||
Subordinated Promissory Note Eleven [Member] | |||
Maturity Date | February 2024 | ||
Interest Rate | [2] | 11.00% | |
Other Unsecured Loans | $ 20 | ||
Senior Subordinated Promissory Note [Member] | |||
Maturity Date | [4] | March 2022 | |
Interest Rate | [2] | 10.00% | |
Other Unsecured Loans | $ 370 | 400 | |
Senior Subordinated Promissory Note One [Member] | |||
Maturity Date | [5] | March 2022 | |
Interest Rate | [2] | 1.00% | |
Other Unsecured Loans | $ 728 | 728 | |
Junior Subordinated Promissory Note [Member] | |||
Maturity Date | [5] | March 2022 | |
Interest Rate | [2] | 22.50% | |
Other Unsecured Loans | $ 417 | 417 | |
Senior Subordinated Promissory Note Two [Member] | |||
Maturity Date | [6] | October 2020 | |
Interest Rate | [2] | 1.00% | |
Other Unsecured Loans | $ 279 | 279 | |
Junior Subordinated Promissory Note One [Member] | |||
Maturity Date | [6] | October 2020 | |
Interest Rate | [2] | 20.00% | |
Other Unsecured Loans | $ 173 | 173 | |
Other Unsecured Debt [Member] | |||
Other Unsecured Loans | $ 5,600 | 6,628 | |
Unsecured Line of Credit from Builder Finance, Inc. [Member] | |||
Other Unsecured Loans | |||
[1] | Due six months after lender gives notice. | ||
[2] | Interest rate per annum, based upon actual days outstanding and a 365/366-day year. | ||
[3] | Amount due in October 2020 is $1,000 with the remainder due in November 2020. | ||
[4] | Lender may require us to repay $20 of principal and all unpaid interest with 10 days' notice. | ||
[5] | These notes were issued to the same holder and, when calculated together, yield a blended rate of 11% per annum. | ||
[6] | These notes were issued to the same holder and, when calculated together, yield a blended return of 10% per annum. |
Borrowings - Schedule of Othe_2
Borrowings - Schedule of Other Unsecured Loans (Details) (Parenthetical) - USD ($) $ in Thousands | 1 Months Ended | 9 Months Ended | |
Oct. 30, 2020 | Sep. 30, 2020 | Dec. 31, 2019 | |
Unsecured debt | $ 1,000 | $ 26,484 | $ 26,520 |
Debt instrument maturity date | Nov. 30, 2020 | ||
Senior Subordinated Promissory Note Two [Member] | |||
Debt yield return percentage | 10.00% | ||
Senior Subordinated Promissory Note One [Member] | |||
Debt yield return percentage | 11.00% | ||
Senior Subordinated Promissory Note [Member] | |||
Debt, principal amount | $ 20 |
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, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Equity [Abstract] | |||
Series C Cumulative Preferred Equity, beginning balance | $ 2,959 | $ 2,385 | $ 2,385 |
Additions from new investment | 200 | 300 | |
Redemptions | (37) | (30) | (42) |
Additions from reinvestment | 275 | 229 | 316 |
Series C Cumulative Preferred Equity, ending balance | $ 3,197 | $ 2,784 | $ 2,959 |
Redeemable Preferred Equity -_2
Redeemable Preferred Equity - Schedule of Redemption Option for Investors (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Dec. 31, 2018 |
Total Amount Redeemable | $ 3,197 | $ 2,959 | $ 2,784 | $ 2,385 |
2024 [Member] | ||||
Total Amount Redeemable | 2,963 | |||
2025 [Member] | ||||
Total Amount Redeemable | $ 234 |
Members' Capital (Details Narra
Members' Capital (Details Narrative) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2015 | Sep. 30, 2020 | Jun. 30, 2020 | Sep. 30, 2020 | Dec. 31, 2019 | |
Series B preferred equity | $ 1,550 | $ 1,550 | $ 1,470 | ||
Class A Common Units [Member] | |||||
Common stock, units outstanding | 2,629 | 2,629 | 2,629 | ||
Series B Preferred Units [Member] | |||||
Number of units agreed to purchase | Series B Preferred Units were initially issued to the Hoskins Group (consisting of Benjamin Marcus Homes, LLC, Investor's Mark Acquisitions, LLC, and Mark L. Hoskins) 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 subdivisions. | ||||
Number of preferred units value to purchase during the period | $ 10 | ||||
Series B preferred units, shares | 15.5 | 15.5 | |||
Series B preferred equity | $ 1,550 | $ 1,550 | |||
Series B Cumulative Preferred Units [Member] | |||||
Earned but unpaid distributions discription | Earned but unpaid distributions on the Series B cumulative preferred units for the second and third quarters of 2020 total approximately $37 and $28, respectively, and have been rolled forward to be paid in a subsequent quarter. | ||||
Earned but unpaid distribution amount | $ 28 | $ 37 |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) $ in Thousands | Sep. 30, 2020USD ($) |
Daniel M. Wallach [Member] | |
Debt from related party current borrowing capacity | $ 1,249 |
Daniel M. Wallach Legacy [Member] | |
Debt from related party current borrowing capacity | 250 |
William Myrick [Member] | |
Debt from related party current borrowing capacity | 1,000 |
Loan outstanding | $ 198 |
Commitments and Contingencies (
Commitments and Contingencies (Details Narrative) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Commitments and Contingencies Disclosure [Abstract] | ||
Letter of credit, amount outstanding | $ 21,560 | $ 16,662 |
Selected Quarterly Condensed _3
Selected Quarterly Condensed Consolidated Financial Data (Unaudited) - Schedule of Unaudited Quarterly Condensed Consolidated Financial Data (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||||||
Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Quarterly Financial Information Disclosure [Abstract] | ||||||||||
Net Interest Income (loss) | $ 389 | $ (228) | $ 990 | $ 1,138 | $ 1,118 | $ 969 | $ 1,126 | $ 1,152 | $ 3,213 | |
Loan loss provision | 70 | 1,560 | 35 | 21 | 3 | 151 | 47 | 1,665 | 201 | |
Net (loss) interest Income after Loan Loss Provision | (1,788) | 955 | 1,117 | 1,115 | 818 | 1,079 | ||||
Gain on sale of foreclosed assets | 135 | 3 | 138 | |||||||
Gain on foreclosure of assets | 22 | 86 | 95 | 181 | ||||||
Impairment gain on foreclosed assets | 95 | 95 | ||||||||
SG&A Expense | 367 | 462 | 708 | 447 | 703 | 620 | 624 | 1,536 | 1,947 | |
Depreciation and Amortization | 21 | 21 | 21 | 26 | 21 | 22 | 23 | |||
Loss on Sale of Foreclosed Assets | 51 | 35 | 274 | |||||||
Loss on Foreclosure of Assets | 2 | 169 | 2 | 169 | ||||||
Impairment Loss on Foreclosed Assets | 4 | 91 | 109 | 282 | 27 | 80 | $ (114) | $ (107) | ||
Net (loss) income | $ 104 | $ (2,359) | $ 82 | $ 384 | $ 203 | $ 75 | $ 352 |
Selected Quarterly Condensed _4
Selected Quarterly Condensed Consolidated Financial Data - Schedule of Unaudited Quarterly Condensed Consolidated Financial Data (Details) (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||||||
Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Quarterly Financial Information Disclosure [Abstract] | ||||||||||
Net interest income after loan loss provision | $ 1,492 | |||||||||
Write-off Interest income | 469 | |||||||||
Impairment loss on foreclosed assets | $ 4 | $ 91 | $ 109 | $ 282 | $ 27 | $ 80 | $ (114) | $ (107) |
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, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Non-interest Expense Detail | |||||||||
Legal and accounting | $ 202 | $ 211 | |||||||
Salaries and related expenses | 684 | 1,143 | |||||||
Board related expenses | 74 | 66 | |||||||
Advertising | 54 | 102 | |||||||
Rent and utilities | 36 | 36 | |||||||
Loan and foreclosed asset expenses | 303 | 179 | |||||||
Travel | 105 | 101 | |||||||
Other | 78 | 109 | |||||||
Total SG&A | $ 367 | $ 462 | $ 708 | $ 447 | $ 703 | $ 620 | $ 624 | $ 1,536 | $ 1,947 |