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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-K

☒ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Fiscal Year Ended December 31, ~~2024~~2025

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Transition Period From ________ to ________

Commission File Number 333-263759

SHEPHERD’S FINANCE, LLC

(Exact name of registrant as specified on its charter)

Delaware		36-4608739
(State or other jurisdiction of		(I.R.S. Employer
Incorporation or organization)		Identification No.)

13241 Bartram Park Blvd., Suite 2401, Jacksonville, Florida 32258

(Address of principal executive offices)

(302) 752-2688

(Registrant’s telephone number including area code)

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

Title of Each Class		Trading Symbol(s)		Name of Each Exchange on Which Registered
None		None		None

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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

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

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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

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

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

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

The aggregate market value of the common equity held by non-affiliates of the registrant as of ~~June~~December 3031, ~~2024~~2025: There is currently no established public market for the registrant’s membership interests.

DOCUMENTS INCORPORATED BY REFERENCE:

None.

FORM 10-K

SHEPHERD’S FINANCE, LLC

TABLE OF CONTENTS

Cautionary Note Regarding Forward-Looking Statements 3 PART I. 3 Item 1. Business 3 Item 1A. Risk Factors 13 Item 1B. Unresolved Staff Comments 27 Item 1C. Cybersecurity 27 Item 2. Properties 27 Item 3. Legal Proceedings 28 Item 4. Mine Safety Disclosures 28 PART II. 28 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 28 Item 6. [Reserved] 30 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 30 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 59 Item 8. Financial Statements and Supplementary Data 60 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 60 Item 9A. Controls and Procedures 60 Item 9B. Other Information 60 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 60 PART III. 61 Item 10. Directors, Executive Officers and Corporate Governance 61 Item 11. Executive Compensation 63 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 66 Item 13. Certain Relationships and Related Transactions, and Director Independence 67 Item 14. Principal Accountant Fees and Services 69 PART IV. 70 Item 15. Exhibits and Financial Statement Schedules 70 Item 16. Form 10-K Summary 70 SIGNATURES 75

Cautionary Note Regarding Forward-Looking Statements	3
PART I.	4
Item 1. Business	4
Item 1A. Risk Factors	13
Item 1B. Unresolved Staff Comments	27
Item 1C. Cybersecurity	27
Item 2. Properties	28
Item 3. Legal Proceedings	28
Item 4. Mine Safety Disclosures	28
PART II.	29
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	29
Item 6. [Reserved]	30
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 7A. Quantitative and Qualitative Disclosures About Market Risk	60
Item 8. Financial Statements and Supplementary Data	60
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	61
Item 9A. Controls and Procedures	61
Item 9B. Other Information	61
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	61
PART III.	62
Item 10. Directors, Executive Officers and Corporate Governance	62
Item 11. Executive Compensation	64
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	66
Item 13. Certain Relationships and Related Transactions, and Director Independence	67
Item 14. Principal Accountant Fees and Services	69
PART IV.	70
Item 15. Exhibits and Financial Statement Schedules	70
Item 16. Form 10-K Summary	70
SIGNATURES	74

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this Form 10-K of Shepherd’s Finance, LLC, other than historical facts, may be considered forward-looking statements within the meaning of the federal securities laws. Words such as “may,” “will,” “expect,” “anticipate,” “believe,” “estimate,” “continue,” “predict,” or other similar words identify forward-looking statements. Forward-looking statements appear in a number of places in this report, including without limitation, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and include statements regarding our intent, belief or current expectation about, among other things, trends affecting the markets in which we operate, our business, financial condition and growth strategies.

Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, forward-looking statements are not guarantees of future performance and involve risks and uncertainties. These risks and uncertainties include, but are not limited to: The recent rise in interest rates; the coming anticipated drop-in interest rates; general economic and geopolitical uncertainty; and those other risks described in other risk factors as outlined in this Form 10-K. Actual results may differ materially from those predicted in the forward-looking statements as a result of various factors, including but not limited to those set forth in the “Risk Factors” section of this Form 10-K. For further information regarding risks and uncertainties associated with our business, and important factors that could cause our actual results to vary materially from those expressed or implied in such forward-looking statements, please refer to the factors set forth in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections of the documents we file from time to time with the U.S. Securities and Exchange Commission, including, but not limited to, this report and subsequent Quarterly Reports on Form 10-Q.

When considering forward-looking statements, our risk factors, as well as the other cautionary statements in this report and in our Registration Statement on Form S-1, should be kept in mind. Do not place undue reliance on any forward-looking statement. We are not obligated to update forward-looking statements.

PART I

ITEM 1. BUSINESS

Purpose and History

Our business is focused on commercial lending to participants in the residential construction and development industry. We believe this market is underserved because of the lack of traditional lenders currently fully participating in the market. We were originally formed as a Pennsylvania limited liability company on May 10, 2007. To meet our business objectives, we changed our name to Shepherd’s Finance, LLC on December 2, 2011. We converted to a Delaware limited liability company on March 29, 2012. We are located in Jacksonville, Florida. As used in this report, “we,” “us,” “our,” and “Company” refer to Shepherd’s Finance, LLC. We have an internet website at www.shepherdsfinance.com. We are not incorporating by reference into this report any material from our website. The reference to our website is an inactive textual reference to the uniform resource locator (URL) and is for reference only.

WeThrough ~~are~~August 6, 2025, we were the sole member of two consolidating subsidiaries, ~~Shepherd’s~~339 ~~Stable~~Justabout ~~Investments~~Land Company (“339”) and Builder’s Assistance, LLC ~~and~~(“Builder’s ~~339~~Assistance”). ~~Justabout~~On ~~Land~~August ~~Company~~6, 2025, we sold 339. The Company operates pursuant to its Second Amended and Restated Limited Liability Company Agreement effective as of March 16, 2017, and as subsequently amended.

The commercial loans we extend are secured by mortgages on the underlying real estate. We extend and service commercial loans to small-to-medium sized homebuilders for the purchase of lots and/or the construction of homes thereon. In some circumstances, the lot is purchased with an older home on the lot which is then either removed or rehabilitated. If the home is rehabilitated, the loan is referred to as a “rehab” loan. We also extend and service loans for the purchase of lots and undeveloped land and the development of that land into residential building lots. In addition, we may, depending on our cash position and the opportunities available to us, do neither or either of the following: purchase defaulted unsecured debt from suppliers to homebuilders at a discount (and then secure that debt with real estate or other collateral), and purchase defaulted secured debt from financial institutions at a discount. In a few instances, we have acquired property and hired contractors to build a house or develop the land into lots. Sometimes this is done purely to make money, sometimes it is done to better secure our position in an ongoing project that we are lending on, and sometimes to help sell a piece of real estate that we own. At Builder’s Assistance, we help builders grow their net profit and production capacity. Currently most of that activity centers around offering accounting services. These services do not include tax services.

Experience and Resources

Our Chief Executive Officer (“CEO”), Mr. Wallach, has been in the housing industry since 1985. He was the Chief Financial Officer of a multi-billion-dollar supplier of building materials to home builders for 12 years. He also was responsible for that company’s lending business for 20 years. During those years, he was responsible for the creation and implementation of many secured lending programs to builders. Some of these were performed fully by that company, and some were performed in partnerships with banks. In general, the creation of all loans, and the resolution of defaulted loans, was his responsibility, whether the loans were company loans or loans in partnership with banks. Through these programs, he was responsible for the creation of approximately $2,000,000,000 in loans which generated interest spread of $50,000,000, after deducting for credit losses. Through the years, he managed the development of systems for reducing and managing the risks and losses on defaulted loans. Mr. Wallach also was responsible for that company’s unsecured debt to builders, which reached over $300,000,000 at its peak. He also gained experience in securing defaulted unsecured debt.

In addition, Barbara L. Harshman, our Executive Vice President of Operations, has 1921 years of experience in this type of lending. Catherine Leslie, our Chief Financial Officer (“CFO”) has 1923 years of SEC registrant accounting experience and over ~~seven~~eight years of experience in this industry. ~~William Myrick, our Partner has been in the housing industry for over 40 years including holding executive level positions for the majority of that time.~~ Mark Reynolds, our Executive Vice President of Sales has over 2224 years of experience in the construction finance industry. Thomas Spatola, our Executive Vice President of Lending Operations, has over 35 years of experience in the banking industry including secondary marketing, mortgage banking, consumer, commercial and builder/consumer construction lending.

Human Capital Resources

As of December 31, ~~2024~~2025, we have retained 2025 employees (~~three~~four of which are lending representatives) including our CEO. In his previous experience, our CEO had a nationwide staff of 20 lenders in the field. The development, attraction, and retention of employees is a strong focus for the Company, as it is fostering and maintaining a strong, healthy corporate culture. Additionally, as described in more detail elsewhere in this report, we have an executive compensation program designed to attract, retain, and motivate highly talented executives and to align each executive’s incentives with our short-term and long-term objectives, while maintaining a healthy and stable financial position.

Opportunity, Strategy, and Approach

Background and Strategy

Finance markets are highly fragmented, with numerous large, mid-size, and small lenders and investment companies, such as banks, savings and loan associations, credit unions, insurance companies, private lenders and institutional lenders, all competing for investment opportunities. Many of these market participants experienced losses, as a result of the housing market (which started to decline in 2006, reached its ~~bottom~~ bottom in 2008, improved through ~~early~~late ~~2022~~2019, ~~then declined through most of 2023,~~ and since has been relatively stable nationally (within 20% of the December 2019 level), and their participation in lending in it. As a result of credit losses and restrictive government oversight, financial institutions are not participating in this market to the extent they had before the 2008 credit crisis. Nonregulated builder focused lenders (of which we are one) have increased their presence since 2008. Our goal is not to be the customer’s only source of commercial lending, but an extra, more user and capital-friendly piece of their financing. We help builders grow their businesses by requiring less money down than typical lenders, and the tradeoff for that is a higher cost for the builder (but typically a higher return percentage wise on their lower investment).

Our loans are marketed by lending representatives who work for us and are driven to maintain long-term customer relationships. Compensation for loan originators is focused on the profitability of loans originated, not simply the volume of loans originated.

Our investment policies may be amended or changed at any time by our board of managers. In the years ahead, we plan on maintaining or growing our current level of lending, increasing our geographic diversity, growing our rehab lending program, increasing our accounting services for builders’ revenue, and improving our financial performance. We may be adding systems and people to accomplish these goals.

Risk and Mitigation

We believe that, while creating speculative construction loans is a high-risk venture, the opportunity for margin, the differences in our lending versus typical small bank lending, and our loss mitigation techniques will all help this type of lending to continue to be a profitable business.

We engage in various activities to try to mitigate the risks inherent in this type of lending by:

● Keeping the loan-to-value ratio (“LTV”), between 60% and 75% on a portfolio basis, however, individual loans may, from time to time, have a greater LTV; ● Generally using deposits from the builder on home construction loans to ensure the completion of the home. Lending losses on defaulted loans are usually a higher percentage when the home is not built, or is only partially built; ● Having a higher yield than other forms of secured real estate lending; ● Using interest escrows for some of our loans; ● Aggressively working with builders who are in default on their loan before and during foreclosure. This technique generally yields a reduced realized loss; and ● Market grading. We review all lending markets, analyzing their historic housing start cycles. Then, the current position of housing starts is examined in each market. Markets are classified into volatile, average, or stable, and then graded based on that classification and our opinion of where the market is in its housing cycle. This grading is then used to determine the builder deposit amount, LTV, and how much of the lot purchase the builder is required to fund. Typically, builders who enter a market at one grade maintain that grade if they perform well in that market, even as the market changes its grade.

The following table contains items that we believe differentiate us from our competitors:

Item	Our Methods	Comments
Lending Regulation	We follow various state and federal laws but are not regulated and controlled by bank examiners from the government. We follow the best practices we have learned through our experience, some of which are required by banks.	For instance, banks are not required to buy title insurance by law, but typically banks do purchase title insurance for the properties on which they lend. We generally do not, as it is very difficult to collect on title policies. Instead, we use title searches to protect our interests.

FDIC Insurance	We do not offer FDIC insurance to our unsecured notes investors.	Our yield to our customers, and our cost of funds, is typically higher than that of most banks. We charge our borrowers higher interest rates than most banks do. We also save money by not paying for FDIC insurance.

Capital Structure	Typically, our unsecured notes offered through our notes program are due in one to four years, or when the Note matures.	This results in liquidity risk (i.e., funding borrowing requests or maturities of debt). Our assets typically turnover much quicker (about 4 times faster) than our average unsecured debt does, and our unsecured debt is mostly prepayable. These items help keep liquidity stable. Our development and lot loans typically have durations well beyond the construction loan timeframe.

Community Reinvestment Act (CRA)⁽¹⁾	We do not participate in the CRA.	Our sole purpose in making each individual loan is to maximize our returns while maintaining proper risk management.

Leverage	We try to maintain a 15% ratio of equity (including preferred equity) to loan assets.	Our equity to loan assets, net ratio was 13.9% as of December 31, 2025. The higher the percentage, the more potential losses the company can absorb without impacting debt holders.

Product Diversification	We generally make loans for builders to purchase lots and/or to construct or rehab homes.	We have extensive experience in our field.

Geographic Diversity	We provide lending services in 21 states as of December 31, 2025.	We believe that this geographic diversity helps in down markets, as not all housing markets decrease at the same rate and time.

Governmental Bailouts	Most likely not eligible.	We are not likely to be eligible for bank bailouts, which have happened periodically. We maintain a better leverage ratio to counter this.

Underwriting	We focus on items that, in our experience, tend to predict risk.	These items include using collateral, controlling LTVs, controlling the number of loans in one subdivision, underwriting appraisals, conducting property inspections, and maintaining certain files and documents similar to those that a bank might maintain.

Capital Structure	Typically, our unsecured notes offered through our notes program are due in one to four years, or when the Note matures.	This results in liquidity risk (i.e., funding borrowing requests or maturities of debt). Our assets typically turnover much quicker (about 4 times faster) than our average unsecured debt does, and our unsecured debt is mostly prepayable. These items help keep liquidity stable.
Community Reinvestment Act (CRA)(1)	We do not participate in the CRA.	Our sole purpose in making each individual loan is to maximize our returns while maintaining proper risk management.
Leverage	We try to maintain a 15% ratio of equity (including preferred equity) to loan assets.	Our equity to loan assets, net ratio was 17.8% as of December 31, 2024. The higher the percentage, the more potential losses the company can absorb without impacting debt holders.
Product Diversification	We generally make loans for builders to purchase lots and/or to construct or rehab homes.	We have extensive experience in our field.
Geographic Diversity	We lend in 20 states as of December 31, 2024.	We believe that this geographic diversity helps in down markets, as not all housing markets decrease at the same rate and time.
Governmental Bailouts	Most likely not eligible.	We are not likely to be eligible for bank bailouts, which have happened periodically. We maintain a better leverage ratio to counter this.
Underwriting	We focus on items that, in our experience, tend to predict risk.	These items include using collateral, controlling LTVs, controlling the number of loans in one subdivision, underwriting appraisals, conducting property inspections, and maintaining certain files and documents similar to those that a bank might maintain.

⁽¹⁾

The CRA subjects a bank who receives FDIC insurance to regulatory assessment to determine if the bank meets the credit needs of its entire community, and to consider that determination in its evaluation of any application made by the bank for, among other things, approval of the acquisition or establishment of a bank branch.

Lines of Business

Our efforts are designed to create a loan portfolio that includes some or all the following investment characteristics: (i) provides current income; (ii) is well-secured by residential real estate; (iii) is short term in nature; and (iv) provides high interest spreads. While we primarily provide commercial construction loans to homebuilders (for residential real estate), we may also purchase defaulted unsecured debt from suppliers to homebuilders at a discount (and then secure that debt with real estate or other collateral), purchase defaulted secured debt from financial institutions at a discount, and purchase real estate in which we will operate our business.

Our investment policies may be amended or changed at any time by our board of managers.

Construction Loans tofor Homebuilders

We extend and service commercial loans to small-to-medium sized homebuilders for the purchase of lots and/or the construction of homes thereon. Our customers generally benefit from doing business with us not just because they are able to sell additional homes (which we finance), but because, as they build additional homes, they are able to increase sales of homes that are built as contracted homes, where the eventual homeowner obtains the loan. Builders generally have more success selling homes when a model or spec home is available for customers to see. We also extend and service loans for the purchase of undeveloped land and the development of that land into residential building lots. In addition, we lend money to purchase and rehabilitate older existing homes. Most of the loans are for “spec homes” or “spec lots,” meaning they are built or developed speculatively (with no specific end-user homeowner in mind).

6In a typical home construction transaction, a homebuilder obtains a loan to purchase a lot and build a home on that lot. In some cases, the builder has a contract with a customer to purchase the home upon its completion. In other cases, the home is built as a spec home, but the homebuilder believes it will sell before or shortly after completion, and therefore, building the home before it is under contract will increase the homebuilder’s sales and profitability. The builder may also believe that the construction of a spec home will increase the number of contract sales the homebuilder will have in a given year, as it may be easier to sell contract homes when the customer can see the builder’s work in the spec home. In some cases, these speculatively built homes are constructed with the intention of keeping them as a model for a period of time, to increase contract sales, and then be sold. These are called model homes. While we may lend to a homebuilder for any of these types of new construction homes, for the year 2025, about 84% of our construction loans were created as spec homes and 16% were contracts.

In a typical ~~home~~rehab ~~construction~~ transaction, awe ~~homebuilder~~fund ~~obtains~~all aof ~~loan~~the to purchase aprice, ~~lot~~ and ~~build~~then aall ~~home~~or ona ~~that~~portion ~~lot.~~of ~~In some cases,~~ the ~~builder~~cost ~~has a contract with a customer~~ to ~~purchase~~complete the ~~home upon its completion~~project. In ~~other cases, the home is built as a spec home,~~some ~~but the homebuilder believes it will sell before or shortly after completion~~circumstances, ~~and~~we ~~therefore,~~are ~~building~~unable the home before it is under contract will increase the homebuilder’s sales and profitability. The builder may also believe that the construction of a spec home will increase the number of contract sales the homebuilder will have in a given year, as it may be easier to ~~sell contract homes when the customer can~~ see the ~~builder’s~~inside ~~work~~of in the ~~spec~~ home. Inprior ~~some~~to ~~cases~~closing, ~~these~~so ~~speculatively~~we ~~built~~assume ~~homes~~that ~~are~~anything ~~constructed~~from ~~with~~drywall ~~the intention of keeping them as a model for a period of time,~~ to ~~increase~~completion ~~contract sales, and then be sold. These are called model homes. While we~~needs ~~may lend~~ to abe ~~homebuilder for any of these types of new construction homes~~redone, ~~through~~as ~~December~~well ~~31,~~as ~~2024,~~what ~~about~~we ~~65%~~can ofsee ~~our~~from ~~construction loans~~the ~~have been spec homes and 35% have been contracts~~outside.

In a typical rehab transaction, we fund all of the purchase price, and then all or a portion of the cost to complete the project. In some circumstances, we are unable to see the inside of the home prior to closing, so we assume that anything from drywall to completion needs to be redone, as well as what we can see from the outside. Because we are flexible in our need to see the inside of the home, and we only use experienced builders as customers for this type of lending, we believe that this differentiates us from banks.

We fund the loans that we originate using available cash resources that are generated primarily from borrowings, our loan purchase and sale agreements, proceeds from the fixed rate subordinated notes (“Notes”) offered pursuant to our public offering (“Notes Program”), equity, and net operating cash flow. We intend to continue funding loans we originate using the same sources.

There is a seasonal aspect to home construction, and this affects our monthly cash flow. In general, since the home construction loans we made will last less than a year on average and we are geographically diverse, the seasonal impact is somewhat mitigated.7

There is a seasonal aspect to home construction, and this affects our monthly cash flow. In general, since the home construction loans, we made will last less than a year on average and we are geographically diverse, the seasonal impact is somewhat mitigated.

Generally, our real estate loans are secured by one or more of the following:

● The homes being constructed; ● the parcels of land to be developed; ● finished lots; ● new or rehabbed single-family homes; and/or ● in most cases, personal guarantees of the principals of the borrower entity.

Most of our lending is based on the following general policies:

Customer Type		Small-to-Medium Size Homebuilders

Loan Type		Commercial

Loan Purpose		Construction/Rehabilitation of Homes or Development of Lots

Security		Homes, Lots, and/or Land

Priority		Generally, our loans are secured by a first priority mortgage lien; however, we may make loans secured by a second or other lower priority mortgage lien.

Loan-to-Value Averages		60-75%

Loan Amounts		Our average home construction loan was $445,000 as of December 31, 2025. Development loans vary greatly.

Term		Demand, however most home construction loans typically payoff in under one year, and development loans are typically three to five-year projects.

Rate		Cost of Funds (“COF”) plus 2.5%, minimum rate of 7.75%

Origination Fee		5% for home construction loans, development loans on a case-by-case basis

Title Insurance		Only on high-risk loans and rehabs

Hazard Insurance		Always

General Liability Insurance		Always

Credit		Builders should have significant building experience in the market, be building in the market currently, be able to make payments of interest, be able to make the required deposit, have acceptable personal credit, and have open lines of credit (unsecured) with suppliers reasonably within terms. Required deposits may be avoided if we do not fund the purchase of land. We generally do not advertise to find customers, but use our loan representatives and our builder website, www.constructionspecloans.com.

Third Party Guarantor		None; however, the loans are generally guaranteed by the owners of the borrower.

Loan Amounts		The average home construction loan was $380,000 as of December 31, 2024. Development loans vary greatly.
Term		Demand, however most home construction loans typically payoff in under one year, and development loans are typically three to five-year projects.
Rate		Cost of Funds (“COF”) plus 2.5%, minimum rate of 7%
Origination Fee		5% for home construction loans, development loans on a case-by-case basis
Title Insurance		Only on high-risk loans and rehabs
Hazard Insurance		Always
General Liability Insurance		Always
Credit		Builders should have significant building experience in the market, be building in the market currently, be able to make payments of interest, be able to make the required deposit, have acceptable personal credit, and have open lines of credit (unsecured) with suppliers reasonably within terms. Required deposits may be avoided if we do not fund the purchase of land. We generally do not advertise to find customers, but use our loan representatives and our builder website, www.constructionspecloans.com.
Third Party Guarantor		None; however, the loans are generally guaranteed by the owners of the borrower.

We may change these policies at any time based on then-existing market conditions or otherwise at the discretion of our CEO and the Board of Managers.

Development of Land Parcels

~~Effective~~On February 15, 2024, the Company completed its acquisition of 339 Justabout Land Co. LLC (“339”), in a transaction valued at $9,122,000. The Company paid cash consideration of $3,000,000 plus the amount of our intercompany debt. The property was then subdivided into two parcels. One parcel was being developed into lots for home construction (“Phase 1 Lots”) and the other parcel was being developed into a second phase of lots (“Phase 2 Lots”).

~~The~~During ~~property~~our ~~has~~ownership ~~since~~of ~~been~~339, ~~subdivided~~we ~~into~~earned ~~two~~fees ~~parcels.~~and ~~One~~had ~~parcel~~sales isand ~~being~~cost ~~developed~~of ~~into~~goods ~~lots~~sold ~~and~~related ~~are~~to ~~available~~lot ~~for~~sales. ~~home~~We ~~construction~~also invested money in developing (“Phase 1 Lots”) and ~~the~~permitting ~~other parcel will be developed into a second phase of lots (“~~Phase 2 Lots~~”),~~ ~~which~~within ~~should be available for construction early next year (collectively~~ the ~~“339 Lots”)~~development.

Other investments

We own ~~several~~ other investments inrelated ~~the~~to ~~housing~~real ~~space~~estate, with earnings and risk objectives similar to lending. As of December 31, ~~2024~~2025, we own a ~~two phase subdivision~~ ~~near~~lot ~~Pittsburgh PA, the first phase of which is developed and lots are being sold to one of our customers, and the second phase of which is still in permitting. We also own two lots~~ near Orlando FL, ~~one~~Florida ~~of which we have partnered~~ with a ~~builder~~book tovalue ~~build~~of ~~a home on (which is almost complete and on the market) and the other is currently just a lot~~$169,000. We also have an investment in a fund in common management with one of our borrowers which buys lots and build homes. We lend money to that fund as well. The investment is treated as a loan receivable on the Company’s balance sheet.

~~2025~~In ~~Outlook~~addition, we may, depending on our cash position and the opportunities available to us, do neither or either of the following: purchase defaulted unsecured debt from suppliers to homebuilders at a discount (and then secure that debt with real estate or other collateral), and purchase defaulted secured debt from financial institutions at a discount. We currently have a secured loan on our books which was purchased from a lender at a discount. The loan was booked at the discounted purchase price, and interest is being recognized monthly and paid in conjunction with principal payments. The asset purchased at a discount is treated as a loan receivable on the Company’s balance sheet.

During 2025, the housing market in most of the areas in which we do business will likely remain somewhat stable. We believe long term rates are not likely to change much, leading to housing stability. There is a risk if mortgage rates drop that many homeowners in existing low-rate mortgages will decide to “move up” and sell their low mortgage rate home, flooding the market with homes. Offsetting that risk is the fact that they will also increase demand for homes as they will need one to live in. Rents may become less affordable vs. owning a home, which helps our customer. While we donBuilder’~~t anticipate the market flooding to negatively impact us, there is little~~s ~~history to go by and this might cause housing prices to drop steeply, which will hurt our existing loans.~~Assistance

8At Builder’s Assistance, we help builders grow their net profit and production capacity. Currently most of that activity centers around offering accounting services. These services do not include tax services. We provide a variety of services which include but are not limited to, data entry, journal entries, cash balancing, purchase order issuing, budget control, and financial statements. We also offer customers consultations to help them improve their business, ranging from gross profit analysis to cash management.

In2026 2025, we don’t anticipate increasing our investments that are not loans or foreclosed assets. Our large development project will continue to sell lots from phase 1 and spend money developing phase 2. We anticipate selling the built home near Orlando and starting the home on the current vacant lot.Outlook

During 2026, we anticipate that the housing market in most of the areas in which we do business will likely improve, as we believe that the long-term interest rates that our borrowers’ customers use are likely to fall. There is a risk if mortgage rates drop that many homeowners in existing low-rate mortgages will decide to “move up” and sell their low mortgage rate home, flooding the market with homes. Offsetting that risk is the fact that they will also increase demand for homes as they will need one to live in. Rents may become less affordable vs. owning a home, which helps our customer. While we don’t anticipate the market flooding to negatively impact us, there is little history to go by and this might cause housing prices to drop steeply, which will hurt our existing loans. Of course, rates may not fall, or they may instead go up, or the actual impact of falling rates may not result in an enhanced housing market. While we are anticipating growth in housing and loan balances, we are prepared for a declining market as well.

In 2026, we don’t anticipate increasing our investments that are not loans or foreclosed assets.

Commercial Loans – Construction Loan Portfolio Summary

The following is a summary of our loan portfolio to builders for home construction loans as of December 31, 2025:

(All dollar [$] amounts shown in table in thousands.)

State	Number of Borrowers			Number of Loans		Value of Collateral		Commitment Amount		Gross Amount Outstanding		Loan to Value Ratio⁽¹⁾			Loan Fee
Arizona		2			4	$	1,719	$	1,126	$	1,126		66	%		5	%
California		1			1		1,285		1,750		1,439		137	%		5	%
Connecticut		1			3		1,730		1,162		890		67	%		5	%
Florida		11			50		23,854		16,637		10,984		70	%		5	%
Georgia		7			10		6,448		4,228		3,068		66	%		5	%
Idaho		1			1		2,770		1,500		874		54	%		5	%
Illinois		1			1		1,500		815		606		54	%		5	%
Louisiana		2			3		825		623		594		76	%		5	%
Michigan		1			1		970		582		171		60	%		5	%
Mississippi		1			1		335		258		258		77	%		5	%
Montana		2			2		975		683		578		70	%		5	%
New Jersey		1			4		1,798		1,531		1,471		85	%		5	%
New York		1			5		2,248		1,345		488		60	%		5	%
North Carolina		8			14		6,530		4,135		1,861		63	%		5	%
Oklahoma		1			1		167		117		77		70	%		5	%
Pennsylvania		2			18		20,748		16,368		13,055		79	%		5	%
South Carolina		7			26		10,739		8,394		4,808		78	%		5	%
Tennessee		2			3		1,061		743		718		70	%		5	%
Utah		1			1		4,880		3,538		1,213		73	%		5	%
Virginia		1			2		592		362		236		61	%		5	%
Total		54	⁽³⁾		151	$	91,174	$	65,897	$	44,515		72	% ⁽²⁾		5	%

⁽¹⁾	The loan to value ratio is calculated by taking the commitment amount and dividing by the appraised value.

⁽²⁾	Represents the weighted average loan to value ratio of the loans.

⁽²⁾	Total number of borrowers is 53. One borrower has construction loans in North Carolina and South Carolina which is reflected in the Number of Borrowers column of the table above.

The following is a summary of our loan portfolio to builders for home construction loans as of December 31, 2024:

(All dollar [$] amounts shown in table in thousands.)

State	Number of Borrowers		Number of Loans		Value of Collateral~~(1)~~		Commitment Amount		Gross Amount Outstanding		Loan to Value Ratio(21)			Loan Fee
Arizona		1		2	$	890	$	634	$	633		71	%		5	%
California		1		1		3,210		1,750		1,346		55	%		5	%
Connecticut		1		2		1,040		728		389		70	%		5	%
Florida		9		42		16,089		11,081		6,874		69	%		5	%
Georgia		3		6		3,301		2,037		878		62	%		5	%
Idaho		1		4		1,462		1,060		661		73	%		5	%
Illinois		1		1		1,727		992		1,781		57	%		5	%
Louisiana		4		6		1,613		1,169		1,031		72	%		5	%
Michigan		1		1		890		481		27		54	%		5	%
Mississippi		1		1		369		258		258		70	%		5	%
New Jersey		2		4		1,585		1,362		1,122		86	%		5	%
New York		1		1		650		455		105		70	%		5	%
North Carolina		9		18		10,737		6,642		4,786		62	%		5	%
Ohio		3		3		1,275		857		1,074		67	%		5	%
Pennsylvania		2		22		24,449		18,065		15,192		74	%		5	%
South Carolina		10		49		22,057		14,309		7,438		65	%		5	%
Tennessee		3		4		1,334		893		748		67	%		5	%
Texas		2		3		2,320		1,844		1,567		79	%		5	%
Utah		1		3		2,918		1,792		1,422		61	%		5	%
Virginia		3		4		1,546		982		672		64	%		5	%
Total		59		177	$	99,462	$	67,391	$	48,004		68	% (32)		5	%

(1)	~~(1)~~The loan to value ratio is calculated by taking the commitment amount and dividing by the appraised value.	~~The value is determined by the appraised value.~~
(2)	~~(2)~~Represents the weighted average loan to value ratio of the loans.	~~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.

The following is a summary of our loan portfolio to builders for home construction loans as of December 31, 2023:

(All dollar [$] amounts shown in table in thousands.)

State	Number of Borrowers		Number of Loans		Value of Collateral(1)		Commitment Amount		Gross Amount Outstanding		Loan to Value Ratio(2)			Loan Fee
Arizona		2		5	$	2,148	$	1,504	$	846		70	%		5	%
California		1		1		2,551		1,530		1,511		60	%		5	%
Connecticut		1		2		1,039		681		510		66	%		5	%
Florida		12		71		36,644		19,279		14,093		53	%		5	%
Georgia		4		8		2,963		1,831		1,229		62	%		5	%
Illinois		1		1		1,600		992		763		62	%		5	%
Indiana		1		1		35		235		79		70	%		5	%
Louisiana		2		3		773		541		300		70	%		5	%
Maryland		1		1		480		336		336		70	%		5	%
Mississippi		1		2		820		570		439		70	%		5	%
New Jersey		2		5		1,985		1,563		954		79	%		5	%
North Carolina		8		23		10,637		6,681		2,994		63	%		5	%
Ohio		3		10		3,776		2,601		1,686		69	%		5	%
Pennsylvania		2		21		21,301		16,763		13,205		79	%		5	%
South Carolina		11		50		20,029		12,624		6,694		63	%		5	%
Tennessee		3		5		1,554		1,047		696		67	%		5	%
Texas		2		4		1,970		1,773		1,693		90	%		5	%
Utah		1		3		2,918		1,792		910		61	%		5	%
Virginia		3		3		857		530		474		62	%		5	%
Washington		1		6		2,789		2,427		2,376		87	%		5	%
Total		62		225	$	117,169	$	75,300	$	51,788		64	%(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

In a typical development transaction, a homebuilder/developer purchases a specific parcel or parcels of land. Developers must secure financing to pay the purchase price for the land as well as to pay expenses incurred while developing the lots. This is the financing we provide. Once financing has been secured, the lot developers create individual lots. Developers secure permits allowing the property to be developed and then design and build roads and utility systems for water, sewer, gas, and electricity to service the property. The individual lots are then sold before a home is built on them; paid off, built on and then sold; or built on, then sold and paid off (in these cases, we may subordinate our loan to the home construction loan).

The following is a summary of our loan portfolio to builders for land development as of December 31, 2025:

(All dollar [$] amounts shown in table in thousands.)

States	Number of Borrowers		Number of Loans		Value of Collateral		Commitment Amount		Gross Amount Outstanding		Loan to Value Ratio⁽¹⁾			Interest Spread⁽³⁾
Florida		2		2		550		630		350		115	%	7	%
Georgia		1		1		560		100		99		18	%	7	%
Louisiana		1		1		150		88		88		59	%	7	%
New Jersey		1		1		88		56		56		64	%	7	%
North Carolina		2		2		3,037		681		680		22	%	7	%
Pennsylvania		1		2		15,337		14,066		12,854		92	%	varies
South Carolina		1		1		1,500		487		539		32	%	7	%
Utah		2		2		3,146		1,600		868		51	%	7	%
Wyoming		1		1		2,750		1,635		1,634		59	%	7	%
Total		12		13	$	27,118	$	19,343	$	17,168		71	% ⁽²⁾	7	%

⁽¹⁾	The loan to value ratio is calculated by taking the outstanding amount and dividing by the appraised value calculated as described above.

⁽²⁾	Represents the weighted average loan to value ratio of the loans.

⁽³⁾	The interest spread varies for the state of Pennsylvania and is 7% across other states.

The following is a summary of our loan portfolio to builders for land development as of December 31, 2024:

(All dollar [$] amounts shown in table in thousands.)

States	Number of Borrowers		Number of Loans		Value of Collateral~~(1)~~		Commitment Amount		Gross Amount Outstanding~~(4)~~		Loan to Value Ratio(21)			Interest Spread(53)
Florida		2		2		2,469		1,500		268		11	%		7	%
Georgia		1		1		346		275		159		46	%		7	%
New York		1		1		300		300		300		100	%		7	%
Pennsylvania		1		1		2,484		3,700		1,919		77	%		varies
South Carolina		1		1		1,860		487		488		26	%		7	%
Total		6		6	$	7,459	$	6,262	$	3,134		42	% (32)		7	%

⁽¹⁾	The loan to value ratio is calculated by taking the outstanding amount and dividing by the appraised value calculated as described above.

⁽²⁾	Represents the weighted average loan to value ratio of the loans.

⁽³⁾	The interest spread varies for the state of Pennsylvania and is 7% across other states.

(1)	The value is determined by the appraised value adjusted for the remaining costs to be paid and third-party mortgage balances. 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 on 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)	Represents the weighted average loan to value ratio of the loans.
(4)	Gross Amount Outstanding credit balances are due to deposits on account.
(5)	The interest spread varies for the state of Pennsylvania and is 7% across other states.

The following is a summary of our loan portfolio to builders for land development as of December 31, 2023:

(All dollar [$] amounts shown in table in thousands.)

States	Number of Borrowers		Number of Loans		Value of Collateral(1)		Commitment Amount		Gross Amount Outstanding(4)		Loan to Value Ratio(2)			Interest Spread(5)
Delaware		1		1		543		147		147		27	%		7	%
Florida		3		3		207		1,378		133		64	%		7	%
New Jersey		1		1		50		26		26		51	%		7	%
North Carolina		1		2		1,110		240		210		19	%		7	%
Pennsylvania		1		2		19,983		8,500		8,365		42	%		varies
South Carolina		2		2		1,980		965		624		32	%		7	%
Total		9		11	$	23,873	$	11,256	$	9,505		40	%(3)		7	%

(1)	The value is determined by the appraised value adjusted for the remaining costs to be paid and third-party mortgage balances. 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 on 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)	Represents the weighted average loan to value ratio of the loans.
(4)	Gross Amount Outstanding credit balances are due to deposits on account.
(5)	The interest spread varies for the state of Pennsylvania and is 7% across other states.

Credit Quality Information

See the notes to our financial statements for credit quality information.

Competition

Historically, our industry has been highly competitive. We compete for opportunities with numerous public and private investment vehicles, including financial institutions, specialty finance companies, mortgage banks, pension funds, opportunity funds, hedge funds, REITs, and other institutional investors, as well as individuals. Many competitors are significantly larger than us, have well-established operating histories and may have greater access to capital, resources and other advantages over us. These competitors may be willing to accept lower returns on their investments or to modify underwriting standards and, as a result, our origination volume and profit margins could be adversely affected.

We believe that this is a good time to extend commercial loans to builders in the residential real estate market because this market appears underserved. We expect our loans to be different than other lenders in the markets in which we are active. Typically, the differences are:

	●	our loans may have a higher fee;

	●	our loans typically require a small deposit which is refundable, versus a large upfront payment for the lot which is not refundable; and

	●	some of our loans may have lower costs as a result of not requiring title insurance.

Regulatory Matters

Financial Regulation

Our operations are not subject to the stringent regulatory requirements imposed upon the operations of commercial banks, savings banks, and thrift institutions. We are not subject to periodic compliance examinations by federal or state banking regulators. Further, our Notes are not certificates of deposit or similar obligations or guaranteed by any depository institution and are not insured by the FDIC or any governmental or private insurance fund, or any other entity.

The Investment Company Act of 1940

An investment company is defined under the Investment Company Act of 1940, as amended (the “Investment Company Act”), to include any issuer engaged primarily in the business of investing, reinvesting, or trading in securities. Absent an exemption, investment companies are required to register as such with the SEC and to comply with various governance and operational requirements. If we were considered an “investment company” within the meaning of the Investment Company Act, we would be subject to numerous requirements and restrictions relating to our structure and operation. If we were required to register as an investment company under the Investment Company Act and to comply with these requirements and restrictions, we may have to make significant changes in our structure and operations to comply with exemption from registration, which could adversely affect our business. Such changes may include, for example, limiting the range of assets in which we may invest. We intend to conduct our operations so as to fit within an exemption from registration under the Investment Company Act for purchasing or otherwise acquiring mortgages and other liens on and interest in real estate. In order to satisfy the requirements of such exemption, we may need to restrict the scope of our operations.

Environmental Compliance

We do not believe that compliance with federal, state, or local laws relating to the protection of the environment will have a material effect on our business in the foreseeable future. However, loans we extend, or purchase are secured by real property. In the course of our business, we may own or foreclose and take title to real estate that could be subject to environmental liabilities with respect to these properties. We (or our loan customers) may be held liable to a governmental entity or to third parties for property damage, personal injury, investigation, and clean-up costs incurred by these parties in connection with environmental contamination or may be required to investigate or clean up hazardous or toxic substances or chemical release at a property. The costs associated with the investigation or remediation activities could be substantial. In addition, if we become the owner of or discover that we were formerly the owner of a contaminated site, we may be subject to common law claims by third- parties based on damages and costs resulting from environmental contamination emanating from the property. To date, we have not incurred any significant costs related to environmental compliance and we do not anticipate incurring any significant costs for environmental compliance in the future. Generally, when we are lending on property which is being developed into single family building lots, an environmental assessment is done by the builder for the various governmental agencies. When we lend for new construction on newly developed lots, the lots have generally been reviewed while they were being developed. We also perform our own physical inspection of the lot, which includes assessing potential environmental issues. Before we take possession of a property through foreclosure, we again assess the property for possible environmental concerns, which, if deemed to be a significant risk compared to the value of the property, could cause us to forego foreclosure on the property and to seek other avenues for collection.

ITEM 1A. RISK FACTORS

Below are risks and uncertainties that could adversely affect our operations that we believe are material to investors. Other risks and uncertainties may exist that we do not consider material based on the information currently available to us at this time.

Risks Related to our Business

Our business is not industry diversified. Deterioration in the homebuilding industry or economic conditions, including as a result of pandemics, or wars, could decrease demand and pricing for new homes and residential home lots. A decline in housing values similar to the national ~~downturn~~ downturn in the real estate market that began in ~~2007~~2006 would have a negative impact on our business. Smaller value declines will also have a negative impact on our business. These factors may decrease the likelihood we will be able to generate enough cash to repay the Notes.

Developers and homebuilders to whom we may make loans use the proceeds of our loans to develop raw land into residential home lots and construct homes. The developers obtain the money to repay our development loans by selling the residential home lots to home builders or individuals who will build single-family residences on the lots, or by obtaining replacement financing from other lenders. A developer’s ability to repay our loans is based primarily on the amount of money generated by the developer’s sale of its inventory of single-family residential lots. Homebuilders obtain the money to repay our loans by selling the homes they construct or by obtaining replacement financing from other lenders, and thus, the homebuilders’ ability to repay our loans is based primarily on the amount of money generated by the sale of such homes.

The homebuilding industry is cyclical and is significantly affected by changes in industry conditions, as well as in general and local economic conditions, such as:

	●	employment level and job growth;

	●	demographic trends, including population increases and decreases and household formation;

	●	availability of financing for homebuyers;

	●	interest rates;

	●	affordability of homes;

	●	consumer confidence;

	●	levels of new and existing homes for sale, including foreclosed homes and homes held by investors and speculators; and

	●	housing demand generally.

These conditions may occur on a national scale or may affect some of the regions or markets in which we operate more than others.

13We generally lend a percentage of the values of the homes and lots. These values are determined shortly prior to the lending. If the values of homes and lots in markets in which we lend drop fast enough to cause the builders losses that are greater than their equity in the property, we will be forced to liquidate the loan in a fashion which will cause us to lose money. If these losses when combined and added to our other expenses are greater than our revenue from interest charged to our customers, we will lose money overall, which will hurt our ability to pay interest and principal on the Notes. Values are typically affected by demand for homes, which can change due to many factors, including but not limited to, demographics, interest rates, the overall economy, which can be impacted by outbreaks of communicable illnesses, cost of building materials and labor, availability of financing for end-users, inventory of homes available, wars, and governmental action or inaction. If there is a tightening of the credit markets, it would be more difficult for potential homeowners to obtain financing to purchase homes. If housing prices decline or sales in the housing market decline, our customers may have a hard time selling their homes at a profit. This could cause the amount of defaulted loans that we will have to increase. An increase in defaulted loans would reduce our revenue and could lead to losses on our loans. A decline in housing prices will further increase our losses on defaulted loans. If the amount of defaulted loans or the loss per defaulted loan is large enough, we will operate at a loss, which will decrease our equity. This could cause us to become insolvent, and we will not be able to pay back Note holders’ principal and interest on the Notes.

We generally lend a percentage of the values of the homes and lots. These values are determined shortly prior to the lending. If the values of homes and lots in markets in which we lend drop fast enough to cause the builders losses that are greater than their equity in the property, we will be forced to liquidate the loan in a fashion which will cause us to lose money. If these losses when combined and added to our other expenses are greater than our revenue from interest charged to our customers, we will lose money overall, which will hurt our ability to pay interest and principal on the Notes. Values are typically affected by demand for homes, which can change due to many factors, including but not limited to, demographics, interest rates, the overall economy, which can be impacted by outbreaks of communicable illnesses, cost of building materials and labor, availability of financing for end-users, inventory of homes available and governmental action or inaction. If there is a tightening of the credit markets, it would be more difficult for potential homeowners to obtain financing to purchase homes. If housing prices decline or sales in the housing market decline, our customers may have a hard time selling their homes at a profit. This could cause the amount of defaulted loans that we will have to increase. An increase in defaulted loans would reduce our revenue and could lead to losses on our loans. A decline in housing prices will further increase our losses on defaulted loans. If the amount of defaulted loans or the loss per defaulted loan is large enough, we will operate at a loss, which will decrease our equity. This could cause us to become insolvent, and we will not be able to pay back Note holders’ principal and interest on the Notes.

The homebuilding industry could experience adverse conditions, and the industry’s implementation of strategies in response to such conditions may not be successful.

The United States homebuilding industry experienced a significant downturn beginning in 2007. During the downturn, many homebuilders focused on generating positive operating cash flow, resizing and reshaping their product for a more price-conscious consumer and adjusting finished new home inventories to meet demand, and did so in many cases by significantly reducing the new home prices and increasing the level of sales incentives. Notwithstanding these strategies, homebuilders continued to experience an elevated rate of sales contract cancelations, as many of the factors that affect new sales and cancelation rates are beyond the control of the homebuilding industry. Although the homebuilding industry has experienced positive gains over the last decade, there can be no assurance that these gains will continue, or if there is a negative impact on the homebuilding industry’s expectations for future home sales. The homebuilding industry could suffer similar, or worse, adverse conditions in the future. Decreases in new home sales would increase the likelihood of defaults on our loans and, consequently, reduce our ability to repay Note holders’ principal and interest on the Notes.

We have $48,387,000 of loan assets, net as of December 31, 2024. A 35% reduction in total collateral value would reduce our earnings and net worth by $3,316,000. Larger reductions would result in lower earnings and lower net worth.

As of December 31, 2024, we had $48,387,000 of loan assets, net on our books. These assets are recorded on our balance sheet at the lower of the loan amount or the value of the collateral after deduction for expected selling expenses. A reduction in the value of the underlying collateral could result in significant losses. A 35% reduction, for instance, would result in a $3,316,000 loss. Accordingly, our business is subject to the risk of a loss of a portion of our Note holders’ investments if such a reduction were to occur.

We have $3,134,000 of development loan assets as of December 31, 2024, which unlike our construction loans, are long term loans. This longer duration as well as the nature of collateral (raw ground and lots) creates more risk for that portion of our portfolio.

We have $3,134,000 development loan assets as of December 31, 2024. Development loans are riskier than construction loans for two reasons: the duration of the loan and the nature of the collateral. The duration (being three to five years as compared to generally less than one year on construction loans) allows for a greater period of time during which the collateral value could decrease. Also, the collateral value of development loans is more likely to change in greater percentages than that of built homes. For example, during a 70% reduction in housing starts, newly completed homes still have value, but lots may be worthless. This added risk to this portion of our portfolio adds risk to our investors as our net worth would be significantly impacted by losses.

WeThe ~~have~~homebuilding ~~$13,529,000~~industry ofcould ~~real~~experience ~~estate~~adverse ~~investments~~conditions, asand ofthe ~~December~~industry’s ~~31,~~implementation ~~2024.~~of Astrategies ~~35% reduction~~ in ~~our~~response ~~real~~to ~~estate investments would reduce our~~such ~~earnings~~conditions ~~and~~may ~~net~~not ~~worth~~be ~~by $4,783,000~~successful. ~~Larger reductions would result in lower earnings and lower net worth.~~

AsThe ofUnited ~~December~~States 31homebuilding industry experienced a significant downturn beginning in 2006. During the downturn, ~~2024~~many homebuilders focused on generating positive operating cash flow, weresizing ~~had~~and ~~$13~~reshaping their product for a more price-conscious consumer and adjusting finished new home inventories to meet demand,~~529~~ and did so in many cases by significantly reducing the new home prices and increasing the level of sales incentives. Notwithstanding these strategies,~~000~~ homebuilders continued to experience an elevated rate of ~~real~~sales ~~estate~~contract ~~investments~~cancelations, as onmany ~~our~~of ~~books.~~the ~~These~~factors ~~assets~~that affect new sales and cancelation rates are ~~recorded~~beyond onthe ~~our~~control ~~balance~~of ~~sheet~~the athomebuilding ~~cost~~industry. Although the Ahomebuilding ~~reduction~~industry inhas experienced positive gains over the ~~value~~last ~~could~~decade, ~~result~~there incan ~~significant~~be ~~losses.~~no Aassurance ~~35%~~that ~~reduction,~~these ~~for~~gains ~~instance~~will continue, or ~~would~~if ~~result~~there inis a $4negative impact on the homebuilding industry’s expectations for future home sales. The homebuilding industry could suffer similar,~~783~~ or worse,~~000~~ ~~loss~~adverse conditions in the future. ~~Accordingly, our~~Decreases ~~business~~in isnew ~~subject~~home tosales would increase the ~~risk~~likelihood of adefaults ~~loss~~on our ofloans aand, ~~portion~~consequently, ofreduce our ability to repay Note holders’ ~~investments~~principal ifand ~~such~~interest aon ~~reduction~~the ~~were to occur~~Notes.

~~Currently, we~~We ~~are~~have ~~reliant~~$59,223,000 onof aloan ~~single~~assets, ~~developer~~net ~~and~~as ~~homebuilder,~~of ~~the~~December ~~Hoskins Group~~31, ~~who~~2025. ~~are~~A ~~concentrated~~35% reduction in ~~the~~total ~~Pittsburgh,~~collateral ~~Pennsylvania~~value ~~market, for~~would areduce ~~significant portion of~~ our ~~revenues~~earnings and anet ~~portion~~worth ofby ~~our capital~~$6,468,000. ~~Our~~Larger ~~second~~reductions ~~largest~~would ~~customer~~result is in ~~the~~lower ~~Orlando, Florida market~~earnings and islower ~~also~~net ~~a significant portion of our portfolio~~worth.

As of December 31, ~~2024~~2025, ~~20%~~we ofhad ~~our~~$59,223,000 ~~outstanding~~of loan ~~commitments~~assets, ~~consisted~~net ofon ~~loans~~our ~~made~~books. toThese ~~Benjamin~~assets ~~Marcus~~are ~~Homes,~~recorded ~~LLC~~on ~~and~~our ~~Investor’s~~balance sheet at the lower ~~Mark~~of ~~Acquisitions,~~the ~~LLC,~~loan ~~both~~amount or the value of ~~which~~the ~~are~~collateral ~~owned~~after bydeduction ~~Mark~~for ~~Hoskins~~expected ~~(collectively~~selling ~~both~~expenses. ~~parties~~A ~~are~~reduction ~~referred~~in tothe ~~herein~~value asof the ~~“Hoskins~~underlying ~~Group”)~~collateral could result in significant losses. WeA ~~refer~~35% toreduction, ~~the~~for ~~loans~~instance, would result in a $6,468,000 loss. Accordingly, our business is subject to the ~~Hoskins~~risk ~~Group~~of asa ~~the~~loss ~~“Pennsylvania~~of ~~Loans.”~~a ~~The~~portion ~~Hoskins~~of ~~Group~~our isNote ~~concentrated in~~holders’ ~~the~~investments ~~Pittsburgh,~~if ~~Pennsylvania~~such ~~market~~a reduction were to occur.

~~Currently,~~We wehave ~~are reliant upon a single developer and homebuilder who is concentrated in a single city~~$17,168,000 ~~for a significant portion~~ of ~~our~~development ~~revenues and~~loan aassets ~~portion~~as of ~~our~~December ~~capital. Any event of bankruptcy~~31, ~~insolvency~~2025, orwhich ~~general~~unlike ~~downturn in the business of this developer and homebuilder or in the Pittsburgh housing market generally will have a substantial adverse financial impact on~~ our ~~business~~construction ~~and~~loans, ~~our~~are ~~ability to pay back Note holders’ investments in the Notes in the~~ long term loans. ~~Adverse~~This ~~conditions affecting the local housing market could include,~~longer ~~but~~duration ~~are~~as ~~not~~well ~~limited~~as ~~to, declines in new housing starts, declines in new home prices, declines in new home sales, increases in~~ the ~~supply of~~nature ~~available building lots or built homes available for sale, increases in unemployment, and unfavorable demographic changes. One~~ of ~~our~~ ~~independent~~collateral ~~managers,~~(raw ~~Gregory~~ground ~~L. Sheldon, also lends money to the Hoskins Group~~ and, ~~consequently,~~lots) ~~Mr.~~creates ~~Sheldon~~more ~~may~~risk ~~face~~for ~~conflicts of interest in the advice~~ that heportion ~~provides~~of toour ~~us, including if any such adverse condition were to materialize~~portfolio.

InWe ~~addition~~have $17,168,000 gross development loan assets as of December 31, ~~2024,~~2025 4%(these are included in the $59,223,000 of ~~our~~net ~~outstanding~~loans above). Development loans are riskier than construction loans for two reasons: the duration of the loan ~~commitments~~and ~~consisted~~the nature of ~~loans~~the ~~made~~collateral. The duration (being three to ~~our~~five ~~second~~years ~~largest~~as ~~customer~~compared to generally less than one year on construction loans) allows for a greater period of time during which the collateral value could decrease. Also, the collateral value of development loans is more likely to change in greater percentages ~~Orlando~~than that of built homes. For example, ~~Florida~~during a 70% reduction in housing starts, newly completed homes still have value, but lots may be worthless. This added risk to this portion of our portfolio adds risk to our investors as our net worth would be significantly impacted by losses.

WeCurrently, ~~have~~we ~~foreclosed~~are ~~assets~~reliant ason ofa ~~December~~single 31developer and homebuilder, ~~2024~~the Hoskins Group, ~~which~~who ~~unlike~~are ~~our~~concentrated ~~loans~~in the Pittsburgh, ~~are~~Pennsylvania ~~recorded~~market, for ona ~~our~~significant ~~balance~~portion ~~sheet~~of atour ~~the~~revenues ~~value~~and a portion of our capital. Our second largest customer is in the ~~collateral~~Central and Southwest, ~~net~~Florida ofmarket ~~estimated~~and ~~selling~~is ~~expenses~~also a significant portion of our portfolio.

WeAs ~~have foreclosed assets as~~ of December 31, ~~2024.~~2025, A35% ~~reduction~~of inour ~~the~~outstanding ~~value~~loan ofcommitments ~~the~~consisted ~~underlying~~of ~~collateral~~loans ofmade ~~our~~to ~~foreclosed~~Benjamin ~~assets~~Marcus ~~could result~~Homes, inLLC ~~significant~~and ~~losses.~~339 ~~For~~Justabout Land ~~example~~Co, aLLC, ~~35%~~both ~~reduction~~of inwhich ~~the~~are ~~value~~owned ofby ~~the~~Mark ~~underlying~~Hoskins ~~collateral~~and family (~~net~~collectively ofboth ~~estimated~~parties ~~selling~~are ~~expenses) would~~referred ~~result~~to inherein aas ~~$475,000~~the ~~loss~~“Hoskins Group”). ~~Our~~We ~~business~~refer isto ~~subject~~the loans to anthe ~~increased~~Hoskins ~~risk~~Group ofas ~~not~~the ~~being~~“Pennsylvania ~~able~~Loans.” toThe ~~repay~~Hoskins ~~our~~Group ~~Note~~is ~~Holders’ investments~~concentrated in athe ~~timely~~Pittsburgh, ~~manner~~Pennsylvania ~~if such a reduction were to occur~~market.

Currently, we are reliant upon a single developer and homebuilder who is concentrated in a single city, for a significant portion of our revenues and a portion of our capital. Any event of bankruptcy, insolvency, or general downturn in the business of this developer and homebuilder or in the Pittsburgh housing market generally will have a substantial adverse financial impact on our business and our ability to pay back Note holders’ investments in the Notes in the long term. Adverse conditions affecting the local housing market could include, but are not limited to, declines in new housing starts, declines in new home prices, declines in new home sales, increases in the supply of available building lots or built homes available for sale, increases in unemployment, and unfavorable demographic changes. One of our independent managers, Gregory L. Sheldon, also lends money to the Hoskins Group and, consequently, Mr. Sheldon may face conflicts of interest in the advice that he provides to us, including if any such adverse conditions were to materialize.

In addition, as of December 31, 2025, 7% of our outstanding loan commitments consisted of loans made to our second largest customer, in Central and Southwest, Florida.

We have foreclosed assets as of December 31, 2025, which unlike our loans, are recorded on our balance sheet at the value of the collateral, net of estimated selling expenses.

We have foreclosed assets as of December 31, 2025. A reduction in the value of the underlying collateral of our foreclosed assets could result in significant losses. For example, a 35% reduction in the value of the underlying collateral (net of estimated selling expenses) would result in a $175,000 loss. Our business is subject to an increased risk of not being able to repay our Note Holders’ investments in a timely manner if such a reduction were to occur.

Changes in mortgage interest rates, reductions in mortgage availability, or increases in other costs of home ownership could prevent potential customers from buying new homes and adversely affect our business and financial results.

An increase in mortgage rates could reduce the value of the homes that our customers sell. A decrease in mortgage rates could also reduce the value of the homes that our customers sell, as it could cause a flood of resale homes to hit the market. Other changes could also make it more difficult for our customers to sell homes, including but not limited to reduced mortgage availability, increases in taxes, and increases in other cost of home ownership. These factors increase the likelihood of defaults on our loans, which would adversely affect our business and consolidated financial results.

Most of our assets are commercial construction loans to homebuilders and/or developers which are a higher-than-average credit risk and therefore could expose us to higher rates of loan defaults, which could impact our ability to repay amounts owed to Note holders.

Our primary business is extending commercial construction loans to homebuilders, along with some loans for land development. These loans are considered a higher risk because the ability to repay depends on the homebuilder’s ability to sell a newly built home. These homes typically are not sold by the homebuilder prior to commencement of construction. Therefore, we may have a higher risk of loan default among our customers than other commercial lending companies. If we suffer increased loan defaults in any given period, our operations could be materially adversely affected, and we may have difficulty making our principal and interest payments on the Notes.

15The collateral securing our real estate loans may not be sufficient to pay back the principal amount in the event of a default by the borrowers.

In the event of default, our real estate loan investments are generally dependent entirely on the loan collateral to recover our investment. Our loan collateral consists primarily of a mortgage on the underlying property. In the event of a default, we may not be able to recover the premises promptly and the proceeds we receive upon sale of the property may be adversely affected by risks generally related to interests in real property, including changes in general or local economic conditions and/or specific industry segments, declines in real estate values, increases in interest rates, real estate tax rates and other operating expenses including energy costs, changes in governmental rules, regulations and fiscal policies (including environmental legislation), wars, acts of God, and other factors which are beyond our or our borrowers’ control. Current market conditions may reduce the proceeds we are able to receive in the event of a foreclosure on our collateral. Our remedies with respect to the loan collateral may not provide us with a recovery adequate to recover our investment.

Our underwriting standards and procedures are more lenient than conventional lenders.

We invest in loans with borrowers who will not be required to meet the credit standards of conventional mortgage lenders, which is riskier than investing in loans made to borrowers who are required to meet those higher credit standards. Because we generally approve loans more quickly than some other lenders or providers of capital, there may be a risk that the due diligence we perform as part of our underwriting procedures will not reveal the need for additional precautions. If so, the interest rate that we charge and the collateral that we require may not adequately protect us or generate adequate returns for the risk undertaken.

We have $169,000 of real estate investments as of December 31, 2025. A 35% reduction in our real estate investments would reduce our earnings and net worth by $59,000. Larger reductions would result in lower earnings and lower net worth.

As of December 31, 2025, we had $169,000 of real estate investments on our books. These assets are recorded on our balance sheet at cost. A reduction in the value could result in significant losses. A 35% reduction, for instance, would result in a $59,000 loss. Accordingly, our business is subject to the risk of a loss of a portion of our Note holders’ investments if such a reduction were to occur.

If we lose or are unable to hire or retain key personnel, we may be delayed or unable to implement our business plan, which would adversely affect our ability to repay the Notes.

We do not have an employment agreement with any of our employees and cannot guarantee that they will remain affiliated with us. Although we have purchased key person life insurance on our Chief Executive Officer, we do not have key person insurance on any of our other employees. If any of our key employees were to cease their affiliation with us, our consolidated operating results could suffer. We believe that our future success depends, in part, upon our ability to hire and retain additional personnel. We cannot assure our investors that we will be successful in attracting and retaining such personnel, which could hinder our ability to implement our business plan.

Employee misconduct could harm us by subjecting us to monetary loss, significant legal liability, regulatory scrutiny, and reputational harm.

Our reputation is critical to maintaining and developing relationships with our existing and potential customers and third parties with whom we do business. There is a risk that our employees could engage in misconduct that adversely affects our business. For example, if an employee were to engage - or be accused of engaging - in illegal or suspicious activities including fraud or theft, we could suffer direct losses from the activity, and in addition we could be subject to regulatory sanctions and suffer serious harm to our reputation, financial condition, customer relationships, and ability to attract future customers or employees. Employee misconduct could prompt regulators to allege or to determine based upon such misconduct that we have not established adequate supervisory systems and procedures to inform employees of applicable rules or to detect and deter violations of such rules. It is not always possible to deter employee misconduct, and the precautions we take to detect and prevent misconduct may not be effective in all cases. Misconduct by our employees, or even unsubstantiated allegations of misconduct, could result in a material adverse effect on our reputation and our business.

A failure in, or breach of, our operational or security systems or infrastructure, or those of our third-party vendors, including because of cyber-attacks, could disrupt our business, result in the disclosure or misuse of confidential or proprietary information, damage our reputation, increase our costs, and cause losses.

We rely heavily on communications and information systems to conduct our business. Information security risks for our business have generally increased in recent years in part because of the proliferation of new technologies; the use of the Internet and telecommunications technologies to process, transmit, and store electronic information, including the management and support of a variety of business processes, including financial transactions and records, personally identifiable information, and customer and investor data; and the increased sophistication and activities of organized crime, hackers, terrorists, activists, and other external parties. As customer, public, and regulatory expectations regarding operational and information security have increased, our operating systems and infrastructure must continue to be safeguarded and monitored for potential failures, disruptions, and breakdowns. Certain of our software and technology systems have been developed internally and may be vulnerable to unauthorized access or disclosure. Our business, financial, accounting, and data processing systems, or other operating systems and facilities, may stop operating properly or become disabled or damaged as a result of a number of factors, including events that are wholly or partially beyond our control. For example, there could be electrical or telecommunication outages; natural disasters such as earthquakes, tornadoes, and hurricanes; disease pandemics; events arising from local or larger scale political or social matters, including terrorist acts; and, as described below, cyber-attacks.

1617

Our business relies on its digital technologies, computer and email systems, software, and networks to conduct its operations. Although we have information security procedures and controls in place, our technologies, systems, and networks and, because the nature of our business involves the receipt and retention of personal information about our customers, our customers’ personal accounts may become the target of cyber-attacks or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss, or destruction of our customers’, or other third parties’ confidential information. Third parties with whom we do business or who facilitate our business activities, including intermediaries or vendors that provide service or security solutions for our operations, and other third parties, could also be sources of operational and information security risk to us, including breakdowns or failures of their own systems or capacity constraints. In addition, hardware, software, or applications we develop or procure from third parties may contain defects in design or manufacture or other problems that could unexpectedly compromise information security.

While we have disaster recovery and other policies and procedures designed to prevent or limit the effect of the failure, interruption, or security breach of our information systems, there can be no assurance that any such failures, interruptions, or security breaches will not occur or, if they do occur, that they will be adequately addressed. Our risk and exposure to these matters remain heightened because of the evolving nature of these threats. As a result, cyber security and the continued development and enhancement of our controls, processes, and practices designed to protect our systems, computers, software, data, and networks from attack, damage, or unauthorized access remain a focus for us. As threats continue to evolve, we may be required to expend additional resources to continue to modify or enhance our protective measures or to investigate and remediate information security vulnerabilities. Disruptions or failures in the physical infrastructure or operating systems that support our business and customers, or cyber-attacks or security breaches of the networks or systems, could result in regulatory fines, penalties or intervention, reputation damage, reimbursement or other compensation costs, and/or additional compliance costs, any of which could have a material effect on our results of operations or financial condition. Furthermore, if such attacks are not detected immediately, their effect could be compounded.

We are susceptible to customer fraud, which includes among other things wires and ACHs and could cause us to suffer losses on our loan portfolio.

Because most of our customers do not publicly report on their financial condition and therefore typically are not required to be audited on a ~~regular~~ regular basis, we are susceptible to a customer’s fraud, which could cause us to suffer losses on our loan portfolio. The failure of a customer to accurately report its financial position, compliance with loan covenants, or eligibility for additional borrowings could result in our providing loans that do not meet our underwriting criteria, defaults in loan payments, and the loss of some or all of the principal of a particular loan or loans. Customer fraud can come in other forms, including but not limited to fraudulent invoices for work done, appraisal fraud, and fraud related to inspections done by third parties.

We have entered into loan purchase and sale agreements with third parties to sell them portions of some of our loans. This increases our leverage. While the agreements are intended to increase our profitability, large credit losses and/or idle cash could actually reduce our profitability, which could impair our ability to pay principal and/or interest on the Notes.

The loan purchase and sale agreements we entered have allowed us to increase our loan assets and debt. If loans that we create have significant losses, the benefit of larger balances can be outweighed by the additional credit losses. Also, while these transactions are booked as secured financing, they are not lines of credit. Accordingly, we will have increased our loan balances without increasing our lines of credit, which can cause a decrease in liquidity. One solution to this liquidity problem is having idle cash for liquidity, which then could reduce our profitability. If either of these problems is persistent and/or significant, our ability to pay interest and principal on our Notes may be impaired.

1718

Additional competition may decrease our profitability, which would adversely affect our ability to repay the Notes.

We may experience increased competition for business from other companies and financial institutions that are willing to extend the same types of loans that we extend at lower interest rates and/or fees. These competitors also may have substantially greater resources, lower cost of funds, and a better-established market presence. If these companies increase their marketing efforts to our market niche of borrowers, or if additional competitors enter our markets, we may be forced to reduce our interest rates and fees to maintain or expand our market share. Any reduction in our interest rates, interest income, or fees could have an adverse impact on our profitability and our ability to repay the Notes.

Customers not paying interest causes reduced profitability or losses. An increase in the dollar amount of loans not paying interest may adversely affect our ability to repay the Notes.

We typically have some balance of loans not paying interest. Some of those loans, when they are resolved, never end up collecting unpaid interest. Typically, the amount of nonpaying loans is around 10% of our outstanding balance. If this percentage goes up significantly, as it did at the start of the COVID-19 pandemic, this causes us to lose money because we are paying interest without receiving interest. If these losses are significant, it can inhibit our ability to pay principal and interest on the Notes.

Our real estate loans are illiquid, which could restrict our ability to respond rapidly to changes in economic conditions.

The real estate loans we currently hold and intend to extend are illiquid. As a result, our ability to sell under-performing loans in our portfolio or respond to changes in economic, financial, investment, and other conditions may be very limited. We cannot predict whether we will be able to sell any real estate loan for the price or on the terms set by us, or whether any price or other terms offered by a prospective purchaser would be acceptable to us. We also cannot predict the length of time needed to find a willing purchaser and to close the sale of a loan. The relative illiquidity of our loan assets may impair our ability to generate sufficient cash to make required interest and principal payments on the Notes.

Our systems and procedures might be inadequate to handle our potential growth. Failure to successfully improve our systems and procedures would adversely affect our ability to repay the Notes.

We may experience growth that could place a significant strain upon our operational systems and procedures. Initially, all of our computer systems used electronic spreadsheets, and we utilized other methods that a small company would use. ~~During~~Over ~~2021~~time ~~and 2022,~~ we added accounting, loan and production documentation, administration, servicing, and investing systems which many banks use to produce closing documents for loans. If any of these systems fail, they could have a material adverse effect on our business, financial condition, results of operations, and, ultimately, our ability to repay principal and interest on the Notes.

If we do not meet the requirements to maintain effective internal controls over financial reporting, our ability to raise new capital will be harmed.

If we do not maintain effective internal controls over our financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002, then it could result in delaying future SEC filings or future offerings. If future SEC filings or future offerings are delayed, it could have an extreme negative impact on our cash flow causing us to default on our obligations, including on the Notes.

We are required to devote resources to complying with various provisions of the Sarbanes-Oxley Act, including Section 404 relating to internal controls testing, and this may reduce the resources we have available to focus on our core business.

Pursuant to Section 404 of the Sarbanes-Oxley Act and the related rules adopted by the SEC and the Public Company Accounting Oversight Board, or PCAOB, our management is required to report on the effectiveness of our internal controls over financial reporting. We may encounter problems or delays in completing any changes necessary to our internal controls over financial reporting. Among other things, we may not be able to conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404. Any failure to comply with the various requirements of the Sarbanes-Oxley Act may require significant management time and expenses and divert attention or resources away from our core business. In addition, we may encounter problems or delays in completing the implementation of any requested improvements provided by our independent registered public accounting firm.

1819

We are subject to the risk of significant losses on our loans because we do not require our borrowers to insure the title of their collateral for our loans.

It is customary for lenders ~~extending~~who extend loans secured by real estate to require the borrower to provide title insurance with minimum coverage amounts set by the lender. We do not require most of our home builders to provide title insurance on their collateral for our loans to them. This represents an additional risk to us as the lender. The homebuilder may have a title problem which normally would be covered by insurance but may result in a loss on the loan because insurance proceeds are not available.

The collateral securing our real estate loans may not be sufficient to pay back the principal amount in the event of a default by the borrowers.

In the event of default, our real estate loan investments are generally dependent entirely on the loan collateral to recover our investment. Our loan collateral consists primarily of a mortgage on the underlying property. In the event of a default, we may not be able to recover the premises promptly and the proceeds we receive upon sale of the property may be adversely affected by risks generally related to interests in real property, including changes in general or local economic conditions and/or specific industry segments, declines in real estate values, increases in interest rates, real estate tax rates and other operating expenses including energy costs, changes in governmental rules, regulations and fiscal policies (including environmental legislation), acts of God, and other factors which are beyond our or our borrowers’ control. Current market conditions may reduce the proceeds we are able to receive in the event of a foreclosure on our collateral. Our remedies with respect to the loan collateral may not provide us with a recovery adequate to recover our investment.

If a large number of our current and prospective borrowers are unable to repay their loans within a normal average number of months, we will experience a significant reduction in our income and liquidity and may not be able to repay the Notes as they become due.

Construction loans that we extend are expected to be repaid in a normal average number of months, typically nine months, depending on the size of the loan. Development loans are expected to last for many years. We have interest paid on a monthly basis but also charge a fee which will be earned over the life of the loan. If these loans are repaid over a longer period of time, the amount of income that we receive on these loans expressed as a percentage of the outstanding loan amount will be reduced, and fewer loans with new fees will be able to be made, since the cash will not be available. This will reduce our income as a percentage of the Notes, and if this percentage is significantly reduced it could impair our ability to pay principal and interest on the Notes.

Our cost of funds is substantially higher than that of banks.

Because we do not offer FDIC insurance, and because we want to grow our Notes Program faster than most banks want to grow their CD base, our Notes offer significantly higher rates than bank CDs. Our cost of funds is higher than banks’ cost of funds due to, among other factors, the higher rate that we pay on our Notes and other sources of financing. This may make it more difficult for us to compete against banks when they re-join our niche lending market in large numbers. This could result in losses which could impair or eliminate our ability to pay interest and principal on our outstanding Notes.

We are subject to the general market risks associated with real estate construction and development.

Our financial performance depends on the successful construction and/or development and sale of the homes and real estate parcels that serve as security for the loans we make to homebuilders and developers. As a result, we are subject to the general market risks of real estate construction and development, including weather conditions, the price and availability of materials used in construction of homes and development of lots, environmental liabilities and zoning laws, and numerous other factors that may materially and adversely affect the success of the projects.

Our operations are not subject to the stringent banking regulatory requirements designed to protect investors, so repayment of Note Holders’ investments is completely dependent upon our successful operation of our business.

Our operations are not subject to the stringent regulatory requirements imposed upon the operations of commercial banks, savings banks, and thrift institutions, and are not subject to periodic compliance examinations by federal or state banking regulators. For example, we will not be well diversified in our product risk, and we cannot benefit from government programs designed to protect regulated financial institutions. Therefore, an investment in our Notes does not have the regulatory protections that the holder of a demand account or a certificate of deposit at a bank does. The return on any Notes purchased by a Note holder is completely dependent upon our successful operations of our business. To the extent that we do not successfully operate our business, our ability to pay interest and principal on the Notes will be impaired.

We are an “emerging growth company” under the federal securities laws and are subject to reduced public company reporting requirements.

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act, or the JOBS Act, and are eligible to take advantage of certain exemptions from, or reduced disclosure obligations relating to, various reporting requirements that are normally applicable to public companies.

We will remain an “emerging growth company” until the earliest of (1) the last day of the first fiscal year in which we have total annual gross revenues of $1.235 billion or more, (2) the last day of the fiscal year following the fifth anniversary of the date of the first sale of our common equity securities pursuant to an effective registration statement, (3) the date on which we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act (which would occur if the market value of our common equity held by non-affiliates exceeds $700 million, measured as of the last business day of our most recently completed second fiscal quarter, and we have been publicly reporting for at least 12 months), or (4) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three-year period. Under the JOBS Act, emerging growth companies are not required to (1) provide an auditor’s attestation report on management’s assessment of the effectiveness of internal control over financial reporting, pursuant to Section 404 of the Sarbanes-Oxley Act, (2) comply with new requirements adopted by the PCAOB which require mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor must provide additional information about the audit and the issuer’s financial statements, (3) comply with new audit rules adopted by the PCAOB after April 5, 2012 (unless the SEC determines otherwise), (4) provide certain disclosures relating to executive compensation generally required for larger public companies, or (5) hold shareholder advisory votes on executive compensation.

Additionally, the JOBS Act provides that an “emerging growth company” may take advantage of an extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies. This means an “emerging growth company” can delay adopting certain accounting standards until such standards are otherwise applicable to private companies. However, we have elected to “opt out” of such extended transition period and will therefore comply with new or revised accounting standards on the applicable dates on which the adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of such extended transition period for compliance with new or revised accounting standards is irrevocable.

We are exposed to the risk of environmental liabilities with respect to properties of which we take title. Any resulting environmental remediation expense may reduce our ability to repay the Notes.

In the course of our business, we foreclose and take title to real estate that could be subject to environmental liabilities. We also have invested in several real estate projects. We may be held liable to a governmental entity or to third parties for property damage, personal injury, investigation and clean-up costs incurred by these parties in connection with environmental contamination or may be required to investigate or clean up hazardous or toxic substances or chemical ~~release~~releases at any property. The costs associated with investigation or remediation activities could be substantial. In addition, as the owner or former owner of a contaminated site, we may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from the property. If we ever become subject to significant environmental liabilities, our business, financial condition, liquidity, and results of operations could be materially and adversely affected.

Risks Related to Conflicts of Interest

Our CEO (who is also on our board of managers) ~~and Executive Vice President~~ will face conflicts of interest as a result of the secured lines of credit made to us, which could result in actions that are not in the best interests of our Note holders.

We have two lines of credit from Daniel M. Wallach (our CEO and chairman of the board of managers) and his affiliates~~, and one line of credit from William Myrick (our Partner)~~. The first line of credit has a maximum principal borrowing amount of $1,250,000 and is payable to Mr. Wallach and his wife, Joyce S. Wallach, as tenants by the entirety (the “Wallach LOC”). The second line of credit has a maximum principal borrowing amount of $250,000 and is payable to the 2007 Daniel M. Wallach Legacy Trust (the “Wallach Trust LOC,” and together with the Wallach LOC, the “Wallach Affiliate LOCs”). ~~The third line of credit has a maximum principal borrowing amount of $1,000,000 and is payable to Mr. Myrick (the “Myrick LOC”).~~

As of December 31, ~~2024~~2025, there was $0 outstanding pursuant to the Wallach Trust LOC, with availability on that line of credit of $250,000, there was $~~743~~26,000 outstanding pursuant to the Wallach LOC, with remaining availability on that line of credit of $~~507,000. As of December 31, 2024, the amount outstanding pursuant to the Myrick LOC was $0 with availability on that line of credit of $~~1,~~000~~224,000. The interest rates on the Wallach Affiliate LOCs ~~and the Myrick LOC~~ generally equal the prime rate plus 3% and were 109.5075% as of December 31, ~~2024~~2025.

The Wallach Affiliate LOCs ~~and the Myrick LOC~~ are collateralized by a lien against all of our assets. The Notes are subordinated in right of payment to all secured debt, including these Wallach Affiliate LOCs ~~and the Myrick LOC~~. Pursuant to the promissory note for each Wallach Affiliate LOCs ~~and the Myrick LOC~~, the lenders have the option of funding any amount up to the face amount of the note, in the lender’s sole and absolute discretion. Therefore, Mr. Wallach ~~and Mr. Myrick~~ will face conflicts of interest in deciding whether and when to exercise any rights pursuant to the Wallach Affiliate LOCs ~~and Myrick LOC, respectively~~. If Mr. Wallach orexercises ~~Mr.~~his ~~Myrick exercise their~~ rights to collect on their collateral upon a default by us, we could lose some or all of our assets, which could have a negative effect on our ability to repay the Notes.

As a result of his large equity ownership in the Company, our CEO will face a conflict of interest in deciding the number of distributions to equity owners, which could result in actions that are not in the best interests of Note Holders.

As of December 31, 2024, our CEO (who is also on the board of managers) beneficially owned 78.2% of the common equity of the Company. He and his wife’s parents also own 21.07% and 3.23% of our Series C cumulative preferred units outstanding as of December 31, 2024. Since the Company is taxed as a partnership for federal income tax purposes, all profits and losses flow through to the equity owners. Therefore, Mr. Wallach and his affiliated equity owners of the Company will be motivated to distribute profits to the equity owners on an annual basis, rather than retain earnings in the Company for Company purposes. There is currently no limit in the indenture or otherwise on the amount of funds that may be distributed by the Company to its equity owners. If substantial funds are distributed to the equity owners, the liquidity and capital resources of the Company will be reduced and our ability to repay the Notes may be negatively impacted.

Some of our employees and managers may face conflicts of interest as a result of their and their relatives’ investment in the Notes, which could result in actions that are not in the best interests of our Note holders.

Employees, managers, members, and relatives of managers and members have invested in the Notes, in the aggregate amount of $7,186,000 as of December 31, 2024. While investment in the Notes by our affiliates may align their interests with those of other Note holders, it could also create conflicts of interest by influencing those employees’ or managers’ actions during times of financial difficulties. For example, the fact that certain of our managers hold Notes, and the value of Notes they hold, could influence their decision to redeem Notes at a time o times when it would be prudent to use our cash resources to build capital, pay down other outstanding obligations, or grow our business. There may be other situations not presently foreseeable in which the ownership of Notes by related persons may create conflicts of interest. These conflicts of interest could result in action or inaction by management that is adverse to other holders of the Notes.

WeAs ~~have~~a ~~three~~result ~~lines~~ of ~~credit~~his ~~from~~large ~~affiliates~~equity ~~which~~ownership ~~allow~~in usthe toCompany, ~~incur~~our aCEO ~~significant~~will ~~amount~~face a conflict of ~~secured~~interest ~~debt.~~in ~~These~~deciding ~~lines~~the ~~are~~number ~~collateralized~~of distributions byto aequity ~~lien~~owners, ~~against~~which ~~all~~could ofresult ~~our~~in ~~assets.~~actions ~~Our~~that ~~purchase~~are ~~and~~not ~~sale~~in ~~agreements~~the ~~function~~best asinterests ~~secured~~of ~~debt~~Note ~~as well~~Holders. WeIn ~~expect~~addition, toeach ~~incur~~independent ~~a significant~~manager ~~amount~~owns 1.17% of ~~additional~~our ~~debt~~common ~~in the future~~equity, ~~including~~and ~~issuance~~one ofmember ~~the~~owns ~~Notes,~~15.94% ~~which~~of ~~will~~our ~~subject~~Series usC ~~to increased risk of loss~~equity.

As of December 31, ~~2024~~2025, weour ~~had~~CEO ~~$743,000~~(who ~~secured~~is ~~debt~~also ~~outstanding~~ on ~~our~~the ~~senior~~board ~~debt lines~~ of ~~credit~~managers) ~~from~~beneficially ~~affiliates~~owned 91.78% of ~~$2,500,000 and~~ the ~~capacity~~ tocommon ~~sell~~equity ~~portions~~ of ~~many~~the ~~loans~~Company. ~~under~~He and ~~the~~his ~~terms~~wife’s ofparents ~~our~~also ~~loan~~own ~~purchase~~17.83% and ~~sale agreements~~3.32% ~~The~~of ~~affiliate~~our ~~loans~~Series ~~are~~C ~~collateralized by~~cumulative apreferred ~~lien~~units ~~against~~outstanding ~~all~~as of ~~our~~December ~~assets~~31, 2025. Each ~~The~~of ~~loan~~our ~~purchase~~three ~~and~~independent ~~sale~~managers ~~agreements~~owns ~~and~~1.17% ~~other~~of ~~secured~~our ~~debt~~common ~~are~~equity, ~~with third parties~~ and ~~are~~one ~~collateralized by~~owns ~~loans~~15.94% ~~The~~of ~~affiliate~~our ~~loans~~Series ~~are~~C ~~collateralized~~cumulative bypreferred aunits at ~~lien~~that ~~against~~date. ~~all~~Since ofthe ~~our~~Company ~~assets.~~is ~~The~~taxed ~~loan~~as ~~purchase~~a ~~and~~partnership ~~sale~~for ~~agreements~~federal ~~and~~income ~~other secured~~tax ~~debt~~purposes, ~~are~~all ~~with~~profits ~~third~~and ~~parties~~losses ~~and~~flow ~~are~~through ~~collateralized~~to bythe equity ~~loans~~owners. ~~In addition~~Therefore, weMr. ~~expect~~Wallach toand ~~incur~~his aaffiliated ~~significant~~equity ~~amount~~owners of ~~additional debt in~~ the ~~future,~~Company ~~including~~will ~~issuance~~be ofmotivated ~~the~~to ~~Notes,~~distribute ~~borrowing~~profits ~~under~~to ~~credit~~the equity ~~facilities~~owners ~~and~~on ~~other~~an ~~arrangements.~~annual ~~The~~basis, ~~Notes~~rather ~~will~~than beretain ~~subordinated~~ earnings in the ~~right~~Company offor ~~payment~~Company topurposes. ~~all~~There ~~secured~~is ~~debt,~~currently ~~including~~no ~~the~~limit ~~affiliate loans. Therefore,~~ in the indenture ~~event~~or ofotherwise ~~a default~~ on the ~~secured~~amount ~~debt, affiliates~~ of ~~our~~funds ~~Company,~~that ~~including~~may ~~Mr.~~be ~~Wallach,~~distributed ~~have~~by the ~~right~~Company to ~~receive~~its ~~payment~~equity ~~ahead~~owners. ofIf ~~Note~~substantial ~~holders,~~funds asare ~~do other secured debt holders,~~distributed ~~such~~to as the ~~loan~~equity ~~purchasers~~owners, ~~under~~ the ~~purchase~~liquidity and ~~sale~~capital ~~agreements.~~resources ~~Accordingly,~~of ~~our~~the ~~business~~Company iswill ~~subject~~be toreduced anand ~~increased risk of a total loss of~~ our ~~Note~~ability ~~holders’ investments if we are unable~~ to repay ~~all~~the ofNotes ~~our~~may ~~secured~~be ~~debt~~negatively impacted.

Employees, managers, members, and relatives of managers and members have invested in the Notes, in the aggregate amount of $7,378,000 as of December 31, 2025. While investment in the Notes by our affiliates may align their interests with those of other Note holders, it could also create conflicts of interest by influencing those employees’ or managers’ actions during times of financial difficulties. For example, the fact that certain of our managers hold Notes, and the value of Notes they hold, could influence their decision to redeem Notes at a time o times when it would be prudent to use our cash resources to build capital, pay down other outstanding obligations, or grow our business. There may be other situations not presently foreseeable in which the ownership of Notes by related persons may create conflicts of interest. These conflicts of interest could result in action or inaction by management that is adverse to other holders of the Notes.

We have two lines of credit from affiliates which allow us to incur a significant amount of secured debt. These lines are collateralized by a lien against all of our assets. Our purchase and sale agreements function as secured debt as well. We expect to incur a significant amount of additional debt in the future, including issuance of the Notes, which will subject us to increased risk of loss.

As of December 31, 2025, we had $26,000 secured debt outstanding on our senior debt lines of credit from affiliates of $1,500,000 and the capacity to sell portions of many loans under the terms of our loan purchase and sale agreements. The affiliate loans are collateralized by a lien against all of our assets. The loan purchase and sale agreements and other secured debt are with third parties and are collateralized by loans. The affiliate loans are collateralized by a lien against all of our assets. The loan purchase and sale agreements and other secured debt are with third parties and are collateralized by loans. In addition, we expect to incur a significant amount of additional debt in the future, including issuance of the Notes, borrowing under credit facilities and other arrangements. The Notes will be subordinated in the right of payment to all secured debt, including the affiliate loans. Therefore, in the event of a default on the secured debt, affiliates of our Company, including Mr. Wallach, have the right to receive payment ahead of Note holders, as do other secured debt holders, such as the loan purchasers under the purchase and sale agreements. Accordingly, our business is subject to an increased risk of a total loss of our Note holders’ investments if we are unable to repay all of our secured debt.

Risks Related to Liquidity

We depend on the availability of significant sources of credit to meet our liquidity needs and our failure to maintain these sources of credit could materially and adversely affect our liquidity in the future.

We plan to maintain our loan purchase and sale agreements and our lines of credit from affiliates so that we may draw funds when necessary to meet our obligation to redeem maturing Notes, pay interest on the Notes, meet our commitments to lend money to our customers, and for other general corporate purposes. Certain features of the loan purchase and sale agreements with third parties have added liquidity and flexibility, which have lessened the need for the lines of credit from affiliates. If we fail to maintain liquidity through our loan purchase and sale agreements and lines of credit for any reason, including a potential negative impact to the credit markets as a result of an outbreak of a communicable illness such as COVID-19, we will be more dependent on the proceeds from the Notes for our continued liquidity. If the sale of the Notes is significantly reduced or delayed for any reason and we fail to obtain or renew a line of credit, or we default on any of our lines of credit, then our ability to meet our obligations, including our Note obligations, could be materially adversely affected, and we may not have enough cash to pay back Note holders’ investments.

In addition, the borrowing capacity on two of our lines of credit is based on the amount outstanding on the underlying collateral loans. If we are unable to find suitable investment opportunities, we may not be able to replace the underlying collateral loans with new loans and, in such a situation, the borrowing capacity on those lines of credit would be reduced. Also, the failure to maintain an active line of credit (and therefore using cash for liquidity instead of a borrowing line) will reduce our earnings, because we will be paying interest on the Notes, while we are holding cash instead of reducing our borrowings.

We have unfunded commitments to builders as of December 31, 2024. If every builder borrowed every amount allowed (which would mean all their homes were complete) and no builders paid us back, we would need to fund that amount. While some of that amount would automatically come from our loan purchase and sale agreements, the rest would have to come from our Notes Program and/or our lines of credit. Therefore, we may not have the ability to fund our commitments to builders.

As of December 31, 2024, we have $22,515,000 unfunded commitments to builders. If every builder borrowed every amount allowed and no builders repaid us, then we would need to fund that amount. Lines of credit, loan purchase and sale agreements, payoffs from builders, and immediate investments in our Notes may not be enough to fund our commitments to builders as they become payable. If we default on these obligations, then we may face any one or more of the following: a higher default rate, lawsuits brought by customers, an eventual lack of business from borrowers, missed principal and interest payments to Note holders and holders of other debt, and a lack of desire for investors to invest in our Notes Program. Therefore, we could default on our repayment obligations to our Note Holders.

WeIn ~~have~~addition, ~~one~~the ~~secured~~borrowing capacity on some of our lines of credit ~~which~~is ~~expires~~based inon ~~2025~~the amount outstanding on the underlying collateral loans. If we are unable to find suitable investment opportunities, ~~and~~we may not be able to replace the ~~unsecured~~underlying ~~portion~~collateral ofloans ~~one~~with ofnew loans and, in such a situation, the borrowing capacity on those lines of credit ~~also~~would ~~expires~~be ~~in 2025~~reduced. ~~Failure~~ ofAlso, ~~those~~the ~~lines~~failure to ~~renew~~maintain ~~could~~an ~~strain~~active line of credit (and therefore using cash for liquidity instead of a borrowing line) will reduce our ~~ability~~earnings, tobecause ~~pay~~we ~~other~~will ~~obligations~~be paying interest on the Notes, while we are holding cash instead of reducing our borrowings.

We have aunfunded ~~$1,325,000~~commitments ~~line~~to ofbuilders ~~credit~~as ~~(the “Shuman LOC”). As~~ of December 31, ~~2024, the amount outstanding under the Shuman LOC was $125,000 which is due in July~~ 2025. WeIf ~~also~~every ~~have~~builder aborrowed ~~$7,000,000~~every ~~line~~amount ofallowed ~~credit~~ (~~the “Judith Swanson LOC”), a portion of~~ which iswould ~~unsecured~~mean ~~(the~~all ~~“Unsecured Judith Swanson LOC”). The balances on Judith Swanson LOC that were secured and unsecured~~their ashomes ~~of December 31, 2024,~~ were ~~$6,000,000~~complete) and ~~$1,000,000~~no ~~respectively.~~builders ~~Both~~paid ~~the~~us ~~secured and unsecured portions were due March 27~~back, ~~2025, if~~we ~~notice~~would ~~was~~need ~~given~~to ~~120~~fund inthat ~~advance~~amount. AsWhile ofsome ~~December 31, 2024, the Judith Swanson LOC are due March 2026,~~ of ~~which~~that ~~$4,000,000~~amount iswould ~~due~~automatically ~~July~~come ~~2026~~from ~~and~~our ~~the~~loan ~~remaining~~purchase ~~balance~~and issale ~~due November~~agreements, ~~2026.~~the Ifrest wewould ~~are~~have ~~unable~~ to ~~renegotiate~~come orfrom ~~extend~~our ~~these~~Notes ~~lines~~Program ~~of credit, then we may default on one~~ and/or ~~both~~our ~~of those~~ lines of credit. Therefore, we ~~could~~may ~~default~~not onhave ~~repayment~~the ~~obligations~~ability to ~~some~~fund of our ~~debt~~commitments ~~holders,~~to ~~including our Note holders~~builders.

As of December 31, 2025, we have $23,557,000 unfunded commitments to builders. If every builder borrowed every amount allowed and no builders repaid us, then we would need to fund that amount. Lines of credit, loan purchase and sale agreements, payoffs from builders, and immediate investments in our Notes may not be enough to fund our commitments to builders as they become payable. If we default on these obligations, then we may face any one or more of the following: a higher default rate, lawsuits brought by customers, an eventual lack of business from borrowers, missed principal and interest payments to Note holders and holders of other debt, and a lack of desire for investors to invest in our Notes Program. Therefore, we could default on our repayment obligations to our Note Holders.

We have several secured lines of credit which allow the lender to give notice and then they eventually expire, and with those expirations, any unsecured portion related to the lines of credit also expire. Any notice of nonrenewal or expiration could strain our ability to pay other obligations.

We have various secured lines of credit, most of which allow the lender to give us notice of expiration, and then a time period to resolve the outstanding balances. As of December 31, 2025 we had ten lines of credit with $10,498,000 outstanding total. If a large dollar amount of balance is due on lines that require us to repay them in a limited amount of time, then we may default on one or more of those lines of credit. Therefore, we could default on repayment obligations to some of our debt holders, including our Note holders.

We have a significant amount of debt and expect to incur a significant amount of additional debt in the future, including the issuance of the Notes, which will subject us to an increased risk of loss. Our present and future senior debt may make it difficult to repay the Notes.

We have a significant amount of debt and expect to incur a significant amount of additional debt in the future. As of December 31, ~~2024~~2025, we have approximately $5654,~~315~~219,000 of debt, net of deferred financing costs. Our primary sources of debt include our lines of credit, loan purchase and sale agreements, and the Notes. As of December 31, ~~2024~~2025, we have a total outstanding balance of $92,~~833~~540,000 on our ~~lines~~ lines of credit and approximately $107,~~918~~959,000 on our loan purchase and sale agreements.

We also have the capacity to sell portions of many loans under the terms of our loan purchase and sale agreements. The loan purchase and sale agreements and other secured debt are with third parties and all but one of the lines of credit are collateralized by loans that we have issued to builders. The Notes are subordinate and junior in priority to all of our senior debt and senior subordinated debt, and equal to any and all non-senior debt, including other Notes. There are no restrictions in the indenture regarding the amount of senior debt or other indebtedness that we may incur.

As of December 31, 2024, we had approximately $6,736,000 in Notes coming due by December 2025, and we cannot be certain whether we will be able to fund those Notes upon maturity. Upon the maturity of our senior debt, by lapses of time, acceleration or otherwise, the holders of our senior debt have first right to receive payment, in full, prior to any payments being made to a Note holder or to other non-senior debt. Therefore, upon such maturity of our senior debt Note holders would only be repaid in full if the senior debt is satisfied first and, following satisfaction of the senior debt, if there is an amount sufficient to fully satisfy all amounts owed under the Notes and any other non-senior debt.23

InAs ~~addition,~~of weDecember ~~expect~~31, to2025, ~~incur~~we ahad ~~significant~~approximately ~~amount~~$2,383,000 ofin ~~additional~~Notes ~~debt~~coming indue ~~the~~by ~~future~~December 2026, ~~including~~and ~~issuance~~we ofcannot ~~the~~be ~~Notes,~~certain ~~borrowing~~whether ~~under~~we will ~~credit~~be ~~facilities,~~able ~~and~~to ~~other~~fund ~~arrangements.~~those ~~The~~ Notes ~~will~~upon bematurity. ~~subordinated~~Upon inthe ~~right~~maturity of ~~payment~~our tosenior ~~all secured~~ debt, ~~including~~by ~~the~~lapses ~~Wallach Affiliate~~of ~~LOCs~~time, ~~Myrick~~acceleration ~~LOC,~~or ~~loan purchase and sale agreements~~otherwise, the holders of our senior ~~subordinated~~debt ~~note~~have ~~discussed~~first inright ~~the~~to ~~prior~~receive ~~paragraph~~payment, ~~and the line of credit discussed~~ in ~~the~~full, prior ~~paragraph.~~to ~~Therefore,~~any inpayments ~~the~~being ~~event~~made ofto a ~~default~~Note onholder ~~the~~or ~~secured~~to ~~debt,~~other ~~affiliates of our Company,~~non-senior ~~including Mr~~debt. ~~Wallach~~Therefore, ~~have~~upon ~~the~~such ~~right~~maturity toof ~~receive~~our ~~payment~~senior ~~ahead~~debt of Note holders, aswould doonly ~~other~~be ~~secured~~repaid ~~debt~~in ~~holders,~~full ~~such~~if as the ~~loan~~senior ~~purchasers under~~debt ~~the~~is ~~loan~~satisfied ~~purchase~~ first and ~~sale agreements. Accordingly~~, ~~our~~following ~~business~~satisfaction isof ~~subject~~the tosenior ~~increased~~debt, ~~risk~~if ofthere ais ~~total~~an ~~loss~~amount ofsufficient ato ~~Noteholder’s investment~~fully ifsatisfy weall ~~are~~amounts ~~unable~~owed tounder ~~repay~~the ~~all~~Notes ofand any ~~our~~other ~~secured~~non-senior debt.

In addition, we expect to incur a significant amount of additional debt in the future, including issuance of the Notes, borrowing under credit facilities, and other arrangements. The Notes will be subordinated in right of payment to all secured debt, including the Wallach Affiliate LOCs, loan purchase and sale agreements, the senior subordinated note discussed in the prior paragraph, and the line of credit discussed in the prior paragraph. Therefore, in the event of a default on the secured debt, affiliates of our Company, including Mr. Wallach, have the right to receive payment ahead of Note holders, as do other secured debt holders, such as the loan purchasers under the loan purchase and sale agreements. Accordingly, our business is subject to increased risk of a total loss of a Noteholder’s investment if we are unable to repay all of our secured debt.

If the proceeds from the issuance of the Notes exceed the cash flow needed to fund the desirable business opportunities that are identified, we may not be able to invest all of the funds in a manner that generates sufficient income to pay the interest and principal on the Notes.

Our ability to pay interest on our debt, including the Notes, pay our expenses, and cover credit losses is dependent upon the interest and fee income we receive from loans extended to our customers. If we are not able to lend to a sufficient number of customers at high enough interest rates, we may not have enough interest and fee income to meet our obligations, which could impair our ability to pay interest and principal on the Notes. If money brought in from new Notes and from repayments of loans from our customers exceeds our short-term obligations such as expenses, Notes interest and redemptions, and line of credit principal and interest, then it is likely to be held as cash, which will have a lower return than the interest rate we are paying on the Notes. This will lower earnings and may cause losses which could impair our ability to repay the principal and interest on the Notes.

23Increases in interest rates would increase the amount of debt payments under the Wallach Affiliate LOCs which could impair our ability to repay the principal and interest on the Notes.

~~Increases~~The interest rate under the Wallach Affiliate LOCs is generally equal to the prime rate plus three percent. Increases in interest rates will increase the applicable prime rate and therefore, the interest rate under the Wallach Affiliate LOCs will increase. An increase in the interest rate would increase the amount of debt payments under the Wallach Affiliate LOCs ~~and~~which ~~Myrick~~would ~~LOC~~reduce ~~which~~our ~~could~~cash ~~impair~~flow and may impair our ability to repay the principal and interest on the Notes.

The interest rate under the Wallach Affiliate LOCs and Myrick LOC is generally equal to the prime rate plus three percent. Increases in interest rates will increase the applicable prime rate and therefore, the interest rate under the Wallach Affiliate LOCs and the Myrick LOC will increase. An increase in the interest rate would increase the amount of debt payments under the Wallach Affiliate LOCs and the Myrick LOC which would reduce our cash flows and may impair our ability to repay the principal and interest on the Notes.

We incurred indebtedness secured by our office property, which may result in foreclosure.

The debt incurred by us in connection with our office property is secured by a mortgage. If we default on our secured indebtedness, the lender may foreclose and the entire investment in the office property could be lost, which could adversely affect our ability to repay the principal and interest onin the Notes.

The indenture does not contain the type of covenants restricting our actions, such as restrictions on creating senior debt, paying distributions to our owners, merging, recapitalizing, and/or entering into highly leveraged transactions. The indenture does not contain provisions requiring early payment of Notes in the event we suffer a material adverse change in our business or fail to meet certain financial standards. Therefore, the indenture provides very little protection of Note holders’ investments.

The Notes do not have the benefit of extensive covenants. The covenants in the indenture are not designed to protect Note holders’ investments if there is a material adverse change in our consolidated financial condition, results of operations, or cash flows. For example, the indenture does not contain any restrictions on our ability to create or incur senior debt or other debt to pay distributions to our equity holders, including our Chief Executive Officer ~~and our Executive Vice President~~. It also does not contain any financial covenants (such as a fixed charge coverage or a minimum amount of equity) to help ensure our ability to pay interest and principal on the Notes. The indenture does not contain provisions that permit Note holders to require that we redeem the Notes if there is a takeover, recapitalization or similar restructuring. In addition, the indenture does not contain covenants specifically designed to protect Note holders if we engage in a highly leveraged transaction. Therefore, the indenture provides very little protection of Note holders’ investments.

Payment on the Notes is subordinate to the payment of our outstanding present and future senior debt, if any. Since there is no limit to the amount of senior debt we may incur, our present and future senior debt may make it difficult to repay the Notes.

Our loan purchase and sale agreements and secured lines of credit with third-parties also function as senior debt. The balance on those loan purchase and sale agreements and other secured debt, net of deferred financing costs was $1018,~~918~~445,000 on December 31, ~~2024~~2025, and is expected to grow in the future. In addition, we have $750,000 in senior unsecured lines of credits which were ~~fully~~not drawn as of December 31, ~~2024~~2025. We also have senior subordinated notes which are senior to the Notes of $1,812,000 as of December 31, ~~2024~~2025. The Notes are subordinate and junior in priority to any and all of our senior debt and senior subordinated debt, and equal to any and all non-senior debt, including other Notes. The Notes are senior to junior subordinated notes. There are no restrictions in the indenture regarding the amount of senior debt or other indebtedness that we may incur. Upon the maturity of our senior debt, by lapse of time, acceleration or otherwise, the holders of our senior debt have first right to receive payment, in full, prior to any payments being made to a Note holder or to other non-senior debt. Therefore, upon such maturity of our senior debt Note holders would only be repaid in full if the senior debt is satisfied first and, following satisfaction of the senior debt, if there is an amount sufficient to fully satisfy all amounts owed under the Notes and any other non-senior debt.

Additional competition for investment dollars may decrease our liquidity, which would adversely affect our ability to repay the Notes.

We could experience increased competition for investment dollars from other companies and financial institutions that are willing to offer higher interest rates. We may be forced to increase our interest rates in order to maintain or increase the issuance of Notes. Any increase in our interest rates could have an adverse impact on our liquidity and our ability to meet a debt covenant under any future lines of credit obtained and/or to repay the Notes.

If we are unable to meet our Note maturity and redemption obligations, and we are unable to obtain additional financing or other sources of capital, we may be forced to sell off our operating assets or we might be forced to cease our operations and Note holders could lose some or all of their investment.

Our Notes have maturities ranging from one year to four years. In addition, holders of our Notes may request redemption upon death and we would be obligated to fulfill such redemption request. Holders of a 36-month Note may request redemption at any time and, subject to certain limitations, we would be obligated to fulfill such redemption request. We intend to pay our Note maturity and redemption obligations using our normal cash sources, such as collections on our loans to customers, as well as proceeds from the Notes Program. We may experience periods in which our Note maturity and redemption obligations are high. Since our loans are generally repaid when our borrower sells a real estate asset, our operations and other sources of funds may not provide sufficient available cash flow to meet our continued Note maturity and redemption obligations. While we have secured lines of credit from affiliates of up to $21,500,000 with $~~743~~26,000 borrowed as of December 31, ~~2024~~2025, our affiliates are not obligated to fund our borrowing requests. For all of these reasons we may be substantially reliant upon the net offering proceeds we receive from the Notes Program to pay these obligations. If we are unable to repay or redeem the principal amount of the Notes when due, and we are unable to obtain additional financing or other sources of capital, we may be forced to sell off our operating assets or we might be forced to cease our operations and Note holders could lose some or all of their investment.

There is no “early warning” on the Notes if we perform poorly. Only interest and principal payment defaults on the Notes can trigger a default on the Notes prior to bankruptcy.

There are a limited number of performance covenants to be maintained under the Notes and/or the indenture. Therefore, no “early warning” of a possible default by us exists. Under the indenture, only (i) the non-payment of interest and/or principal on the Notes by us when payments are due, (ii) our bankruptcy or insolvency, or (iii) a failure to comply with provisions of the Notes or the indenture (if such failure is not cured or waived within 60 days after receipt of a specific notice) could cause a default to occur.

Note holders do not have the opportunity to evaluate our investments before they are made.

We intend to use the net offering proceeds in accordance with the “Use of Proceeds” section of our prospectus, including investment in secured real estate loans for the acquisition and development of parcels of real property as single-family residential lots and/or the construction of single-family homes. Since we have not identified any investments that we will make with the net proceeds of this offering, we are generally unable to provide Note holders with information to evaluate the potential investments we may make with the net offering proceeds before purchasing the Notes. Note holders must rely on our management to evaluate our investment opportunities, and we are subject to the risk that our management may not be able to achieve our objectives, may make unwise decisions, or may make decisions that are not in our best interest.

Because we require a substantial amount of cash to service our debt, we may not be able to pay our obligations under the Notes.

To service our total indebtedness, we require a significant amount of cash. Our ability to generate cash depends on many factors, including our successful financial and operating performance. We cannot assure Note holders that our business plans will succeed or that we will achieve our anticipated financial results, which may prevent us from being able to pay our obligations under the Notes.

The indenture and terms of our Notes do not restrict our use of leverage. A relatively small loss can cause overleveraged companies to suffer a material adverse change in their financial position. If this happened to us, it may make it difficult to repay the Notes.

Financial institutions which are federally insured typically have 8-12% of their total assets in equity. A reduction in their loan assets due to losses of 2% reduces their equity by roughly 20%. We had 1814% and 1218% of our loan assets, net in equity as of December 31, ~~2024~~2025 and ~~2023~~2024, respectively. If we allow our assets to increase without increasing our equity, we could have a much lower equity as a percentage of assets than we have today, which would increase our risk of non-payment on the Notes. Note holders have no structural mechanism to protect them from this action and rely solely on us to keep equity at a satisfactory ratio.

We expect to be substantially reliant upon the net offering proceeds we receive from the sale of our Notes to meet principal and interest obligations on previously issued Notes.

We intend to use the net offering proceeds from the sale of Notes to, among other things, make payments on other borrowings, fund redemption obligations, make interest payments on the Notes, and to run our business to the extent that other sources of liquidity from our operations (e.g., repayment of loans we have previously extended to our customers) and our credit lines are inadequate. However, these other sources of liquidity are subject to risks. Our operations alone may not produce a sufficient return on investment to repay interest and principal on our outstanding Notes. We may not be able to obtain an additional line of credit when needed or retain one or more of our existing lines of credit. We may not be able to attract new investors, have sufficient loan repayments, or have sufficient borrowing capacity when we need additional funds to repay principal and interest on our outstanding Notes or redeem our outstanding Notes. If any of these things occur, our liquidity and capital needs may be severely affected, and we may be forced to sell off our loan receivables and other operating assets, or we may be forced to cease our operations.

If we default in our Note payment obligations, the indenture agreements provide that the trustee could accelerate all payments due under the Notes, which would further negatively affect our consolidated financial position and cash flows.

Our obligations with respect to the Notes are governed by the terms of indenture agreements with U.S. Bank Trust Company, National Association as trustee. Under the indentures, in addition to other possible events of default, if we fail to make a payment of principal or interest under any Note and this failure is not cured within 30 days, then we will be deemed in default. Upon such a default, the trustee or holders of 25% in principal of the outstanding Notes could declare all principal and accrued interest immediately due and payable. If our total assets do not cover these payment obligations, then we would most likely be unable to make all payments under the Notes when due, and we might be forced to cease our operations.

There is no sinking fund to ensure repayment of the Notes at maturity, so Note holders are totally reliant upon our ability to generate adequate cash flows.

We do not contribute funds to a separate account, commonly known as a sinking fund, to repay the Notes upon maturity. Because funds are not set aside periodically for the repayment of the Notes over their respective terms, Note holders must rely on our consolidated cash flows from operations, investing and financing activities and other sources of financing for repayment, such as funds from sale of the Notes, loan repayments, and other borrowings. To the extent cash flows from operations and other sources are not sufficient to repay the Notes, the Note holders may lose all or part of their investment.

If we have a large number of repayments on the Notes, whether because of maturity or redemption, we may be unable to make such repayments.

We are obligated to redeem a Note without any interest penalty (i) upon the death of an investor, if requested by the executor or administrator of the investor’s estate (or if the Note is held jointly, by the surviving joint investor), and (ii) subject to certain limitations, upon request by an investor holding a 36-month ~~Note issued on or after February 4, 2020~~. Such redemption requests are not subject to our consent but are subject to restrictions in the indenture. We may be faced with a large number of such redemption requests at one time. We are also required to repay all of the Notes upon their maturity. If the amounts of those repayments are too high, and we cannot offset them with loan repayments, secure new financing, or issue additional Notes, we may not have the liquidity to repay the investments.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 1C. CYBERSECURITY

We face cybersecurity risks due primarily to our position in the industry and identity as a financial service company with potential for harm that could occur to us, our investors and our customers were we to suffer impacts of a material cybersecurity incident. We are committed to maintaining robust governance and oversight of these risks and to implementing mechanisms, controls, technologies, and processes designed to help us assess, identify, and manage these risks. While we have not, as of the date of this Annual Report, experienced a cybersecurity threat or incident that resulted in a material adverse impact or are reasonably likely to have material adverse impact on our business or operations, our business strategy, results of operations, or financial condition, there can be no guarantee that we will not experience such an incident in the future. In addition, the environment and threats are constantly evolving, thereby increasing the difficulty of successfully defending against them or implementing adequate preventative measures. We ~~only~~ use industry leading third -party software applications for our operations and we rely on their technology to assess potential cybersecurity threats. We seek to detect and investigate unauthorized attempts and attacks against our network and services which are also dependent on third parties (multiple law firms, banks, settlement and title entities) and their technology, and to prevent their occurrence and recurrence where practical through changes, updates and enhancements to our internal processes and tools. We have an internal process to consider the cybersecurity practices of our third-party service providers and we actively review their cybersecurity notices and alerts on an ongoing basis. Our assessment of risks associated with the use of third-party providers is part of our overall risk management framework. However, we remain potentially vulnerable to known or unknown threats.

We aim to incorporate industry best practices throughout our cybersecurity program. Our cybersecurity strategy focuses on implementing effective and efficient controls, technologies, and other processes to assess, identify, and manage material cybersecurity risks. Our cybersecurity program is designed to be aligned with applicable industry standards and is assessed periodically by independent subject matter expert third parties who hold industry leading certifications such as Certified Information Systems Security Professional (CISSP), GIAC Certified Intrusion Analyst (GCIA), and GIAC Certified Incident Handler (GCIH).

We have processes in place to identify, access, and address material cybersecurity threats and incidents with the help of the above noted expert third parties as needed. We monitor issues that are internally discovered or externally reported that may affect our business and have processes to assess those issues for potential cybersecurity impact or risk.

Pursuant to our Audit Committee Charter, our Audit Committee is responsible for reviewing and assessing our risk assessment and risk management policies, including oversight of cybersecurity risk. Our risk assessment policy is utilized in making decisions with respect to company priorities, resource allocations, and oversight structures. Our Board of Managers, with the assistance of our Audit Committee and Technology Committee, regularly reviews our cybersecurity program with management and reports to the Board of Managers. Messrs. Wallach and Sheldon, both members of our Technology Committee and our Board of Managers, bring extensive experience in security governance, risk, and compliance, with prior leadership experience in public and private companies, where they closely worked with massive IT departments to handle with cybersecurity risks, information technology and data protection. Cybersecurity reviews generally occur at least annually, or more frequently as determined to be necessary or advisable. We have an escalation process in place to inform senior management and the Board of Managers of material issues.

ITEM 2. PROPERTIES

As of December 31, ~~2024~~2025, we operate an office in Jacksonville, Florida, which we own. We entered a mortgage on our office building for $660,000 in January 2018 after a majority of the construction was completed. During November 2024, we paid off the mortgage balance of the office building. The principal amount at payoff was $559,000. In ~~addition~~January 2025, ~~interest~~we ~~expense~~entered ~~during~~into ~~the~~a ~~years~~new ~~ended~~revolving ~~December~~line ~~31,~~of ~~2024~~credit ~~and~~on ~~2023~~the building ~~was~~with ~~$37,000~~a ~~and~~maximum borrowing capacity for $39725,000, ~~respectively~~with an expiration date of 2040. There was no balance as of December 31, 2025.

27In addition, interest expense during the years ended December 31, 2025 and 2024 was $4,000 and $37,000, respectively.

During October 2023, the Company acquired two properties to construct houses on each lot. Once the properties are fully developed and sold the use of proceeds from the sale will first apply to the land, building, furniture and interest costs to the Company and a portion of the remaining funds will be distributed as a management fee for the development

of the homes.

Effective February 15, 2024, the Company completed its acquisition of 339 Justabout Land Co. LLC (“339”), in a transaction valued at $9,122. The Company paid cash consideration of $3,000 plus the amount of our intercompany debt.

The property has since been subdivided into two parcels. One parcel is being developed into lots and are available for home construction (“Phase 1 Lots”) and the other parcel will be developed into a second phase of lots (“Phase 2 Lots”), which should be available for construction early next year (collectively the “339 Lots”).

During September 2024, the Company invested in one of our borrowers, DBL Capital Real Estate Fund 1, LLC (“DBL”) for $330.

ITEM 3. LEGAL PROCEEDINGS

	(a)	As of the date of this filing, we are not aware that we or our members are a party to any pending or threatened legal proceeding or proceedings by a governmental authority that would have a material adverse effect on our business.

	(b)	None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCK HOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES

(All dollar [$] amounts shown in thousands.)

(a)

Common Equity

The Company has two classes of equity units that it classifies as Members’ Capital: Class A common units (“Class A Common Units”) and Series C Preferred Units. There is currently no established public trading market for the registrant’s equity units. As of December 31, ~~2024~~2025, Class A Common Units are held by 108 members, all of whom have no personal liability. All Class A common members have voting rights in proportion to their capital account.

During March 2023, the Company issued 17,371 Class A Common Units for $1,460. As of December 31, 2024 and 2023, Class A Common Units outstanding were both 20,000, respectively.

On October 1, 2023, the Company entered into restricted unit agreements with Mark Reynolds, the Executive Vice President of Sales, and Catherine Leslie, the Chief Financial Officer, pursuant to which the Company issued 200 restricted common units to each of Mark Reynolds and Catherine Leslie. Vesting of the restricted common units commences from the grant date and occur thereafter on the first day of each subsequent calendar month subject to the Company satisfying monthly earnings goals, measured two months in arrears in accordance with the vesting schedule.

28As of December 31, 2025 and 2024, 84 and 56 restricted common units vested, respectively. Restricted common units outstanding as of December 31, 2025 and 2024 were 312 and 344, respectively. In addition, stock compensation expense was $7 and $20 as of December 31, 2025 and 2024, respectively.

AsDuring ~~of December 31~~2025, ~~2024~~the ~~and~~Company ~~2023~~converted 2,969 44shares ~~and~~of 16Class ~~restricted~~A ~~common~~Common ~~units~~Units ~~vested~~to 2,329 ~~respectively.~~Series ~~Restricted~~C ~~common~~preferred units ~~outstanding~~for asone of our owners. As of December 31, ~~2024~~2025 and ~~2023~~2024, ~~were~~Class ~~340~~A ~~and~~Common ~~384,~~Units ~~respectively.~~outstanding Inwere ~~addition~~17,031 ~~stock compensation expense was $20~~ and ~~$7 as of December 31~~20, ~~2024 and 2023~~000, respectively.

There are two additional authorized unit classes: Class A preferred units and Class B profit units. Once Class B profit units are issued, the existing Class A common units will become Class A preferred units. Class A Preferred units will receive preferred treatment in terms of distributions and liquidation proceeds.

Preferred Equity

Series B Preferred Units

We previously entered into an agreement with the Hoskins Group (consisting of Benjamin Marcus Homes, LLC, Investor’s Mark Acquisitions, LLC, and Mark L. Hoskins) pursuant to which we sell the Hoskins Group 0.1 Series B cumulative preferred units (“Series B Preferred Units”) upon the closing of certain lots.

There is no established public trading market for our Series B Preferred Units. The Series B Preferred Units are redeemable by the Company at any time. The Series B Preferred Units have a fixed value which is their purchase price, and preferred liquidation and distribution rights. Yearly distributions of 10% of the Series B Preferred Units’ value (provided profits are available) are generally made quarterly. The Hoskins Group’s Series B Preferred Units are also used as collateral for that group’s loans to the Company.

During March 2023, the Company redeemed 100% of the outstanding Series B Preferred Units. As of December 31, 2024, we had no Series B Preferred Units outstanding.

The transactions in Series B Preferred Units described above were effected in private transactions exempt from the registration requirements of the Securities Act under Section 4(a)(2) of the Securities Act. The transactions described above did not involve any public offering, were made without general solicitation or advertising, and the buyer represented to us that it is an “accredited investor’’ within the meaning of Rule 501 of Regulation D promulgated under the Securities Act, with access to all relevant information necessary to evaluate the investment in the Series B Preferred Units.

Series C Preferred Units

As of December 31, ~~2024~~2025, we had ~~6430~~9,084 Series C cumulative preferred units (“Series C Preferred Units”) outstanding or 1317 investments, held by 109 investors. There is no established public trading market for our Series C Preferred Units. As of December 31, ~~2024~~2025, 2413.8% of of our outstanding Series C Preferred Units are beneficially owned by our CEO (who is also on our board of managers), Daniel M. Wallach, and his wife, Joyce S. Wallach.

~~Investors~~As inmentioned ~~the~~above, ~~Series~~during C2025, ~~Preferred~~the ~~Units~~Company ~~may~~converted ~~elect~~2,969 toshares ~~reinvest~~of ~~their~~Class ~~distributions~~A inCommon ~~additional Series C Preferred~~ Units ~~(the “Series C Reinvestment Program”). Pursuant~~ to ~~the Series C Reinvestment Program~~2,329 ~~we issued the following~~ Series C Preferred Units ~~during the~~for ~~quarter~~one ~~ended~~of our ~~December 31, 2024:~~owners.

(amounts in this table are not in thousands) Owner	Units		Amount
Daniel M. and Joyce S. Wallach		39.83992	$	39,839.92
Gregory L. Sheldon and Madeline M. Sheldon		26.56729		26,567.29
Schultz Family Living Trust		06.11110		6,111.10
Fernando Ascencio and Lorraine Carol Ascencio		11.43389		11,433.89
Mark and Tris Ann Garboski		38.66040		38,660.40
Total		122.61260	$	122,612.60

Investors in the Series C Preferred Units may elect to reinvest their distributions in additional Series C Preferred Units (the “Series C Reinvestment Program”). Pursuant to the Series C Reinvestment Program, we issued the following Series C Preferred Units during the quarter ended December 31, 2025:

*(amounts in this table are not in thousands)* Owner	Units		Amount
Daniel M. and Joyce S. Wallach		36.91728	$	36,917.28
Gregory L. Sheldon and Madeline M. Sheldon		33.00153		33,001.53
Schultz Family Living Trust		6.87203		6,872.03
Fernando Ascencio and Lorraine Carol Ascencio		12.85763		12,857.63
Mark and Tris Ann Garboski		43.46483		43,464.83
Total		133.11330	$	113,113.30

The proceeds received from the sales of the Series C Preferred Units discussed above were used for the funding of construction loans. The transactions in Series C Preferred Units described above were effected in private transactions exempt from the registration requirements of the Securities Act under Section 4(a)(2) of the Securities Act. The transactions described above did not involve any public offering, were made without general solicitation or advertising, and the buyer represented to us that they were an “accredited investor” within the meaning of Rule 501 of Regulation D promulgated under the Securities Act, with access to all relevant information necessary to evaluate the investment in the Series C Preferred Units.

(b)

Notes Program

We registered up to $70,000 in Fixed Rate Subordinated Notes (“Notes”) in our current public offering, which is our fourth public offering of Notes (SEC File No. 333-263759, effective September 16, 2022). As of December 31, ~~2024~~2025, we issued $1533,~~867~~489 in Notes pursuant to our current public offering. As of December 31, ~~2024~~2025, we incurred expenses of $~~198~~497 in connection with the issuance and distribution of the Notes in our current public offering, which were paid to third parties. These expenses were not for underwriters or discounts, but were for advertising, printing, and professional services. Net offering proceeds as of December 31, ~~2024~~2025 were $1532,~~669~~992, all of which was used to increase loan balances.

(c)

None.

ITEM 6. [RESERVED]

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(All dollar [$] amounts shown in thousands.)

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our consolidated financial statements and the notes thereto contained elsewhere in this report. See also “Cautionary Note Regarding Forward-Looking Statements” preceding Part I.

Overview

WeOur ~~were~~business ~~organized~~is focused on commercial lending to participants in the ~~Commonwealth~~residential ofconstruction ~~Pennsylvania~~and indevelopment ~~2007~~industry. ~~under~~We ~~the~~believe ~~name~~this 84market is REunderserved ~~Partners,~~because ~~LLC~~of ~~and~~the ~~changed~~lack ~~our~~of ~~name~~traditional tolenders ~~Shepherd’s Finance,~~currently ~~LLC~~fully onparticipating ~~December~~in 2,the ~~2011~~market. We ~~converted~~are tolocated ain ~~Delaware~~Jacksonville, Florida. Our operations are governed pursuant to our limited liability company onagreement. ~~March~~We ~~29,~~have ~~2012.~~an ~~Our~~internet ~~business~~website isat ~~focused on~~www.shepherdsfinance.com. ~~commercial~~We ~~lending~~are tonot ~~participants~~incorporating inby ~~the~~reference ~~residential~~into ~~construction~~this ~~and~~report ~~development~~any ~~industry~~material from our website. WeThe ~~believe~~reference ~~this~~to ~~market~~our website is ~~underserved~~an ~~because~~inactive textual ofreference to the ~~lack~~uniform ofresource ~~traditional~~locator ~~lenders~~(URL) ~~currently~~and ~~participating~~is infor ~~the~~reference ~~market~~only.

Through August 6, 2025, we were the sole member of two consolidating subsidiaries, 339 Justabout Land Company (“339”), and Builder’s Assistance, LLC (“Builder’s Assistance”). On August 6, 2025, we sold 339.

The property has since been subdivided into two parcels. One parcel has been developed into lots which are available for home construction (“Phase 1 Lots”) and the other parcel will be developed into a second phase of lots (“Phase 2 Lots”), which should be available for construction early next year (collectively the “339 Lots”).

Our Company is located in Jacksonville, Florida. Our operations are governed pursuant to our limited liability company agreement.

Economic and Industry Dynamics

During ~~2024~~2025, the Company continued to focus on the reduction of non-interest earning assets. As of December 31, ~~2024~~2025, ~~gross~~loan ~~loans~~receivables, ~~classified~~net classified as ~~non-accrual~~individually evaluated were 2129 or $46,~~971~~192 compared to 1721 or $54,~~912~~971 as of December 31, ~~2023~~2024. In addition, as of December 31, ~~2024~~ 2025 and ~~2023~~2024 we had ~~four~~ one or $~~1,356~~478 and ~~one~~four or $~~130~~1,356 gross foreclosed assets, respectively.

The Company continues to lose interest income on non-accrual assets. During the year ended December 31, ~~2024~~2025 the estimated loss on interest income related to ~~impaired~~individually evaluated and foreclosed assets was $~~886~~645 as compared to $~~846~~886 in ~~2023~~2024. Looking ahead, we expect to continue to lose interest income on non-accrual assets, ~~however~~and we expect ~~our~~to ~~provision~~continue ~~for~~to ~~credit~~work ~~losses~~hard to ~~decrease~~mitigate inlosses ~~2025~~from asnonperforming ~~compared~~loans toand ~~2024.~~foreclosed assets

While the Company continues to face risks as it relates to the economy and the homebuilding industry, management has decided to focus on the following during ~~2025~~2026:

1. Continue to manage the balance of non-interest-bearing assets, which includes foreclosed real estate and ~~nonaccrual~~individually evaluated assets. 2. Control SG&A expenses. 3. ~~Slightly~~Maintain ~~increase~~Net ~~margin,~~Interest asIncome ~~compared~~Spread toPercentage ~~our current spread.~~ 4. Maintain liquidity at a level sufficient for loan originations. 5. Decrease loan loss and impairment expenses. 6. Increase ~~sales~~loan balances by obtaining new borrowers.

During ~~2025~~2026, we anticipate that the housing market in most of the areas in which we do business will likely beimprove, ~~similar~~as we believe that the long term interest rates that our borrowers’ customers use are likely to fall. There is a risk if mortgage rates drop that many homeowners in existing low-rate mortgages will decide to “move up” and sell their low mortgage rate home, flooding the ~~same~~market with ~~period~~homes. Offsetting that risk is the fact that they will also increase demand for homes as they will need one to live in. ~~2024~~Rents may become less affordable vs. Weowning ~~should~~a ~~not~~home, which helps our customer. While we don’t anticipate the market flooding to negatively ~~experience~~impact ~~further~~us, ~~losses~~there ~~from~~is little history to go by and this might cause housing prices to drop steeply, which will hurt our ~~COVID-19~~existing loans. Of course, asrates ~~the~~may ~~final~~not ~~balances~~fall, ofor ~~those~~they ~~loans~~may ~~were~~instead ~~either~~go ~~paid~~up, or ~~written~~the ~~off~~actual impact of falling rates may not result in ~~2023,~~an ~~and~~enhanced housing market. While we ~~expect~~are ~~total~~anticipating ~~credit~~growth ~~losses~~in ~~for~~housing ~~2025~~and toloan bebalances, ~~lower~~we ~~than~~are ~~2024~~prepared for a declining market as well. In 2026, we ~~continue~~don’t anticipate toincreasing ~~reduce~~our ~~the~~investments ~~balance~~that ofare ~~noninterest~~not ~~bearing~~loans or foreclosed assets.

There is a risk if mortgage rates continue to drop that many homeowners in existing low-rate mortgages will decide to “move up” and sell their low mortgage rate home, flooding the market with homes. Offsetting that risk is the fact that they will also increase demand for homes as they will need one to live in. Rents may become less affordable vs. owning a home, which helps our customer. While we don’t anticipate the market flooding to negatively impact us, there is little history to go by and this might cause housing prices to drop steeply, which will hurt our existing loans and reduce new loan production.

Perceived Challenges and Anticipated Responses

The following is not intended to represent a comprehensive list or description of the risks or challenges facing the Company. Currently, our management is most focused on the following challenges along with the corresponding actions to address those challenges:

Perceived Challenges and Risks		Anticipated Management Actions/Response
Potential loan value-to-collateral value issues (i.e., being underwater on particular loans)		We manage this challenge by risk-rating both the geographic region and the builder, and then adjusting the loan-to-value (i.e., the loan amount versus the value of the collateral) based on risk assessments. Additionally, we collect a deposit up-front for construction loans. Despite these efforts, if values in a particular area of the country drop by 60%, we will have loaned more than the value of the collateral. We have found that the best solution to this risk is a speedy resolution of the loan, and help the builder finish the home rapidly rather than foreclosing on the partially built home. Our experience in this area will help us limit, but not eliminate, the negative effects in the event of another economic downturn.

Perceived Challenges and Risks		Anticipated Management Actions/Response
Potential loan value-to-collateral value issues (i.e., being underwater on particular loans)		We manage this challenge by risk-rating both the geographic region and the builder and then adjusting the loan-to-value (i.e., the loan amount versus the value of the collateral) based on risk assessments. Additionally, we collect a deposit up-front for most construction loans. Despite these efforts, if values in a particular area of the country drop by a high percentage, we will have loaned more than the value of the collateral. We have found that the best solution to this risk is a speedy resolution of the loan and help the builder finish the home rapidly rather than foreclosing on the partially built home. Our experience in this area will help us limit, but not eliminate, the negative effects in the event of another economic downturn.

Concentration of loan portfolio (i.e., how many of the loans are of or with any particular type, customer, or geography)		As of December 31, 2024 and 2023, 20% and 29%, respectively, of our outstanding loan commitments consist of loans to one borrower, and the collateral is in one real estate market, Pittsburgh, Pennsylvania. Accordingly, the ultimate collectability of a significant portion of these loans is susceptible to changes in market conditions in that area. As of December 31, 2024, our next two largest customers make up 4% and 3% of our loan commitments, with loans in Orlando, Florida, and Greenville, South Carolina respectively. As of December 31, 2023, our next two largest customers made up 7% and 6% of our loan commitments, with loans in Cape Coral and Orlando, Florida, respectively. In the upcoming years, we plan on continuing to increase our geographic and builder diversity while we also focus on our residential homebuilder customers.
Concentration of loan portfolio (i.e., the dollar amount committed to or with any particular loan type, customer, or geography)		As of December 31, 2025 and 2024, 36% and 20%, respectively, of our outstanding loan commitments consist of loans to one borrower, and the collateral is in one real estate market, Pittsburgh, Pennsylvania. Accordingly, the ultimate collectability of a significant portion of these loans is susceptible to changes in market conditions in that area. As of December 31, 2025, our next two largest customers make up 7% and 6% of our loan commitments, with loans in Central and Southwest Florida, and St. George Utah respectively. As of December 31, 2024, our next two largest customers made up 4% and 3% of our loan commitments, with loans in Cape Coral Florida and Greenville South Carolina, respectively. In the upcoming years, we plan on continuing our efforts to increase our geographic and builder diversity while we also focus on our residential homebuilder customers.
Not having funds available to us to service the commitments we have		As of December 31, ~~2024~~2025, our typical construction loan had about 6872% of its loan amount outstanding on average. That means that on average, about 32% of the commitment is not loaned, usually because the house is not complete. As of December 31, ~~2024~~2025, unfunded commitments were $2223,~~515~~557, which we will fund along with our purchase and sale agreement participants. However, if we are short on cash, we could do the following: ● raise interest rates on the Notes we offer to our investors to attract new Note investments; ● sell more secured interests on our loans; or ● draw down on our lines of credit from our affiliates.
Non-payment of interest by our customers		Most of our customers pay interest on a monthly basis, and these funds are used to, among other things, pay interest on our ~~debt~~ monthly debt. While we have the liquidity to withstand some non-payment of interest, if a high percentage of our customers were not paying interest, it will impede our ability to pay our debts on time.
Nonperforming assets		As of December 31, ~~2024~~2025, ~~nonperforming~~individually evaluated assets were approximately $56,~~669~~192 (defined as impaired loans and foreclosed assets net of reserves).

Critical Accounting Estimates

To assist in evaluating our consolidated financial statements, we describe below the critical accounting estimates that we use. We consider an accounting estimate to be critical if: (1) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (2) changes in the estimate that are reasonably likely to occur from period to period, or use of different estimates that we reasonably could have used, would have a material impact on our consolidated financial condition or results of operations.

Allowance for Credit Losses

~~Based~~We use the aggregate method or onloss-rate method to estimate expected credit losses. When developing the ~~Company’s~~estimate ~~size~~of expected credit losses, ~~complexity~~we ~~and~~consider our historical loss ~~data~~experience, ~~the~~current ~~aggregate~~borrower ~~method~~performance orand ~~loss-rate~~economic ~~method~~conditions, ~~was~~as ~~selected~~well toas ~~estimate~~reasonable ~~expected~~and supportable forecasts of future economic conditions that may affect expected credit losses. An expected loss ratio is applied based on internal historical losses and originations. The aggregate method relies upon the performance of an entire segment of the loan portfolio to best represent the behavior of these specific segments over time. In addition, the modified open pool approach was used which utilizes our borrowers credit rankings for both construction and development loans. Internal risk-rating grades are assigned by the ~~Company’s~~ management based on an analysis of financial and collateral strength and other credit attributes underlying each loan. Loan grades are A, B, ~~and~~ C and ~~Unsecured~~individually evaluated for both construction and development loans where A and C define the highest and lowest scores, respectively. ~~Unsecured loans in our portfolio do not hold underlying collateral.~~

The Company defines loan grades based on the following credit risks:

	●	A Credit Risk: Based on various factors (cash available, credit score, LTV, etc.) the Company believes asset quality is acceptable and is deemed to not require additional monitoring.
	●	B Credit Risk: Assets in this category are currently protected but have some weaknesses as compared to credit A. These loans are monitored similar to A; however, fall below the Points defined within the paragraphs below.
	●	C Credit Risk: Assets in this category have a potential weakness but not to the point of individually evaluated. Loss potential is moderate if corrective action isn’t taken. They are monitored on a weekly watch list by the Company’s management.
	●	Individually Evaluated Risk: Loans that do not share similar risk characteristics with other loans are excluded from the loan pools and individually evaluated for impairment. Individually evaluated loans are loans for which it is probable that all the amounts due under the contractual terms of the loan will not be collected. The ACL on loans that are individually evaluated is based on a comparison of the loan receivable balance, observable market price for the loan or the fair value of the collateral underlying secured loans.

Individually evaluated loans, or portions thereof, are charged off when deemed uncollectible. Once a loan is 90 days past due, management begins a workout plan with the borrower or commences its foreclosure process on the collateral.

Each loan pool is adjusted for qualitative factors not inherently considered in the quantitative analysis. The qualitative adjustments either increase or decrease the quantitative model estimation. We consider factors that are relevant within the qualitative framework which include the following: lending policy, changes in nature and volume of loans, staff experience, changes in volume and trends of non-performing loans, trends in underlying collateral values, quality of our loan review system and other economic conditions, including inflation.

The following is performed by the Company’s Production Loan Operations department to determine the loan grades included within our loan’s receivable portfolio:

Each is rated on a scale of 1-5. With 5 being the highest rating, equal weight is given based on cash (split between average balance and ending balance), credit, and experience.

POINTS-CASH

	●	Average cash should be 2% of the borrower’s total approval limit or current committed amount (whichever is higher) = .83 POINTS
	●	Ending cash balance should be 1% of their total approval limit or current committed amount (whichever is higher) = .83 POINTS

Bank statements received from the borrower are entered ~~into LAS~~ by the loan processors at the time of the initial application or annual credit renewal. The Company’s Loan Administration System (“LAS”) automatically calculates the grading points given for cash based on the borrower’s approval limits and calculated cash ending and average balances.

POINTS-CREDIT

● ~~630~~680 or higher combined credit score average for all principals for new borrowers and 640 combined credit score average for all principals for existing borrowers = 1.66

Credit scores are entered into LAS by the loan processors at the time of the initial application or annual credit renewal. LAS automatically calculates the grading points given for credit scores based on the average of the scores entered for the reporting agencies TransUnion and Equifax for all guarantors.

POINTS-EXPERIENCE

●

Meets minimum experience requirement according to the application matrix = 1.66

At the time of the initial application, the loan processor and underwriter determine whether the applicant meets the minimum experience requirements and enters this information into LAS under the application processing checklist. LAS then determines, based on how the question is answered, how many points are allocated to this category.

At the time of each loan approval, the underwriter confirms the grade calculated by LAS prior to signing off on the loan approval.

POINTS

Points from the three categories are added to come up with their 1-5 rating. The grading scale is as follows:

	●	Rating Score of 4+ = A
	●	Rating Score of 2.49 – 3.9 = B
	●	Rating Score below 2.49 = C

Once the grading is established or locked in at the time of origination the loan then is populated into the Historical Loan Loss Analysis report. This report populates each loan ranking at the time of origination and does not fluctuate.

Borrower’s credit rankings do change over time based on new information obtained when available.

The CECL calculation for credit loss is performed using the following for the quantitative portion of the analysis:

1. Commitment value which is obtained when the loan originates; 2. Historical Originations by Ranking Bucket which is the sum of the Commitment Value obtained when the loan is closed; and 3. Losses by Ranking Bucket which are ~~losses~~ expensed for loans not within foreclosure since 2018.

The Loan Committee reviews ongoing activity ~~with~~regarding ~~regard to~~ loans, to include discussion regarding any changes in the reserve and charge-offs. These meetings are documented within the related Board of Managers minutes.

Other Significant Accounting Policies

Other significant accounting policies, not involving the same level of measurement uncertainties as those discussed above, are nevertheless important to an understanding of the consolidated financial statements. Policies related to credit quality information, fair value measurements, offsetting assets and liabilities, related party transactions and revenue recognition require difficult judgments on complex matters that are often subject to multiple and recent changes in the authoritative guidance. Certain of these matters are among topics currently under re-examination or have recently been addressed by accounting standard setters and regulators. Specific conclusions have not been reached by these standard setters, and outcomes cannot be predicted with confidence. Also, see Note 2 of our consolidated financial statements, as they discuss accounting policies that we have selected from acceptable alternatives.

Consolidated Results of Operations

Key financial and operating data for the years ended December 31, ~~2024~~2025 and ~~2023~~2024 are set forth below. For a more complete understanding of our industry, the drivers of our business, and our current period results, this discussion should be read in conjunction with our consolidated financial statements, including the related notes and the other information contained in this document.

Accounting principles generally accepted in the United States of America (U.S. GAAP) require that we report financial and descriptive information about reportable segments and how these segments were determined. Our management determines the allocation and performance of resources based on operating income, net income and operating cash flows. Segments are identified and aggregated based on the products sold or services provided and the market(s) they serve. Based on these factors, management has determined that our ongoing operations are in two segments, commercial lending and land parcel development.

Below is a summary of our statements of operations for the years ended December 31, ~~2024~~2025 and ~~2023~~2024:

(in thousands of dollars)	~~2024~~2025		~~2023~~2024
Net Interest Income
Net Interest and Fee Income
Interest and fee income on loans	$	10,~~198~~804	$	1110,~~554~~198
Interest expense:
Interest related to secured borrowings		1,~~297~~473		21,~~263~~297
Interest related to unsecured borrowings		3,~~564~~599		3,~~261~~564
Interest expense	$	45,~~861~~072	$	54,~~524~~861
Net interest income		5,337		6,030
Net interest and fee income		5,732		5,337
Less: Credit loss provision		762		737
Less: Provision for credit losses		1,066		762
Net interest income after credit loss provision		4,575		5,293
Net interest and fee income after provision for credit losses		4,666		4,575
Non-Interest Income
Gain on sale of foreclosed assets	$	—	$	8
Gain on sale of real estate investments		276		–
Gain on sale of real estate investments		—		10
Revenue from the sale of land parcels		2,805		2,998
Revenue from the sale of land parcels		2,998		—
Option fee income		314		816
Option fee income		816
Other income		249		82
Other income		82		80
Total non-interest income		3,644		3,896
Total non-interest income	$	3,896	$	98
Income before non-interest expense		8,310		8,471
Income		8,471		5,391
Non-Interest Expense
Selling, general and administrative	$	3,~~061~~824	$	23,~~696~~061
Depreciation and amortization		8063		8180
Loss on foreclosed assets		~~595~~205		34595
Cost of land parcels sold		2,~~998~~805		2,998
Total non – Interest expense		6,734		2,813
Total non-interest expense		6,897		6,734
Net income	$	1,~~737~~413	$	21,~~578~~737
Net income attributable to preferred equity holders		~~702~~988		~~587~~702
Net income attributable to common equity holders	$	~~1,035~~425	$	1,~~991~~035

Net income for the year ended December 31, ~~2024~~2025 decreased $~~841~~324 to $1,~~737~~413 when compared to the same period of ~~2023~~2024.

We had $4859,~~387~~223 and $5849,~~130~~254 in loan receivables, net as of December 31, ~~2024~~2025 and ~~2023~~2024, respectively. As of December 31, ~~2024~~2025, we had ~~177~~151 construction loans in 2021 states with 6153 borrowers and 613 development loans in 59 states with 612 borrowers.

Interest Spread

The following table displays a comparison of our interest income, expense, fees and spread for the years ended December 31, ~~2024~~2025 and ~~2023~~2024:

	2024					2023
	2025					2024
Interest Income				*					*
Estimated interest income	$	7,887		14	%	$	9,094		15	%
Interest income on loans		8,328		15	%		7,888		14	%
Estimated unearned interest income due to COVID-19		—		—	%		(379	)	(1	)%
Fee income on loans**		3,016		6	%		2,975		5	%
Interest income on loans		7,887		14	%		8,715		14	%
Deferred loan fees		(540	)	(1	)%		(665	)	(1	)%
Fee income on loans**		2,975		5	%		3,457		5	%
Fee income on loans, net		2,476		5	%		2,310		4	%
Deferred loan fees		(665	)	(1	)%		(618	)	(1	)%
Interest and fee income on loans		10,804		20	%		10,198		18	%
Fee income on loans, net		2,310		4	%		2,839		4	%
Interest expense – secured		1,473		3	%		1,297		3	%
Interest and fee income on loans		10,197		18	%		11,554		18	%
Interest expense – unsecured		3,436		6	%		3,365		6	%
Interest expense – secured		1,297		3	%		2,263		4	%
Offering costs amortization		163		—	%		199		—	%
Interest expense – unsecured		3,365		6	%		3,026		5	%
Interest expense		5,072		9	%		4,861		9	%
Offering costs amortization		199		—	%		235		—	%
Net interest income (spread)		5,732		11	%		5,337		9	%
Interest expense		4,861		9	%		5,524		9	%
Weighted average outstanding loan asset balance	$	52,941				$	55,914
Net interest income (spread)		5,336		9	%		6,030		9	%
Weighted average outstanding loan asset balance	$	55,914				$	63,586

*Annualized amount as percentage of weighted average outstanding gross loan balance.

**~~Excludes~~Fee ~~fee~~ income related to the 339 Acquisition is not included in fee income on loans.

There are three main components that can impact our interest spread:

● Difference between the interest rate received (on our loan assets) and the interest rate paid (on our borrowings). The loans we have originated have interest rates which are based on our cost of funds, with a minimum cost of funds of 107.2575%. For most loans, the margin is fixed at 2.5%; however, for our development loans the margin is generally fixed at 7%. This component is also impacted by the lending of money with no interest cost (our equity).

Interest income on loans was 15% and 14% for ~~both~~ the years ended December 31, ~~2024~~2025 and ~~2023. Estimated interest not earned during the year ended December 31~~2024, ~~2024~~respectively. ~~and~~This ~~2023~~is due to ~~loans impaired as~~ a ~~result~~reduction of ~~COVID-19~~loans ~~was~~not paying ~~$0 and $379, respectively~~interest.

We anticipate our standard margin to be 2.5% on all future construction loans and generally 7% on all development loans. ~~Our~~This ~~margin~~spread ~~may~~in ~~increase~~2026 inshould ~~2025~~be ~~because~~somewhere ~~some~~in ~~customers run past~~ the ~~standard~~same ~~repayment~~range ~~time~~as 2025 and ~~pay a higher rate of 5~~2024.~~0%, which started in 2023.~~

● Fee income. Our construction loan fee is 5% on the amount we commit to lend, which is amortized over the expected life of each loan. When loans terminate before their expected life, the remaining fee is recognized at the termination of the loan. In 2023, we started charging an annual fee on most of our development loans which varies.

Fee income on loans before deferred loan fee adjustments ~~was~~increased from 5% to 6% in 2025.0 This is due to loans paying off faster in 2025 than 2024. While this improves the fee as a % ~~for~~of ~~both~~loan ~~years~~balance, ~~ended~~we ~~December~~have 31lower balance to charge interest on. In 2025, we originated more loans than in 2024, ~~and~~but ~~2023~~the average loan outstanding amount did not increase.

● Amount of nonperforming assets. Generally, we can have two types of nonperforming assets that negatively affect interest spread which are defined as loans not paying interest and foreclosed assets.

As of December 31, ~~2024~~2025 and ~~2023~~2024, we had 2129 ~~impaired~~individually evaluated loans, net of reserves of $46,~~313~~192 and 1721 ~~impaired~~nonperforming loans, net of reserves of $54,~~475~~ 313 that were not paying interest, respectively.

Foreclosed assets do not provide a monthly interest return. As of December 31, ~~2024~~2025 and ~~2023~~2024, foreclosed assets, net were $~~1,356~~499 and $~~130~~1,356, respectively, which resulted in a negative impact on our interest spread in both years.

Provision for Credit Losses

Provision for credit losses (expense throughout the year) was $~~762~~1,066 and $~~737~~762 for the years ended December 31, ~~2024~~2025 and ~~2023~~2024, respectively.

The allowance for credit losses as of December 31, ~~2024~~2025 and December 31, ~~2023~~2024 was $~~868~~1,113 and $~~695~~868, respectively. The increase in the allowance for credit losses is due to certain ~~impaired~~individually evaluated assets ~~that~~are ~~required~~at ~~completion~~higher ~~that~~risk ~~cost~~based ~~more~~on collateral than when the ~~original~~loans ~~budget~~were ~~from~~initially ~~the builder~~made. In In addition, some appraised values decreased in specific markets. The Company believes it has properly reserved for all foreclosed and ~~impaired~~ individually evaluated loans.

Non-Interest Income

Gain on Foreclosed Assets

During the years ended December 31, 2024 and 2023, we recognized $0 and $8, respectively, as a gain on the sale of foreclosed assets which related to the sale of one and two foreclosed assets during 2024 and 2023, respectively.

Gain on the Sale of Real Estate Investments

During the year ended December 31, 2025, the Company sold two real estate investment assets and recognized a gain on the sale of $83 and recorded a gain on the sale of 339 of $193.

During the year ended December 31, 2024, the Company recognized no gains or losses on real estate investment sales.

~~During~~Beyond the ~~year~~sale ~~ended~~of ~~December 31, 2023,~~ the ~~Company~~remaining ~~sold~~lot ~~two~~held in real estate ~~investment~~investments ~~assets~~for ~~and~~$169, ~~recognized~~the aCompany ~~gain~~does onnot ~~the~~anticipate ~~sale~~more ofreal ~~$10~~estate investment activity in 2026.

Revenue from the Sale of Land Parcels

During the year ended December 31, ~~2024~~2025 and ~~2023~~2024, the Company sold ~~nine 339~~ land parcels ~~and~~related ~~recognized~~to ~~sales~~our ofinvestment in 339 for $2,~~998~~805 and $02,998, respectively. The Company sold 339 in August of 2025 and will not have revenue from the sale of land parcels in 2026.

Option Fee Income

During the year end December 31, ~~2024~~2025 and ~~2023~~2024, the Company recognized 339 option fee income of $~~816~~314 and $0816, respectively. We are now lending on this development asset rather than owning it as of the date of sale of 339 on August 6, 2025. As a result, revenue will be reflected as interest income, and our interest cost will be reflected as interest expense (rather than being capitalized). There will be no revenue on the option fee income line of the income statement going forward in 2026. The amount invested in 339 was also eliminated from the balance sheet and our loan asset balance increased.

Other Income

During the year ended December 31, ~~2024~~2025 and ~~2023~~2024, we ~~consulted~~provided accounting consulting services for ~~two~~several of our construction and development loan customers, ~~respectively, which included accounting guidance~~ and recognized $82249 and $8082 in other income, respectively. We anticipate increasing our consulting services ~~to our customers~~ during ~~2025~~2026.

Non-Interest Expense

Selling, General and Administrative (“SG&A”) Expenses

The following table displays our SG&A expenses for the years ended December 31, ~~2024~~2025 and ~~2023~~2024:

	2024		2023
	2025		2024
Selling, general and administrative expenses
Legal and accounting	$	~~286~~304	$	~~274~~286
Salaries and related expenses		12,~~970~~450		1,~~708~~970
Board related expenses		~~112~~108		~~108~~112
Advertising		82129		4082
Rent and utilities		8591		6185
Loan and foreclosed asset expenses		~~125~~110		87125
Travel		~~221~~249		~~182~~221
Other		180		236
Insurance		97		38
Total SG&A	$	3,061	$	2,696
Other		286		142
Total SG&A	$	3,824	$	3,061

SG&A expenses increased $~~365~~763 to $3,~~061~~864 for the year ended December 31, ~~2024~~2025 compared to $23,~~696~~061 for the same period of ~~2023~~2024 due primarily to salaries and related expenses, which included adding four additional employees compared to the same period of 2024. The Company anticipates relatively level SG&A in 2026.

Loss on Foreclosed Assets

During the years ended December 31, ~~2024~~2025 and ~~2023~~2024, we recognized $~~595~~205 and $36595 for losses on foreclosed assets, respectively. ~~During~~In ~~the~~2025, ~~first quarter of 2024~~ we ~~reclassed~~transferred ~~six~~two construction loans from loans receivable, ~~net~~ to foreclosed assets, ~~with~~which resulted in a loss on foreclosure of $~~160~~205. During 2024, we transferred ~~and~~six ~~impairments~~construction onloans ~~foreclosed~~from ~~assets~~loans ~~were~~receivable ~~$435.~~to ~~During~~foreclosed ~~2023,~~assets with a loss on ~~the~~foreclosure ~~sale~~ of ~~one~~$160 ofand ~~our~~impairments ~~foreclosed~~on foreclosed assets ~~was~~were $36435.

Cost of Land Parcels Sold

During the year ended December 31, ~~2024~~2025 and ~~2023~~2024, the Company sold nine 339 land parcels and recognized costs on the sales of $2,~~998~~805 and $02, 998, respectively. The Company sold 339 in August of 2025 and will not have additional costs associated with 339 in 2026.

Consolidated Financial Position

Cash and Cash Equivalents

WeAs ~~try to avoid borrowing on our lines~~ of ~~credit from affiliates. To accomplish this, we must carry some cash for liquidity. This amount generally grows as our Company grows. As of~~ December 31, ~~2024~~2025 and ~~2023~~2024, our cash was $3,~~347~~490 and $3,~~522~~347 respectively. ~~During 2025, the Company will establish lines of credit to allow it to have liquidity while reducing or eliminating the holding of cash on a daily basis.~~

Loans Receivable, net

Commercial Loans – Construction Loan Portfolio Summary

We anticipate the aggregate balance of our construction loan portfolio will increase as built homes take longer to sell.

The following is a summary of our loan portfolio to builders for home construction loans as of December 31, ~~2024~~2025:

State	Number of Borrowers		Number of Loans		Value of Collateral(1)		Commitment Amount		Gross Amount Outstanding		Loan to Value Ratio(2)			Loan Fee
Arizona		1		2	$	890	$	634	$	633		71	%		5	%
California		1		1		3,210		1,750		1,346		55	%		5	%
Connecticut		1		2		1,040		728		389		70	%		5	%
Florida		9		42		16,089		11,081		6,874		69	%		5	%
Georgia		3		6		3,301		2,037		878		62	%		5	%
Idaho		1		4		1,462		1,060		661		73	%		5	%
Illinois		1		1		1,727		992		1,781		57	%		5	%
Louisiana		4		6		1,613		1,169		1,031		72	%		5	%
Michigan		1		1		890		481		27		54	%		5	%
Missouri		1		1		369		258		258		70	%		5	%
New Jersey		2		4		1,585		1,362		1,122		86	%		5	%
New York		1		1		650		455		105		70	%		5	%
North Carolina		9		18		10,737		6,642		4,786		62	%		5	%
Ohio		3		3		1,275		857		1,074		67	%		5	%
Pennsylvania		2		22		24,449		18,065		15,192		74	%		5	%
South Carolina		10		49		22,057		14,309		7,438		65	%		5	%
Tennessee		3		4		1,334		893		748		67	%		5	%
Texas		2		3		2,320		1,844		1,567		79	%		5	%
Utah		1		3		2,918		1,792		1,422		61	%		5	%
Virginia		3		4		1,546		982		672		64	%		5	%
Total		59		177	$	99,462	$	67,391	$	48,004		68	%(3)		5	%

(All dollar [$] amounts shown in table in thousands.)

	(1)	The value is determined by the appraised value.
State		Number of Borrowers			Number of Loans		Value of Collateral		Commitment Amount		Gross Amount Outstanding		Loan to Value Ratio(1)			Loan Fee
	(2)	The loan to value ratio is calculated by taking the commitment amount and dividing by the appraised value.
Arizona			2			4	$	1,719	$	1,126	$	1,126		66	%		5	%
	(3)	Represents the weighted average loan to value ratio of the loans.
California			1			1		1,285		1,750		1,439		137	%		5	%
Connecticut			1			3		1,730		1,162		890		67	%		5	%
Florida			11			50		23,854		16,637		10,984		70	%		5	%
Georgia			7			10		6,448		4,228		3,068		66	%		5	%
Idaho			1			1		2,770		1,500		874		54	%		5	%
Illinois			1			1		1,500		815		606		54	%		5	%
Louisiana			2			3		825		623		594		76	%		5	%
Michigan			1			1		970		582		171		60	%		5	%
Mississippi			1			1		335		258		258		77	%		5	%
Montana			2			2		975		683		578		70	%		5	%
New Jersey			1			4		1,798		1,531		1,471		85	%		5	%
New York			1			5		2,248		1,345		488		60	%		5	%
North Carolina			8			14		6,530		4,135		1,861		63	%		5	%
Oklahoma			1			1		167		117		77		70	%		5	%
Pennsylvania			2			18		20,748		16,368		13,055		79	%		5	%
South Carolina			7			26		10,739		8,394		4,808		78	%		5	%
Tennessee			2			3		1,061		743		718		70	%		5	%
Utah			1			1		4,880		3,538		1,213		73	%		5	%
Virginia			1			2		592		362		236		61	%		5	%
Total			54	(3)		151	$	91,174	$	65,897	$	44,515		72	% (2)		5	%

⁽¹⁾	The loan to value ratio is calculated by taking the commitment amount and dividing by the appraised value.

⁽²⁾	Represents the weighted average loan to value ratio of the loans.

⁽³⁾	Total number of borrowers is 53. One borrower has construction loans in North Carolina and South Carolina which is reflected in the Number of Borrowers column of the table above.

The following is a summary of our loan portfolio to builders for home construction loans as of December 31, ~~2023~~2024:

State	Number of Borrowers		Number of Loans		Value of Collateral(1)		Commitment Amount		Gross Amount Outstanding		Loan to Value Ratio(2)			Loan Fee
Arizona		2		5	$	2,148	$	1,504	$	846		70	%		5	%
California		1		1		2,551		1,530		1,511		60	%		5	%
Connecticut		1		2		1,039		681		510		66	%		5	%
Florida		12		71		36,644		19,279		14,093		53	%		5	%
Georgia		4		8		2,963		1,831		1,229		62	%		5	%
Illinois		1		1		1,600		992		763		62	%		5	%
Indiana		1		1		335		235		79		70	%		5	%
Louisiana		2		3		773		541		300		70	%		5	%
Maryland		1		1		480		336		336		70	%		5	%
Missouri		1		2		820		570		439		70	%		5	%
New Jersey		2		5		1,985		1,563		954		79	%		5	%
North Carolina		8		23		10,637		6,681		2,994		63	%		5	%
Ohio		3		10		3,776		2,601		1,686		69	%		5	%
Pennsylvania		2		21		21,301		16,763		13,205		79	%		5	%
South Carolina		11		50		20,029		12,624		6,694		63	%		5	%
Tennessee		3		5		1,554		1,047		696		67	%		5	%
Texas		2		4		1,970		1,773		1,693		90	%		5	%
Utah		1		3		2,918		1,792		910		61	%		5	%
Virginia		3		3		857		530		474		62	%		5	%
Washington		1		6		2,789		2,427		2,376		87	%		5	%
Total		62		225	$	117,169	$	75,300	$	51,788		64	%(3)		5	%

(All dollar [$] amounts shown in table in thousands

	(1)	The value is determined by the appraised value.
State		Number of Borrowers		Number of Loans		Value of Collateral		Commitment Amount		Gross Amount Outstanding		Loan to Value Ratio(1)			Loan Fee
	(2)	The loan to value ratio is calculated by taking the commitment amount and dividing by the appraised value.
Arizona			1		2	$	890	$	634	$	633		71	%		5	%
	(3)	Represents the weighted average loan to value ratio of the loans.
California			1		1		3,210		1,750		1,346		55	%		5	%
Connecticut			1		2		1,040		728		389		70	%		5	%
Florida			9		42		16,089		11,081		6,874		69	%		5	%
Georgia			3		6		3,301		2,037		878		62	%		5	%
Idaho			1		4		1,462		1,060		661		73	%		5	%
Illinois			1		1		1,727		992		1,781		57	%		5	%
Louisiana			4		6		1,613		1,169		1,031		72	%		5	%
Michigan			1		1		890		481		27		54	%		5	%
Mississippi			1		1		369		258		258		70	%		5	%
New Jersey			2		4		1,585		1,362		1,122		86	%		5	%
New York			1		1		650		455		105		70	%		5	%
North Carolina			9		18		10,737		6,642		4,786		62	%		5	%
Ohio			3		3		1,275		857		1,074		67	%		5	%
Pennsylvania			2		22		24,449		18,065		15,192		74	%		5	%
South Carolina			10		49		22,057		14,309		7,438		65	%		5	%
Tennessee			3		4		1,334		893		748		67	%		5	%
Texas			2		3		2,320		1,844		1,567		79	%		5	%
Utah			1		3		2,918		1,792		1,422		61	%		5	%
Virginia			3		4		1,546		982		672		64	%		5	%
Total			59		177	$	99,462	$	67,391	$	48,004		68	% (2)		5	%

⁽¹⁾	The loan to value ratio is calculated by taking the commitment amount and dividing by the appraised value.

⁽²⁾	Represents the weighted average loan to value ratio of the loans.

Commercial Loans – Real Estate Development Loan Portfolio Summary

States	Number of Borrowers		Number of Loans		Value of Collateral(1)		Commitment Amount		Gross Amount Outstanding(4)		Loan to Value Ratio(2)			Interest Spread(5)
Florida		2		2		2,469		1,500		268		11	%		7	%
Georgia		1		1		346		275		159		46	%		7	%
New York		1		1		300		300		300		100	%		7	%
Pennsylvania		1		1		2,484		3,700		1,919		77	%		varies
South Carolina		1		1		1,860		487		488		26	%		7	%
Total		6		6	$	7,459	$	6,262	$	3,134		42	%(3)		7	%

The following is a summary of our loan portfolio to builders for land development as of December 31, 2025:

(1)	The value is determined by the appraised value adjusted for the remaining costs to be paid and third-party mortgage balances. 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 on 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)	Represents the weighted average loan to value ratio of the loans.
(4)	Gross Amount Outstanding credit balances are due to deposits on account.
(5)	The interest spread varies for the state of Pennsylvania and is 7% across other states.

~~The~~(All ~~following~~dollar is[$] aamounts ~~summary~~shown ofin ~~our~~table ~~loan~~in ~~portfolio to builders for land development as of December 31, 2023:~~thousands.)

States	Number of Borrowers		Number of Loans		Value of Collateral~~(1)~~		Commitment Amount		Gross Amount Outstanding~~(4)~~		Loan to Value Ratio(21)			Interest Spread(53)
Delaware		1		1		543		147		147		27	%		7	%
Florida		2		2		550		630		350		115	%	7	%
Florida		3		3		207		1,378		133		64	%		7	%
Georgia		1		1		560		100		99		18	%	7	%
New Jersey		1		1		50		26		26		51	%		7	%
Louisiana		1		1		150		88		88		59	%	7	%
North Carolina		1		2		1,110		240		210		19	%		7	%
New Jersey		1		1		88		56		56		64	%	7	%
Pennsylvania		1		2		19,983		8,500		8,365		42	%		varies
North Carolina		2		2		3,037		681		680		22	%	7	%
South Carolina		2		2		1,980		965		624		32	%		7	%
Pennsylvania		1		2		15,337		14,066		12,854		92	%	varies
Total		9		11	$	23,873	$	11,256	$	9,505		40	%(3)		7	%
South Carolina		1		1		1,500		487		539		32	%	7	%
Utah		2		2		3,146		1,600		868		51	%	7	%
Wyoming		1		1		2,750		1,635		1,634		59	%	7	%
Total		12		13	$	27,118	$	19,343	$	17,168		71	% (2)	7	%

(1)	The loan to value ratio is ~~determined~~calculated by ~~the~~taking ~~appraised value adjusted for~~ the ~~remaining~~outstanding ~~costs~~amount ~~to be paid~~ and ~~third-party~~dividing ~~mortgage~~by ~~balances. In~~ the ~~event~~appraised ofvalue acalculated ~~foreclosure~~as ondescribed ~~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 on our ability to eliminate the loan balance~~above.
(2)	~~The~~Represents the weighted average loan to value ratio isof ~~calculated by taking~~ the ~~outstanding amount and dividing by the appraised value calculated as described above~~loans.
(3)	~~Represents~~The interest spread varies for the ~~weighted~~state ~~average~~of ~~loan~~Pennsylvania toand ~~value~~is ~~ratio~~7% ofacross ~~the~~other ~~loans~~states.
(4)	Gross Amount Outstanding credit balances are due to deposits on account.
(5)	The interest spread varies for the state of Pennsylvania and is 7% across other states.

The following is a summary of our loan portfolio to builders for land development as of December 31, 2024:

(All dollar [$] amounts shown in table in thousands.)

States	Number of Borrowers		Number of Loans		Value of Collateral		Commitment Amount		Gross Amount Outstanding		Loan to Value Ratio⁽¹⁾			Interest Spread⁽³⁾
Florida		2		2		2,469		1,500		268		11	%		7	%
Georgia		1		1		346		275		159		46	%		7	%
New York		1		1		300		300		300		100	%		7	%
Pennsylvania		1		1		2,484		3,700		1,919		77	%		varies
South Carolina		1		1		1,860		487		488		26	%		7	%
Total		6		6	$	7,459	$	6,262	$	3,134		42	% ⁽²⁾		7	%

⁽¹⁾	The loan to value ratio is calculated by taking the outstanding amount and dividing by the appraised value calculated as described above.

⁽²⁾	Represents the weighted average loan to value ratio of the loans.

⁽³⁾	The interest spread varies for the state of Pennsylvania and is 7% across other states.

The following is a roll forward of our loan receivables net, or construction and development loans:

	December 31, 2024			December 31, 2023
	December 31, 2025			December 31, 2024
Beginning balance	$	5849,~~130~~254		$	5659,~~650~~186
Originations and modifications		4059,~~728~~571			5840,~~216~~729
Principal collections		(48,~~578~~205	)		(5748,~~895~~578	)
Transferred from loans receivables, net		(~~2,306~~909	)		—(2,306
Change in builder deposit		190			(217	)
Change in allowance for credit losses		(245	)		(173	)
Change in allowance for credit losses		(173	)		1,832
Change in loan fees, net		(243	)		(396	)
Change in loan fees, net		396			(456	)
Ending balance	$	59,223		$	49,254
Ending balance	$	48,387		$	58,130

Credit Quality Information

Effective January 1, 2023, we adopted ASC 326, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which replaced the incurred loss methodology for determining out provision for credit losses and allowance for credit losses with current expected credit loss (“CECL”) model. Upon the adoption of ASC 326 the total amount of the allowance for credit losses (“ACL”) on loans estimated using the CECL methodology increased $178 compared to the total amount of the allowance recorded using the prior incurred loss model.

Based on the Company’s size, complexity and historical data the aggregate method or loss-rate method was selected to estimate expected credit losses. An expected loss ratio is applied based on internal historical losses and originations. The aggregate method relies upon the performance of an entire segment of the loan portfolio to best represent the behavior of these specific segments over time. In addition, modified open pool approach was used which utilizes our borrowers credit rankings for both construction and development loans. Internal risk-rating grades are assigned by the Company’s management based on an analysis of financial and collateral strength and other credit attributes underlying each loan. Loan grades are A, B and C and Unsecured for both construction and development loans where A and C defines the highest and lowest scores, respectively. Unsecured loans in our portfolio do not hold underlying collateral.

Credit Quality Information

We use the current expected credit loss (“CECL”) model to estimate our allowance for credit losses (“ACL”) on loans, which uses the aggregate method or loss-rate method to estimate expected credit losses. When developing the estimate of expected credit losses, we consider our historical loss experience, current borrower performance and economic conditions, as well as reasonable and supportable forecasts of future economic conditions that may affect expected credit losses. An expected loss ratio is applied based on internal historical losses and originations. The aggregate method relies upon the performance of an entire segment of the loan portfolio to best represent the behavior of these specific segments over time. In addition, the modified open pool approach was used which utilizes our borrowers credit rankings for both construction and development loans. Internal risk-rating grades are assigned by the Company’s management based on an analysis of financial and collateral strength and other credit attributes underlying each loan. Loan grades are A, B, C and individually evaluated for both construction and development loans where A and C define the highest and lowest scores, respectively.

We defines loan grades based on the following credit risks:

	●	A Credit Risk: Based on various factors (cash available, credit score, LTV, etc.) the Company believes asset quality is acceptable and is deemed to not require additional monitoring.
	●	B Credit Risk: Assets in this category are currently protected but have some weaknesses as compared to credit A. These loans are monitored similar to A; however, fall below the Points defined within the paragraphs below.
	●	C Credit Risk: Assets in this category have a potential weakness but not to the point of individually evaluated. Loss potential is moderate if corrective action isn’t taken. They are monitored on a weekly watch list by the Company’s management.
	●	Individually Evaluated Risk: Loans that do not share similar risk characteristics with other loans are excluded from the loan pools and individually evaluated for impairment. Individually evaluated loans are loans for which it is probable that all the amounts due under the contractual terms of the loan will not be collected. The ACL on loans that are individually evaluated is based on a comparison of the loan receivable balance, observable market price for the loan or the fair value of the collateral underlying secured loans.

Our ~~Company~~ construction loans are collateralized by lots, partially built homes, and built homes, while our Company development loans are collateralized by land and lots. Secured ~~nonaccrual~~ loans individually evaluated are also collateralized by land and real estate.

The following table presents the Company’s gross loans receivable, commitment value and ACL for each respective credit rank loan pool category as of December 31, 2025.

	Loans Receivable Gross		Commitment Value		ACL
Construction Loans Collectively Evaluated:
A Credit Risk	$	23,490	$	37,488	$	122
B Credit Risk		13,799		18,830		151
C Credit Risk		828		1,099		12
Individually Evaluated		6,399		8,480		745

Development Loans Collectively Evaluated:
A Credit Risk	$	3,457	$	4,390	$	2
B Credit Risk		13,072		14,366		79
C Credit Risk		99		100		2
Individually Evaluated		539		487		–

Total	$	61,683	$	85,240	$	1,113

The following table presents the Company’s gross loans receivable, commitment value and ACL for each respective credit rank loan pool category as of December 31, 2024.

	Loans Receivable Gross		Commitment Value		ACL
Construction Loans Collectively Evaluated:
A Credit Risk	$	39,277	$	55,872	$	~~215~~140
B Credit Risk		2,817		3,883		3840
C Credit Risk		939		1,851		2510
Individually Evaluated		4,971		5,785		658
Development Loans Collectively Evaluated:
A Credit Risk	$	2,485	$	5,500	$	2
B Credit Risk		160		275		-–
C Credit Risk		489		487		18
Unsecured Nonaccrual Loans Individually Evaluated	$	–	$	–	$	–
Individually Evaluated		–		–		–
Secured Nonaccrual loans Individually Evaluated:	$	4,971	$	5,785	$	658
ACL Unfunded Commitments		–		–		(88	)
Total	$	51,138	$	73,653	$	868

The following table presents the ~~Company’s~~amortized ~~gross~~cost ~~loans~~basis ~~receivable,~~of ~~commitment~~loans ~~value~~individually evaluated and ~~ACL~~loans ~~for~~past ~~each~~due ~~respective~~over ~~credit~~90 ~~rank~~days ~~loan~~nonaccruing ~~pool category~~ as of December 31, ~~2023.~~2025:

	Loans Receivable Gross		Commitment Value		ACL
	Individually Evaluated Loans without ACL		Individually Evaluated Loans with ACL		Accrual Loans Past Due Over 90 Days
Construction Loans Collectively Evaluated:
Construction Loans:
A Credit Risk	$	40,252	$	59,075	$	215
Individually Evaluated	$	3,239	$	3,160	$	–
B Credit Risk		5,718		10,339		33
Development Loans:
C Credit Risk		–		–		–
Individually Evaluated	$	539	$	–	$	–
Development Loans Collectively Evaluated:
Total	$	3,778	$	3,160	$	–
A Credit Risk	$	8,787	$	9,793	$	4
B Credit Risk		172		511		–
C Credit Risk		452		454		10
Unsecured Nonaccrual Loans Individually Evaluated	$	86	$	81	$	86
Secured Nonaccrual loans Individually Evaluated:	$	5,826	$	6,303	$	351
Total	$	61,293	$	86,556	$	699

The following table presents the amortized cost basis of loans onindividually ~~nonaccrual~~evaluated ~~status~~ and loans past due over 8990 days ~~still~~nonaccruing ~~accruing~~ as of December 31, 2024:

		Nonaccrual with No Allowance for Credit Loss		Nonaccrual with Allowance for Credit Loss		Loans Past Due Over 89 Days Still Accruing
	Individually Evaluated without ACL		Individually Evaluated with ACL		Accrual Loans Past Due Over 90 Days
Unsecured Nonaccrual Loans Individually Evaluated	$	–	$	–	$	–
Construction Loans:
Secured Nonaccrual loans Individually Evaluated:	$	1,427	$	3,544	$	–
Individually Evaluated	$	1,427	$	3,544	$	–
Development Loans:
Individually Evaluated	$	–	$	–	$	–
Total	$	1,427	$	3,544	$	–

~~The~~For ~~following~~loans ~~table~~greater ~~presents~~than 12 months in age that are individually evaluated, appraisals are ordered and prepared if the ~~amortized~~current ~~cost~~appraisal ~~basis~~is greater ofthan ~~loans~~13 months old and construction is greater than 90% complete. If construction is completed by less than 90% the Company uses the latest appraisal on ~~nonaccrual~~file. ~~status~~At ~~and~~certain ~~loans~~times ~~past~~the ~~due~~Company ~~over~~may 89choose ~~days~~to ~~still~~use ~~accruing~~a broker’s opinions of value (“BOV”) as a replacement for an appraisal if deemed more efficient by management. Appraised values are adjusted down for estimated costs associated with asset disposal. Broker’s opinion of selling price use currently valid sales contracts on the subject property or representative ~~December~~recent ~~31,~~actual ~~2023:~~closings by the builder on similar properties may be used in place of a BOV.

	Nonaccrual with No Allowance for Credit Loss		Nonaccrual with Allowance for Credit Loss		Loans Past Due Over 89 Days Still Accruing
Unsecured Nonaccrual Loans Individually Evaluated	$	–	$	86	$	–
Secured Nonaccrual loans Individually Evaluated:	$	2,495	$	3,331	$	–
Total	$	2,495	$	3,417	$	–

For loans greater than 12 months in age that are individually evaluated, appraisals are ordered and prepared if the current appraisal is greater than 13 months old and construction is greater than 90% complete. If construction is completed by less than 90% the Company uses the latest appraisal on file. At certain times the Company may choose to use a broker’s opinions of value (“BOV”) as a replacement for an appraisal if deemed more efficient by management. Appraised values are adjusted down for estimated costs associated with asset disposal. Broker’s opinion of selling price, use currently valid sales contracts on the subject property, or representative recent actual closings by the builder on similar properties may be used in place of a BOV.

Appraisers are state certified and are selected by first attempting to utilize the appraiser who completed the original appraisal report. If that appraiser is unavailable or unreasonably expensive, we use another appraiser who appraises routinely in that geographic area. BOVs are created by real estate agents. We try to first select an agent we have worked with, and then, if that fails, we select another agent who works in that geographic area.

In addition, our loan portfolio includes performing, forbearance and ~~non-accrual~~individually evaluated loans. Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. The Company’s policies with respect to ~~placing~~ placing loans on non-accrual and individually evaluated if they are past due ~~greater~~when ~~than~~the contractual payment of principal or interest becomes 90 days past due unless management deems the loan an exception. A fair market value analysis is performed and an allowance for credit loss is established based on the results of the analysis.

The following is an aging of our gross loan portfolio as of December 31, 2025:

	Gross Loan		Current		Past Due		Past Due		Past Due
	Value		0 - 89		90 - 179		180 - 269		>270
Construction Loans:
A Credit Risk	$	23,490	$	23,490	$	–	$	–	$	–
B Credit Risk		13,799		13,799		–		–		–
C Credit Risk		828		828		–		–		–
Individually Evaluated		6,399		5,201		618		446		134

Development Loans:
A Credit Risk		3,457		3,457		–		–		–
B Credit Risk		13,072		13,072		–		–		–
C Credit Risk		99		99		–		–		–
Individually Evaluated		539		–		539		–		–

Total	$	61,683	$	59,946	$	1,157	$	446	$	134

The following is an aging of our gross loan portfolio as of December 31, 2024:

Gross Loan

Current

Past Due

~~Past Due~~

Value

0 - 5989

6090 - 89179

90180 - ~~179~~269

~~180 - 269~~>270

~~>270~~

Performing Loans

Construction Loans:

A Credit Risk

4139,~~763~~277

–

B Credit Risk

2,~~977~~817

–

C Credit Risk

~~1,428~~939

–

Forbearance Loans

Individually Evaluated

4,971

–

1,057

–

3,914

Secured Nonaccrual Loans

4,476

–

1,057

–

3,419

Development Loans:

Nonaccrual Loans

A Credit Risk

2,485

–

Unsecured Loans

–

B Credit Risk

160

–

Secured Loans

494

–

494

C Credit Risk

489

–

Total

51,138

46,168

–

1,057

–

3,913

Individually Evaluated

–

Total

51,138

46,167

1,057

–

3,914

The following is an aging of our gross loan portfolio as of December 31, 2023:

	Gross Loan		Current		Past Due		Past Due		Past Due		Past Due
	Value		0 - 59		60 - 89		90 - 179		180 - 269		>270
Performing Loans
A Credit Risk	$	49,039	$	49,039	$	–	$	–	$	–	$	–
B Credit Risk		5,890		5,890		–		–		–		–
C Credit Risk		452		452		–		–		–		–
Forbearance Loans
B Credit Risk		–		–		–		–		–		–
C Credit Risk		–		–		–		–		–		–
Unsecured Nonaccrual Loans Individually Evaluated		86		–		–		–		–		86
Secured Nonaccrual Loans Individually Evaluated		5,826		–		881		1,497		1,641		1,807
Total	$	61,293	$	55,381	$	881	$	1,497	$	1,641	$	1,893

Below is an aging schedule of loans receivable as of December 31, 2025, on a recency basis:

	No. Loans		Unpaid Balances		%
Contractual terms (All current Direct Loans and Sales Finance Contracts with installments past due less than 60 days from due date.)		155	$	58,507		94.9	%
60-89 days		1		1,439		2.3	%
90-179 days		5		1,157		1.8	%
180-269 days		2		446		0.7	%
>270 days		1		134		0.3	%

Subtotal		164	$	61,683		100.0	%

Interest only accounts (Accounts on which interest, deferment, extension and/or default charges were received in the last 60 days)		–	$	–		–	%

Partial payment accounts (Accounts on which the total received in the last 60 days was less than 50% of the original contractual monthly payment. “Total received” to include interest on simple interest accounts, as well as late charges on deferment charges on pre-computed accounts.)		–	$	–		–	%

Total		164	$	61,683		100.0	%

Below is an aging schedule of loans receivable as of December 31, 2024, on a recency basis:

	No. Loans		Unpaid Balances		%
Current loans (current accounts and accounts on which more than 50% of an original contract payment was made in the last 59 days)		162	$	46,168		90.2	%
Contractual terms (All current Direct Loans and Sales Finance Contracts with installments past due less than 60 days from due date.)		162	$	46,168		90.2	%
60-89 days		–		–		–	%
90-179 days		5		1,057		2.1	%
180-269 days		–		–		–	%
>270 days		16		3,913		7.7	%
Subtotal		183	$	51,138		100.0	%
Interest only accounts (Accounts on which interest, deferment, extension and/or default charges were received in the last 60 days)		–	$	–		–%	%
Partial Payment accounts (Accounts on which the total received in the last 60 days was less than 50% of the original contractual monthly payment. “Total received” to include interest on simple interest accounts, as well as late charges on deferment charges on pre-computed accounts.)		–	$	–		–%
Partial payment accounts (Accounts on which the total received in the last 60 days was less than 50% of the original contractual monthly payment. “Total received” to include interest on simple interest accounts, as well as late charges on deferment charges on pre-computed accounts.)		–	$	–		–	%
Total		183	$	51,138		100.0	%

Below is an aging schedule of loans receivable as of December 31, 2024, on a contractual basis:

	No. Loans		Unpaid Balances		%
Contractual Terms - All current Direct Loans and Sales Finance Contracts with installments past due less than 60 days from due date.		162	$	46,168		90.2	%
60-89 days		–		–		–	%
90-179 days		5		1,057		2.1	%
180-269 days		–		–		–	%
>270 days		16		3,913		7.7	%
Subtotal		183	$	51,138		100.0	%
Interest only accounts (Accounts on which interest, deferment, extension and/or default charges were received in the last 60 days)		–	$	–		–%
Partial Payment accounts (Accounts on which the total received in the last 60 days was less than 50% of the original contractual monthly payment. “Total received” to include interest on simple interest accounts, as well as late charges on deferment charges on pre-computed accounts.)		–	$	–		–%
Total		183	$	51,138		100.0	%

Below is an aging schedule of loans receivable as of December 31, ~~2023~~2025, on a ~~recency~~contractual basis:

	No. Loans		Unpaid Balances		%
Current loans (current accounts and accounts on which more than 50% of an original contract payment was made in the last 59 days)		219	$	55,381		90.4	%
Contractual terms (All current Direct Loans and Sales Finance Contracts with installments past due less than 60 days from due date.)		155	$	58,507		94.9	%
60-89 days		31		~~881~~1,439		12.43	%
90-179 days		35		1,~~497~~157		21.48	%
180-269 days		42		~~1,641~~446		20.7	%
>270 days		71		~~1,893~~134		30.13	%
Subtotal		236	$	61,293		100.0	%
		155	$	58,507		94.9
Interest only accounts (Accounts on which interest, deferment, extension and/or default charges were received in the last 60 days)		–	$	–		–%
Subtotal		164	$	61,683		100.0	%
Partial Payment accounts (Accounts on which the total received in the last 60 days was less than 50% of the original contractual monthly payment. “Total received” to include interest on simple interest accounts, as well as late charges on deferment charges on pre-computed accounts.)		–	$	–		–%
Interest only accounts (Accounts on which interest, deferment, extension and/or default charges were received in the last 60 days)		–	$	–		–	%
Total		236	$	61,293		100.0	%
Partial payment accounts (Accounts on which the total received in the last 60 days was less than 50% of the original contractual monthly payment. “Total received” to include interest on simple interest accounts, as well as late charges on deferment charges on pre-computed accounts.)		–	$	–		–	%
Total		164	$	61,683		100.0	%

Below is an ~~ageing~~aging schedule of loans receivable as of December 31, ~~2023~~2024, on a contractual basis:

	No. Loans		Unpaid Balances		%
Contractual Terms - All current Direct Loans and Sales Finance Contracts with installments past due less than 60 days from due date.		219	$	55,381		90.4	%
Contractual terms (All current Direct Loans and Sales Finance Contracts with installments past due less than 60 days from due date.)		162	$	46,168		90.2	%
60-89 days		3–		~~881~~–		~~1.4~~–	%
90-179 days		35		1,~~497~~057		2.41	%
180-269 days		4–		~~1,641~~–		~~2.7~~–	%
>270 days		716		13,~~893~~913		37.17	%
Subtotal		~~236~~183	$	6151,~~293~~138		100.0	%
Interest only accounts (Accounts on which interest, deferment, extension and/or default charges were received in the last 60 days)		–	$	–		–%	%
Partial Payment accounts (Accounts on which the total received in the last 60 days was less than 50% of the original contractual monthly payment. “Total received” to include interest on simple interest accounts, as well as late charges on deferment charges on pre-computed accounts.)		–	$	–		–%
Partial payment accounts (Accounts on which the total received in the last 60 days was less than 50% of the original contractual monthly payment. “Total received” to include interest on simple interest accounts, as well as late charges on deferment charges on pre-computed accounts.)		–	$	–		–	%
Total		~~236~~183	$	6151,~~293~~138		100.0	%

The company modifies loans for borrowers for various reasons, including but not limited to changes in what the builder is building versus what was appraised, changes in loan-to-value (“LTV”) or market conditions, and a builder’s inability to pay interest. This last grouping (builder’s inability to pay interest) is done through forbearance agreements which will allow the builder to have a specified period not to pay interest while the home is either completed or marketed. Typically, those interest amounts are collected at final payoff of the loan.

As of December 31, 2025, we had one loan with a commitment and loan balance of $258 currently not paying interest under a forbearance agreement. The amount of interest unpaid under the forbearance agreement is $40 and is included in our interest receivable. No loans were under a forbearance agreement as of December 31, 2024.

Allowance for Credit Losses on Loans

The following table provides a roll forward of the allowance for credit losses as of December 31, 2025:

	Construction												Development
	A Credit Risk			B Credit Risk			C Credit Risk			Individually Evaluated			A Credit Risk			B Credit Risk			C Credit Risk			Individually Evaluated		Total
Allowance for credit losses as of December 31, 2024	$	(150	)	$	(28	)	$	(13	)	$	(658	)	$	(1	)	$	–		$	(18	)	$	–	$	(868	)
Charge-offs		–			–			–			822			–			–			–			–		822
Recoveries		–			–			–			(53	)		–			–			–			–		(53	)
Provision (benefit) for credit losses on funded balances		28			(123	)		1			(857	)		(1	)		(78	)		16			–		(1,014	)
Allowance for credit losses as of December 31, 2025	$	(122	)	$	(151	)	$	(12	)	$	(746	)	$	(2	)	$	(78	)	$	(2	)	$	–	$	(1,113	)

Reserve for unfunded commitments as of December 31, 2024	$	(65	)	$	(10	)	$	(12	)	$	–		$	(1	)	$	–		$	–		$	–	$	(88	)
Provision (benefit) for credit losses on unfunded commitments		(8	)		(45	)		8			–			1			(8	)		–			–		(52	)
Reserve for unfunded commitments as of December 31, 2025	$	(73	)	$	(55	)	$	(4	)	$	–		$	-		$	(8	)	$	–		$	–	$	(140	)

The following table provides a roll forward of the allowance for credit losses as of December 31,2024:

	Performing Loans																		Nonaccrual loans
	Construction												Development
	Construction									Development
	A Credit Risk			B Credit Risk			C Credit Risk			Individually Evaluated			A Credit Risk			B Credit Risk			C Credit Risk			Individually Evaluated			Total
	A Credit Risk			B Credit Risk			C Credit Risk			A Credit Risk			B Credit Risk			C Credit Risk			Secured			Unsecured			Total
Allowance for credit losses as of December 31, 2023	$	(211	)	$	(32	)	$	–		$	(437	)	$	(5	)	$	–		$	(10	)	$	–		$	(695	)
Allowance for credit losses as of December 31, 2023	$	(211	)	$	(32	)	$	–		$	(5	)	$	–		$	(10	)	$	(351	)	$	(86	)	$	(695	)
Reclassification of ACL on unfunded commitments		59			19			–			–			–			–			–			–			78
Charge-offs		–			–			–			–506			–			–			~~454~~–			52–			506
Recoveries		–			–			–			–(6	)		–			–			–			(6–	)		(6	)
Provision for credit losses funded		2			(15	)		(13	)		4			–			(8	)		(761	)		40			(751	)
Provision (benefit) for credit losses on funded balances		2			(15	)		(13	)		(721	)		4			–			(8	)		–			(751	)
Allowance for credit losses as of December 31, 2024	$	(150	)	$	(28	)	$	(13	)	$	(1658	)	$	–(1	)	$	~~(18~~–	)	$	(~~658~~18	)	$	–		$	(868	)
Reserve for unfunded commitments as of December 31, 2023	$	–—		$	–—		$	–—		$	–—		$	–—		$	–—		$	–—		$	–—		$	–—
Reclassification of ACL on unfunded commitments		(59	)		(19	)		–			–			–			–			–			–			(78	)
Provision for credit losses unfunded		(6	)		9			(12	)		(1	)		–			–			–			–			(10	)
Provision (benefit) for credit losses on unfunded commitments		(6	)		9			(12	)		–			(1	)		–			–			–			(10	)
Reserve for unfunded commitments as of December 31, 2024	$	(65	)	$	(10	)	$	(12	)	$	(1–	)	$	–(1	)	$	–		$	–		$	–		$	(88	)

The following table provides a roll forward of the allowance for credit losses as of December 31,2023:

	Performing Loans																		Nonaccrual loans
	Construction									Development
	A Credit Risk			B Credit Risk			C Credit Risk			A Credit Risk			B Credit Risk			C Credit Risk			Secured			Unsecured			Total
December 31, 2022	$	(174	)	$	(66	)	$	(9	)	$	(37	)	$	(2	)	$	(7	)	$	(247	)	$	(1,985	)	$	(2,527	)
Impact of the adoption of ASC 326		(33	)		(1	)		(12	)		35			2			(30	)		–			(139	)		(178	)
Charge-offs		–			–			–			–			–			–			132			2,610			2,742
Reduction in ACL for loan participations		5			–			–			–			–			–			–			–			5
Provision for credit losses		(9	)		35			21			(3	)		–			27			(236	)		(572	)		(737	)
December 31, 2023	$	(211	)	$	(32	)	$	–		$	(5	)	$	–		$	(10	)	$	(351	)	$	(86	)	$	(695	)

Allowance for Credit Losses on Unfunded Loan Commitments

Unfunded commitments to extend credit, which have similar collateral, credit and market risk to our outstanding loans, were $2223,~~515~~557 and $2522,~~263~~515 as of December 31, ~~2024~~2025 and ~~December 31~~2024, ~~2023,~~ respectively. The ACL is calculated at an estimated loss rate on the total commitment value for loans in our portfolio. The ACL on unfunded commitments is calculated as the difference between the ACL on commitment value less the estimated loss rate and the total gross loan value for loans in our portfolio. AsThe ~~of December 31, 2024, the~~ ACL for unfunded commitments was $~~88.~~140 Inand ~~addition,~~$88 as of December 31, ~~2024,~~2025 weand ~~had no off-balance sheet transactions~~2024, ~~nor do we currently have any such arrangements or obligations~~respectively.

Loan Portfolio by Year of Origination

The table below presents the Company’s loan portfolio by year of origination, category, and credit quality indicator as of December 31, 2025. Loans acquired are shown in the tables by origination year.

	2025		2024		2023		2022			2021			Prior			Total
Construction loans Collectively Evaluated:
A Credit Risk	$	15,907	$	3,786	$	2,277	$	939		$	581		$	-		$	23,490
B Credit Risk		7,228		4,938		620		1,013			-			-			13,799
C Credit Risk		-		827		-		-			-			-			827
Individually Evaluated		2,323		2,429		1,050		597			-			-			6,399
		25,458		11,980		3,947		2,549			581			-			44,515

Current Period Charge Offs		-		-		-		(125	)		(27	)		(670	)		(822	)

Development Loans Collectively Evaluated:
A Credit Risk		3,020		438		-		-			-			-			3,458
B Credit Risk		11,602		-		-		-			-			1,470			13,072
C Credit Risk		-		-		99		-			-			-			99
Individually Evaluated		-		-		-		-			-			539			539
		14,622		438		99		-			-			2,009			17,168

Current Period Charge Offs		-		-		-		-			-			-			-

Total	$	40,080	$	12,418	$	4,046	$	2,424		$	554		$	1,339		$	60,861

The table below presents the Company’s loan portfolio by year of origination, category, and credit quality indicator as of December 31, 2024. Loans acquired are shown in the tables by origination year.

	2024		2023			2022			2021		2020		Prior			Total
Construction loans Collectively Evaluated:
A Credit Risk	$	24,336	$	9,980		$	4,961		$		$	-	$	-		$	39,277
B Credit Risk		1,936		300			-			581		-		-			2,817
C Credit Risk		840		99			-			-		-		-			939
Individually Evaluated		-		1,552			794			446		1,781		398			4,971
	$	27,112	$	11,931		$	5,755		$	1,027	$	1,781	$	398		$	48,004

Current Period Charge Offs		-		(138	)		(356	)		-		-		(12	)		(506	)

Development Loans Collectively Evaluated:
A Credit Risk		300		229			-			37		-		1,919			2,485
B Credit Risk		160		-			-			-		-		-			160
C Credit Risk		-		-			-			-		-		489			489
Individually Evaluated		-		-			-			-		-		-			-
		460		229			-			37		-		2,408			3,134

Current Period Charge Offs		-		-			-			-		-		-			-

Total	$	27,572	$	12,022		$	5,399		$	1,064	$	1,781	$	2,794		$	50,632

Concentration

Financial instruments that potentially subject the Company to concentration 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:

December 31, 2024

December 31, 2023

December 31, 2025

December 31, 2024

Percent of

Borrower

Loan

Borrower

Loan

City

Commitments

City

Commitments

Highest concentration risk

Pittsburgh, PA

2036

Pittsburgh, PA

2920

Second highest concentration risk

~~Orlando,~~Central and Southwest FL

Cape Coral, FL

Third highest concentration risk

~~Greenville~~St. George, SCUT

~~Orlando~~Greenville, FLSC

Foreclosed Assets

Roll forward of foreclosed assets for the years ended December 31, ~~2024~~2025 and ~~2023~~2024:

	December 31, 2024			December 31, 2023
	December 31, 2025			December 31, 2024
Beginning balance	$	~~130~~1,356		$	~~1,582~~130
Transferred from loans receivables, net		~~2,306~~909			–2,306
Investments in foreclosed assets		507			125
Additions for construction in foreclosed assets		96			507
Sale proceeds		(~~992~~1,657	)		(~~1,549~~992	)
Gain on foreclosed assets		–			8
Loss on foreclosed assets, net		(205	)		(595	)
Loss on foreclosed assets		(595	)		(36	)
Ending balance	$	499		$	1,356
Ending balance	$	1,356		$	130

During the year ended December 31, ~~2024~~2025 and ~~2023~~2024 we reclassed $~~2,306~~909 and $02,306 loan receivable, net assets to foreclosed assets, respectively.

Real Estate Investments

During ~~June~~October ~~2020~~2023, wethe Company acquired ~~four~~two ~~lots~~properties ~~from~~to aconstruct ~~borrower~~houses inon ~~exchange~~each ~~for~~lot. ~~the~~One ~~transfer~~ of ~~loans secured by those lots. We extinguished~~ the ~~principal balance~~properties ~~for~~was ~~the~~sold ~~loans~~in on2025 ~~the~~at ~~lots~~a ingain ~~the amount~~ of $~~640~~48. ~~and~~The insecond ~~addition~~property, ~~paid~~with a ~~$500~~carrying ~~management~~value ~~fee~~of ~~for~~$169, ~~the~~is ~~development~~not ofbeing ~~homes on the lots~~developed. The ~~management~~Company ~~fee~~is ~~was~~currently ~~paid~~in ~~through~~negotiations ~~reducing~~to ~~the~~sell ~~principal balance on a current loan receivable with~~ the ~~borrower. Two of the four~~ ~~homes~~second ~~sold~~property ~~during~~as ~~2022~~a ~~and~~lot ~~the~~to ~~remaining~~a ~~two sold in 2023~~builder.

~~During~~On ~~October~~February ~~2023~~15, 2024, the Company ~~acquired~~completed ~~two~~its ~~properties~~acquisition toof ~~construct~~339 ~~houses~~Justabout onLand ~~each~~Co. ~~lot~~LLC (“339”), in a transaction valued at $9,122. ~~Once~~The ~~the~~Company ~~properties~~paid ~~are~~cash ~~fully~~consideration ~~developed~~of ~~and~~$3,000 ~~sold~~plus the ~~use~~ amount of ~~proceeds~~our ~~from~~intercompany ~~the~~debt. ~~sale~~The ~~will~~property ~~first~~was ~~apply~~then tosubdivided ~~the~~into two ~~land,~~parcels. ~~building,~~One ~~furniture~~parcel ~~and~~was ~~interest~~being ~~costs~~developed tointo ~~the~~lots ~~Company~~for ~~and~~home aconstruction ~~portion~~(“Phase of1 Lots”) and the ~~remaining~~ ~~funds~~other ~~will~~parcel bewas ~~distributed~~being developed asinto a ~~management~~second ~~fee~~phase ~~for~~of ~~the~~lots ~~development~~(“Phase of2 ~~the homes~~Lots”).

47We charged option fees to Benjamin Marcus Homes (“BMH”) for the right to buy the Phase 1 Lots owned by 339. The option fee was $890 as of February 15, 2024, and the Company is deferring the revenue related to the option fee over twelve months. As of December 31, 2024, deferred revenue, real estate investment was $74. There was no deferred revenue related to the option fee as of December 31, 2025.

~~Effective~~During ~~February~~the 15year ended December 31, ~~2024~~2025, ~~the~~BMH ~~Company~~purchased ~~completed~~eight ~~its~~lots ~~acquisition~~from 339 for both revenue and cost of ~~339~~land ~~Justabout~~parcels ~~Land~~sold Coof $2,805. ~~LLC~~During the ~~(“339”)~~year ended December 31, in2024, aBMH ~~transaction~~purchased ~~valued~~nine at lots from 339 for both revenue and cost of land parcels sold of $92,~~122~~998. The ~~Company~~related income ~~paid~~and ~~cash~~expense ~~consideration~~on ofthese $3lot sales are included within non-interest income and non-interest expense,~~000~~ ~~plus~~respectively, on the ~~amount~~consolidated statements of ~~our~~operations. ~~intercompany~~No ~~debt~~gains or losses were recognized in the lot sales. We capitalized interest related to the cost of this investment which was included in the assets when we sold lots.

We charge an option fee to Benjamin Marcus Homes (“BMH”) for the right to buy the Phase 1 Lots owned by 339. The option fee was $890 as of February 15, 2024, and the Company is deferring the revenue related to the option fee over twelve months. As of December 31, 2024, deferred revenue, real estate investment was $74.

During the year ended December 31, 2024, BMH purchased nine lots from 339 for both revenue and cost of land parcels sold of $2,998 which is included within non-interest income and non-interest expense, respectively, on the interim consolidated statements of operations. No gains or losses were recognized in the lot sales. We are capitalizing interest related to the cost of this investment which is included in the asset when we sell lots.

The total expected selling price of the 339 Lots is approximately $18,500 and the purchase price was $3,892 (the “Purchase Price”) and the development loan reclassed from loan receivables net to real estate investments of $6,122. BMH immediately repaid an intercompany debt to 339 of $892, which in turn was returned to the Company, leaving the net investment at $3,000. We purchased 339 subject to the debt owed by 339, which included a first position development loan from the Company, and two subordinate financings from lenders outside of the Company.

During September 2024, the Company invested in a minority non-controlling interest in one of our borrowers, DBL Capital Real Estate Fund 1, LLC (“DBL”) for $330. The investment is to develop six empty lots into houses and the Company is expected to receive a return.

The following table is a roll forward of real estate investment assets:

	December 31, 2024			December 31, 2023
Beginning balance	$	435		$	660
Additions from 339 acquisition		11,330			–
Gain on sale of real estate investments		–			10
Investments in real estate asset trust		330			–
Proceeds from the sale of real estate investments		(2,998	)		(2,131	)
Additions for construction/development		4,432			1,896
Ending balance	$	13,529		$	435

The following table is capitalized interest for real estate investment assets:

	December 31, 2024			December 31, 2023
Capitalized interest	$	1,143		$	11
Cost of funds		11.48	%		11.28	%

The capitalized interest is included within real estate investment assets on the consolidated balance sheet.

On August 6, 2025, the Company completed the sale of all assets held by 339, a business segment, to the principal owners of the Company’s largest customer, Benjamin Marcus Homes (“BMH” or “Buyer”), for a sales price of $9,876. The assets sold consisted primarily of undeveloped lots, which had a net book value of $9,683 at the time of the sale. The sale includes the settlement of $725 in option fees receivable from BMH at the time of closing and a reduction of $240 in deferred revenue associated with prior deposits from BMH for lot purchases from 339. The Company recognized a gain of $193 on the sale.

During September 2024, the Company invested in a minority non-controlling interest in one of our borrowers, DBL Capital Real Estate Fund 1, LLC (“DBL”) for $330. The investment assisted in the development of several empty lots into houses with the intent of the Company to receive a return. The Company redeemed this investment on November 4, 2025, and recorded a gain of $38 on investment.

The following table is a roll forward of real estate investment assets:

	December 31, 2025			December 31, 2024

Beginning balance	$	13,529		$	435
Additions from 339 acquisition		–			11,330
Proceeds from disposal of 339		(9,876	)		–
Gain on sale of real estate investments		276			–
Investments in real estate assets		–			330
Proceeds from the sale of real estate investments		(4,956	)		(2,998	)
Additions for construction/development		1,196			4,432
Ending balance	$	169		$	13,529

Capitalized Interest Activity

The following table is capitalized interest included in additions for construction development for real estate investment assets:

	December 31, 2025			December 31, 2024

Capitalized interest	$	513		$	1,143
Cost of funds		9.61	%		11.48	%

The capitalized interest is included within real estate investment assets on the consolidated balance sheet. Beyond the sale of the remaining lot for $169, the Company does not anticipate more real estate investment activity in 2026.

Segment Reporting

During February 2024, the Company completed its acquisition of 339 and the property has since been subdivided into two parcels. One parcel is was being developed into lots and ~~are~~made available for home construction and the other parcel ~~will~~was bebeing developed into a second phase of lots ~~which should be available for construction early next year~~.

The addition of the Company’s real estate investment ~~added~~in 339 during February 2024 resulted in a new reportable segment; ~~therefore,~~for as2024 and through the date of ~~December~~the ~~31,~~disposal ~~2024~~of the ~~Company~~339 ~~will~~segment ~~operate~~on August 6, 2025. The Company operated within two principal business segments: between the acquisition and sale of 339: Shepherd’s Finance and 339, and once consolidated, the Company reports as Shepherd’s Finance, LLC. ~~Shepherd’s Finance was the one principal business segment as of December 31, 2023.~~ Revenues from Shepherd’s Finance consist primarily of interest and fee income earned on loans. 339’s revenues are primarily related to the sale of land parcels and option fee income. The Company has no other reportable segments.

Our CEO assesses segment performance using ~~operating~~net income as well as comparing capital expenditures, sales prices, sales rates, and development timing to a plan that was created prior to purchase. ~~For~~The ~~339,~~Company’s wereportable ~~are~~segments ~~intending to develop 62 lots, of which 38~~ are ~~already~~strategic ~~developed. Of~~business ~~those~~units ~~38,~~that ~~none were sold as of December 31, 2024. In addition, as of December 31, 2024, we invested a total of $14,975, anticipating~~offer ~~another~~different ~~$3,400~~products ~~in capital expenditures,~~ and ~~relieved the total investment of $2,998 through sales~~services. WeThey ~~recognized~~are ~~$816~~managed inseparately ~~option~~because ~~fee~~each ~~income. We~~segment ~~anticipate~~sells a ~~majority~~different ~~of the remaining 38 lots will sale during 2025, with the remaining 24 undeveloped lots will be under development or completed by the end of 2025~~product.

~~The~~Information ~~Company’s~~about reportable segments, ~~are~~and ~~strategic~~reconciliations ~~business~~of ~~units~~such ~~that~~information ~~offer~~to ~~different~~the ~~products~~Consolidated ~~and~~Financial ~~services.~~Statements ~~They~~as ~~are~~of ~~managed~~December ~~separately because~~31, ~~each~~2025 ~~segment~~and 2024, ~~sales~~respectively, aare ~~different~~described ~~product~~below.

Information about reportable segments, and reconciliations of such information to the Consolidated Financial Statements as of December 31, 2024 are described below.

Reconciliation of Consolidated Statements of Operations:

Shepherd’s Finance, LLC

Consolidated Statements of Operations

For the Year Ended December ~~12/~~31~~/2024~~, 2025

(in thousands of dollars)

339 ~~Justabouot~~Justabout Land Company, LLC

~~Shepherds~~Shepherd’s Finance, LLC

Total

Net Interest and Fee Income

Interest and fee income on loans

–

10,~~198~~804

Interest expense:

Interest related to secure borrowings

–

1,~~297~~473

Interest related to unsecured borrowings

–

3,~~564~~599

Interest expense

–

45,~~861~~072

Net interest and fee income

–

5,~~337~~732

Less: Provision for credit losses

–

~~762~~1,066

Net interest and fee income after provision for credit losses

–

4,~~575~~666

Non-Interest Income

Gain on foreclosed assets

–

Gain on sale of real estate investments

193

276

Revenue from the sale of land parcels

2,~~998~~805

–

2,~~998~~805

Option fee income

~~816~~314

–

~~816~~314

Other income

–

82249

Total non-interest income

3,~~814~~312

82332

3,~~896~~644

Income before non-interest expense

3,~~814~~312

4,~~657~~998

8,~~471~~310

Non-Interest Expense

Selling, general and administrative

–

3,~~061~~824

Depreciation and amortization

–

8063

Loss on foreclosed assets

–

~~595~~205

Cost of land parcels sold

2,~~998~~805

–

2,~~998~~805

Total non-interest expense

2,~~998~~805

34,~~736~~092

6,~~734~~897

Net Income

~~816~~507

~~921~~906

1,~~737~~413

Net income attributable to preferred equity holders

–

702

Net income attributable to common equity holders

–

1,035

Reconciliation of Total Assets:

(in thousands of dollars)		339 Justabouot Land Company, LLC				Shepherds Finance, LLC				Elimination				Total
Total assets as of December 31, 2024		$	11,977			$	57,386			$	–			$	69,363

Customer Interest Escrow

The Pennsylvania Loans call for a funded interest escrow account which was initially funded with proceeds from the Pennsylvania Loans. The initial funding on that interest was $450. The balance as of December 31, 2024 and 2023 was $0 and $12, respectively. To the extent the balance is available in the interest escrow, interest due on certain loans is deducted from the interest escrow on the date due. The interest escrow is increased by 20% of lot payoffs on the same loans, and by interest and/or distributions on a loan in which we are the borrower and Investor’s Mark Acquisitions, LLC is the lender and on the Series B preferred equity. All of these transactions are noncash to the extent that the total escrow amount does not need additional funding.

We had 34 and 39 other loans active as of December 31, 2024 and 2023, respectively, which also had interest escrows. The cumulative balance of all interest escrows other than the Pennsylvania Loans was $353 and $279 as of December 31, 2024 and 2023, respectively.

Roll forward of interest escrow for the years ended December 31, 2024 and 2023:

	2024			2023
Beginning balance	$	292		$	766
Preferred equity dividends		–			47
Additions from Pennsylvania Loans		907			654
Additions from other loans		701			538
Interest, fees, principal or repaid to borrower		(1,547	)		(1,713	)
Ending balance	$	353		$	292

Secured Borrowings

Loan Purchase and Sale Agreements

We have two loan purchase and sale agreements where we are the seller of portions of loans we create. The two purchasers are Builder Finance, Inc. (“Builder Finance”) and S.K. Funding, LLC (“S.K. Funding”). Generally, the purchasers buy between 50% and 85% of each loan sold. They receive interest rates ranging from our cost of funds to the interest rate charged to the borrower. The purchasers generally do not receive any of the loan fees we charge. We have the right to call some of the loans sold, with some restrictions. Once sold, the purchaser must fund their portion of the loans purchased. We service the loans. Also, there are limited put options in some cases, whereby the purchaser can cause us to repurchase a loan. The loan purchase and sale agreements are recorded as secured borrowings.

InShepherd’s ~~March 2018~~Finance, we entered into the Seventh Amendment (the “Seventh Amendment”) to our Loan Purchase and Sale Agreement with S.K. Funding. The purpose of the Seventh Amendment was to allow S.K. Funding to purchase a portion of the Pennsylvania Loans.LLC

~~The~~Consolidated ~~Seventh~~Statements ~~Amendment had a term~~ of 24 months and automatically renews for additional six-month terms unless either party gives written notice of its intent not to renew at least six months prior to the end of a term. S.K. Funding will have a priority position as compared to the Company in the case of a default by any of the borrowers.Operations

InFor ~~April 2021, we entered into~~ the ~~Eleventh~~Year ~~Amendment~~Ended ~~(the~~December ~~“Eleventh Amendment”) to our Loan Purchase and Sale Agreement with S.K. Funding. The purpose of the Eleventh Amendment was to allow a principal increase to $2~~31,~~000~~ from the original $1,000 in the Tenth Amendment dated January 2019. In addition, if the collateral value drops then an unsecured portion or $400 may be used until the collateral is increased back to $2,000.2024

The Eleventh Amendment has a term of 12 months and automatically renews for additional six-month terms unless either party gives written notice of its intent not to renew at least five months prior to the end of a term. S.K. Funding will have a priority position as compared to the Company in the case of a default by any of the borrowers.

(in thousands of dollars)	339 Justabout Land Company, LLC		Shepherds Finance, LLC		Total

Net Interest and Fee Income
Interest and fee income on loans	$	–	$	10,198	$	10,198
Interest expense:
Interest related to secure borrowings		–		1,297		1,297
Interest related to unsecured borrowings		–		3,564		3,564
Interest expense	$	–	$	4,861	$	4,861

Net interest and fee income		–		5,337		5,337

Less: Provision for credit losses		–		762		762
Net interest and fee income after provision for credit losses		–		4,575		4,575

Non-Interest Income
Gain on foreclosed assets	$	–	$	–	$	–
Revenue from the sale of land parcels		2,998		–		2,998
Option fee income		816		–		816
Other income		–		82		82
Total non-interest income	$	3,814	$	82	$	3,896

Income before non-interest expense		3,814		4,657		8,471

Non-Interest Expense
Selling, general and administrative	$	–	$	3,061	$	3,061
Depreciation and amortization		–		80		80
Loss on foreclosed assets		–		595		595
Cost of land parcels sold		2,998		–		2,998
Total non-interest expense	$	2,998	$	3,736	$	6,734

Net Income	$	816	$	921	$	1,737

In July 2022, we entered into the Twelfth Amendment (the “Twelfth Amendment”) to our Loan Purchase and Sale Agreement with S.K. Funding. The purpose of the Twelfth Amendment was to allow S.K. Funding to purchase a portion of loans sold to one borrower in Pennsylvania.

The timing of the Company’s principal and interest payments to S.K. Funding under the Twelfth Amendment, and S.K. Funding’s obligation to fund the loans in Pennsylvania vary depending on the total principal amount of the Pennsylvania Loans outstanding at any time, as follows:

	●	If the total principal amount exceeds $3,000. In addition, up to $400 may be unsecured on the Twelfth Amendment loans at any time.
	●	The interest rate accruing to S.K. Funding for both the Secured and Unsecured portion of the Twelfth Amendment is 10.0% and 9.5%, accordingly and calculated on a 365/366-day basis.

In October of 2023, we entered the Thirteenth Amendment (the “Thirteenth Amendment”) to our Loan Purchase and Sale Agreement with S.K. Funding. The purpose of the Thirteenth Amendment was to sell participating interests in a few of our loans with our largest customer. These sales are different than all of our other loan participations in that the buyer is not in a preferred risk position, and as such, the portions of the loans sold are treated as an actual loan sale. The balance of the portion sold is removed from our balance sheet. The interest on the portion sold is not reflected on our statement of operations, and there is no interest cost or loan loss related to the sold portion on our statement of operations. The fee we earn on these loans for origination and servicing is recognized over the expected life of the loan in the same way as all of our other loans.

Pursuant to the Thirteenth Amendment, the aggregate amount of the S.K. Funding’s commitment, either funded or unfunded, under certain loans purchased by S.K. Funding covered by the Thirteenth Amendment (the “Loans”) was increased to $1,650. As of the effective date of the Thirteenth Amendment, S.K. Funding has funded $1,400 and agreed to fund an additional $250 upon notice from us that such additional amount is desired to fund the Loans. In addition, the amount of the portion of any Loan purchased by S.K. Funding was adjusted to the lesser of (i) 45% of our approved appraised value or a third-party sales price if the collateral property is under agreement for sale, as applicable, and (ii) 50% of the maximum principal of the loan after deducting the loan fee. The interest rate for the Loans is the lessor of the (i) the interest rate on such Loan or (ii) 14%, calculated on a 365/366 day basis. For such amounts of the Loan amount that are unsecured, the interest rate for such amounts is 9.5%, calculated on a 365/366 day basis. The loan receivables gross principal balance of the sold portion of the Loans as of December 31, 2024 was $1,400.

~~The~~Reconciliation ~~term~~ of ~~the~~total ~~Thirteenth Amendment and S.K. Funding’s participation in the Loans, shall be through the repayment of the last Loan participated in by S.K. Funding pursuant to the terms of the Thirteenth Amendment.~~assets:

(in thousands of dollars)	339 Justabouot Land Company, LLC		Shepherd’s Finance, LLC		Elimination		Total

Total assets as of December 31, 2025	$	–	$	68,536	$	–	$	68,536

Total assets as of December 31, 2024	$	11,977	$	58,253	$	–	$	70,230

Refundable Prepaid Interest

In specific instances we offer or require borrowers the ability to have an interest escrow , which we call refundable prepaid interest. Refundable prepaid interest is a separate liability on the Company’s balance sheet used to apply towards or pay the borrowers monthly interest payment when due. The Company may require this to ensure cash on hand considered in underwriting is used to make interest payments to the Company. If the customer has already used a substantial amount of cash to purchase a lot, we might require one to be funded with loan proceeds. In some land development and lot loan cases where the interest will be substantial due to the length of the loan, we may require a funded interest escrow to start but then continue to have the builder fund the interest escrow with each lot paydown (as lots are released from the loan).

Below is a roll forward of refundable prepaid interest:

	Year Ended December 31, 2025			Year Ended December 31, 2024

Beginning balance	$	353		$	292
Additions from Pennsylvania loans		1,198			907
Additions from other loans		1,312			701
Interest, fees, principal or repaid to borrower		(1,898	)		(1,547	)
Ending balance	$	965		$	353

Secured Borrowings

Loan Purchase and Sale Agreements

The Company has two purchase and sale agreements where we are the seller of portions of loans we originate. The two purchasers are Builder Finance, Inc. (“Builder Finance”) and S.K. Funding, LLC (“S.K. Funding”). Generally, the purchasers buy between 50% and 85% of each loan sold. They receive interest rates ranging from 8% to our interest rate charged to the borrower. The purchasers generally do not receive any of the loan fees we charge. We have the right to call some of the loans sold, with some restrictions. Once sold, the purchaser must fund their portion of the loans purchased. We service the loans. Also, there are limited put options in some cases, whereby the purchaser can cause us to repurchase a loan. The loan purchase and sale agreements are recorded as secured borrowings. However, an amendment to S.K. Funding’s agreement allowes the Company to sell participating interest in loans which is explained further below.

As of December 31, 2025 and 2024, the there is not a limit of maximum principal on the Builder Finance line and the principal was $1,459 and $4,418, respectively. The interest rate on the borrowings was 8.99% and 11.00% as of December 31, 2025 and 2024, respectively. The agreement has a term of 12 months and renews automatically for an additional 12 months unless either party provides written notice of intent not to renew at least six months prior to the end of the term. During the periods ending December 31, 2025 and 2024, interest expense was $323 and $704, respectively.

As of December 31, 2025 and 2024, the maximum principal on the S.K. Funding line was $6,500 for both period end dates. Borrowings up to $1,400 over the principal amount may be unsecured. There were $0 of unsecured borrowings as of both December 31, 2025 and 2024. The interest rate on the borrowings was 10.00% and 9.50% as of December 31, 2025 and 2024, respectively. The agreement has a term of 12 months and renews automatically for an additional 12 months unless either party provides written notice of intent not to renew at least six months prior to the end of the term. Additionally, the Company executed an amendment to the agreement with S.K. Funding that allowed the Company to sell participating interests in loans. The balance of the portion sold on these loans is removed from the balance sheet of the Company and interest on the portion sold is not reflected in our statement of operations. As of December 31, 2025 and 2024, the loan receivable principal balance sold under this agreement was $1,400.

Lines of Credit

Lines of Credit with Mr. Wallach and His Affiliates

~~During~~As ~~June~~of ~~2018~~December 31, we2025and ~~entered~~2024, the ~~First~~Company ~~Amendment~~had to$26 ~~the~~and ~~line~~$743 ofborrowed ~~credit~~against ~~with~~its ~~our~~lines ~~Chief~~of ~~Executive~~credit ~~Officer~~from ~~and~~affiliates, ~~his~~respectively, ~~wife (the “Wallach LOC”)~~ which have ~~modified~~a ~~the~~total ~~interest~~limit ~~rate~~of on$2,500 ~~the Wallach LOC to generally equal the prime rate plus 3%. The interest rate for the Wallach LOC was 10.50%~~ and ~~11.50%~~$2,500 as of December 31, ~~2024~~2025 and ~~2023~~2024, ~~respectfully~~respectively. AsDuring ofthe year ended December 31, ~~2024~~2025, ~~and~~the Company ~~2023,~~paid $400 towards the ~~outstanding~~balance ~~amount~~of ~~pursuant to~~a ~~the~~line of credit with Daniel M. Wallach ~~LOC~~(our ~~was~~Chief ~~$743~~Executive Officer and ~~$160,~~Chairman ~~respectively.~~of ~~For~~ the ~~years~~Board of ~~ended~~Managers). As of December 31, ~~2024~~2025 and ~~2023~~2024, interest expense ~~was~~for ~~$35~~lines ~~and~~of ~~$18, respectively.~~credit ~~The~~from ~~maximum~~affiliates ~~amount~~was ~~outstanding on the Wallach LOC is~~ $~~1,250~~45 and ~~the~~51, ~~loan is a demand loan~~respectively.

During June 2018, we also entered into the First Amendment to the line of credit with the 2007 Daniel M. Wallach Legacy Trust, which is our CEO’s trust (the “Wallach Trust LOC”) which modified the interest rate on the Wallach Trust LOC to generally equal the prime rate plus 3%. The interest rate for this borrowing was 10.50% and 11.50% as of December 31, 2024 and 2023. As of December 31, 2024, and 2023, the outstanding amount pursuant to the Wallach Trust LOC was $0 and $166, respectively. For the years ended December 31, 2024 and 2023, interest expense was $16 and $20, respectively. The maximum amount outstanding on the Wallach Trust LOC is $250 and the loan is a demand loan.

Line of Credit with William Myrick

During June 2018, we entered into a line of credit agreement (the “Myrick LOC Agreement”) with our Partner (“Partner”), William Myrick. Pursuant to the Myrick LOC Agreement, Mr. Myrick provides us with a line of credit (the “Myrick LOC”) with the following terms:

● Principal not to exceed $1,000; ● Secured by a lien against all our assets; ● Cost of funds to us of prime plus 3%; and ● Due upon demand.

As of December 31, 2024 and 2023, the amounts outstanding pursuant to the Myrick LOC were $0 for both the years ended December 31, 2024 and 2023, interest expense was $0.

Line of Credit with Shuman

During July 2017, we entered into a line of credit agreement (the “Shuman LOC Agreement”) with Steven K. Shuman, which is now held by Cindy K. Shuman. Pursuant to the Shuman LOC Agreement, Shuman provides us with a revolving line of credit (the “Shuman LOC”) with the following terms:

● Principal not to exceed $1,325; ● Secured with assignments of certain notes and mortgages; ● Cost of funds to us of 10%; and ● Due in July ~~2025~~2026; ~~but~~however, will automatically renew for additional 12-month periods, unless either party gives notice to not renew.

As of December 31, ~~2024~~2025 and ~~2023~~2024, the outstanding amount pursuant to the Shuman LOC was $125. Interest expense was $13 for both years ended December 31, ~~2024~~2025 and ~~2023~~2024, respectively.

Line of Credit with Judith Swanson

During December 2021, the Swanson Line of Credit (“Swanson LOC”) was assigned to Judith Swanson (“Judith Swanson LOC”), as trustee of a trust. Pursuant to the Swanson Modification Agreement, the Judith Swanson LOC provides us with a revolving line of credit with the following terms:

● Principal not to exceed $7,000; ● Secured with assignments of certain notes and mortgages; ● Cost of funds to us of 68.7525%; and ● Due ~~March~~in July 2026,; $4however,~~000~~ ~~due~~will ~~July~~automatically ~~2026,~~renew ~~balance~~for ~~due~~additional ~~November~~12-month 21periods, ~~2026~~unless either party gives notice to not renew.

The Judith Swanson LOC was fully borrowed on the secured and unsecured portion of the line of credit as of December 31, 2024 and 2023. The secured balance on the Judith Swanson LOC was $6,000 and $5,164 as of December 31, 2024 and 2023, respectively. Interest expense was $640 and $556 for the years ended December 31, 2024 and 2023, respectively.53

~~New~~The ~~Lines~~Judith Swanson LOC was fully borrowed on the secured and unsecured portion of ~~Credit~~the line of credit as of December 31, 2025 and 2024. In addition, the secured balance on the Judith Swanson LOC was $6,407 and $6,000, as of December 31, 2025 and 2024, respectively. Interest expense was $651 and $640 for the years December 31, 2025 and 2024, respectively.

~~During~~United ~~2020~~Lines ~~and 2019, we entered into one and four line~~ of ~~credit agreements, respectively (the “New LOC Agreements”). Pursuant to the New LOC Agreements, the lenders provide us with revolving lines of credit with the following terms:~~Credit

●In January ~~Principal~~2025, ~~not~~we toentered ~~exceed~~into ~~$6,063;~~a ●revolving ~~Secured~~line of credit with ~~assignments~~United ofBank ~~certain~~for ~~notes~~$2,275, ~~and~~maturing ~~mortgages;~~in ●January ~~Cost~~2027. ofThe ~~funds~~interest torate uson this ~~between~~line ~~9.00%~~of ~~and~~credit 10is 5.005%;. ~~and~~As ●of ~~Terms~~December ~~generally~~31, ~~allow~~2025, the ~~lenders~~amount todue ~~give~~on ~~one~~this ~~month’s~~line ~~notice~~of ~~after~~credit ~~which~~was ~~the~~$2,275. ~~principal~~The ~~balance~~line of acredit ~~New~~is ~~LOC~~collateralized by ~~Agreement~~an ~~will~~investment bein ~~reduced~~certificates toof adeposit ~~zero~~totaling ~~over~~$2,275 ~~the~~as ~~next~~of ~~six~~December ~~months~~31, 2025.

~~The~~In ~~total~~January ~~balance~~2025, we entered into a revolving line of ~~the~~credit ~~New~~with ~~LOC~~United ~~Agreements~~Bank ~~was~~for $2725,~~965~~ ~~and~~with ~~$3,066~~an asexpiration date of ~~December~~January ~~31,~~2040. ~~2024~~The ~~and~~interest rate ~~2023,~~on ~~respectively~~this line of credit is 7.5%. ~~Interest~~There ~~expense~~were ~~was~~no ~~$296 and~~amounts ~~$230~~outstanding ~~for~~pursuant ~~the~~to ~~year~~this ~~ended~~revolving line of credit as of December 31, ~~2024~~2025. The ~~and~~Company’s ~~2023~~office in Jacksonville, ~~respectively~~FL, is used as collateral for this line of credit.

Liberty Savings Bank Line of Credit

In December 2025, we entered into a revolving line of credit with Liberty Savings Bank for $5,000, and can be terminated on 90 days written notice. The interest rate on this line of credit varies and is indexed to the current Prime rate plus 0.5%. As of December 31, 2025, there were no amounts borrowed under this line of credit. The line of credit will be secured with assignments of certain notes and mortgages when drawn upon.

Other Lines of Credit

During 2020 and 2019, we entered into one and four line of credit agreements, respectively (the “Other LOC Agreements”). Pursuant to the Other LOC Agreements, the lenders provide us with revolving lines of credit with the following terms:

	●	Principal not to exceed $6,063;
	●	Secured with assignments of certain notes and mortgages;
	●	Interest rates vary and are generally indexed to Prime plus a margin
	●	Terms generally allow the lenders to give one month’s notice after which the principal balance of a New LOC Agreement will be reduced to a zero over the next six months.

The total balance of the Other LOC Agreements was $1,666 and $2,965 as of December 31, 2025 and 2024, respectively. Interest expense was $246 and $296 for the year ended December 31, 2025 and 2024, respectively.

Hanna Holdings, Inc. Loan

This loan was debt acquired in the 339 acquisition which 339 used the loan to originally purchase the property.

	●	Principal not to exceed $1,250
	●	Secured with a second position mortgage
	●	7% interest rate
	●	Due in December 2027, but payable with a payoff associated with each lot sale. Interest accrues and is paid upon each payoff of principal.

AsDuring ofthe year ended December 31, ~~2024~~2025, the ~~Loan~~Company paid off the loan with Hanna Holdings, Inc. ~~was~~through ~~$350~~the ~~compared~~sale toof ~~$1,250~~339 asland parcels. As of December 31, 2024, the ~~339~~secured ~~Acquisition~~note ~~date~~payable to Hanna Holdings, Inc., was $350.

~~Mortgage Payable~~54

During January 2018, we entered a commercial mortgage on our office building with the following terms:

● Principal not to exceed $660; ● Interest rate was 5.07% per annum until it increased 1.53% to 6.60% in January 2023 and is based on a year of 360 days; and ● Due in January 2033.

During November 2024, we paid off the mortgage on our office building. The principal amount at payoff was $559. In addition, interest expense during the years ended December 31, 2024 and 2023 was $37 and $39 respectively.

Secured Borrowings Secured by Loan Assets

Borrowings secured by loan assets

December 31, 2024

December 31, 2023

December 31, 2025

December 31, 2024

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

71,~~485~~813

41,~~418~~458

7,~~615~~485

54,~~770~~418

S.K. Funding

89,~~229~~011

6,500

78,~~358~~229

6,500

Lender

Shuman

~~236~~210

125

~~358~~236

125

Jeff Eppinger

45,~~028~~789

~~1,500~~200

34,~~496~~028

1,500

R. Scott Summers

12,~~361~~731

903

21,~~177~~361

~~1,003~~903

John C. Solomon

~~649~~1,057

563

~~598~~649

563

Judith Swanson

1012,~~626~~568

6,~~000~~407

10,~~038~~626

56,~~164~~000

Total

3233,~~614~~179

2016,~~009~~156

3132,~~640~~614

20,~~625~~009

Unsecured Borrowings

Unsecured Notes through the Public Offering (“Notes Program”)

The effective interest rate on borrowings through our Notes Program as of December 31, ~~2024~~2025 and ~~December 31~~2024, ~~2023~~ was 98.0990% and 910.0108%, 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. Our fourth public ~~notes~~ offering, which was declared effective on September 16, 2022, includes a mandatory early redemption option on all Notes, provided that the proceeds are reinvested. In our historical offerings, there were limited rights of early redemption. Our 36-month Note sold in our third public ~~notes~~note offering had a mandatory early redemption option, subject to certain conditions.

The following table is a roll forward of our Notes Program:

	December 31, 2024			December 31, 2023
	December 31, 2025			December 31, 2024
Gross notes outstanding, beginning of period	$	2019,~~854~~968		$	2120,~~576~~854
Notes issued		57,~~257~~612			15,~~353~~257
Note repayments / redemptions		(65,~~143~~416	)		(26,~~075~~143	)
Gross notes outstanding, end of period		1922,~~968~~164			2019,~~854~~968
Less deferred financing costs, net		(~~150~~229	)		(~~235~~150	)
Notes outstanding, net	$	1921,~~818~~935		$	2019,~~619~~818

The following is a roll forward of deferred financing costs:

	December 31, 2024			December 31, 2023
	December 31, 2025			December 31, 2024
Deferred financing costs, beginning balance	$	~~939~~1,060		$	~~835~~939
Additions		~~121~~242			~~103~~121
Deferred financing costs, ending balance	$	1,~~060~~302		$	~~939~~1,060
Less accumulated amortization		(~~910~~1,073	)		(~~703~~910	)
Deferred financing costs, net	$	~~150~~229		$	~~235~~150

The following is a roll forward of the accumulated amortization of deferred financing costs:

	December 31, 2024		December 31, 2023
	December 31, 2025		December 31, 2024
Accumulated amortization, beginning balance	$	~~703~~910	$	~~468~~703
Additions		~~207~~163		~~235~~207
Accumulated amortization, ending balance	$	~~910~~1,073	$	~~703~~910

Other Unsecured Debts

Our other unsecured debts are detailed below:

Loan	Maturity Date	Interest Rate(1)			December 31, ~~2024~~2025		December 31, ~~2023~~2024
Unsecured Note with Seven Kings Holdings, Inc. Senior Subordinated	Demand(2)		9.5	%	$	–	$	410
Unsecured Line of Credit	March 2024		10.0	%		592		1,000
Unsecured Line of Credit from Judith Swanson	March 2026		10.0	%		1,000		1,836
Unsecured Line of Credit	April 2026		10.0	%		500		500
Unsecured Line of Credit from Judith Swanson	April 2025		10.0	%		500		-
Unsecured Line of Credit – Senior Subordinated	January 2027		10.0	%		–		750
Unsecured Line of Credit from Builder Finance, Inc. Senior Subordinated	January 2025		10.0	%		750		750
Subordinated Promissory Note	February 2027		9.0	%		600		600
Subordinated Promissory Note	April 2024		10.0	%		–		100
Subordinated Promissory Note	February 2025		9.0	%		600		600
Subordinated Promissory Note	March 2026		9.75	%		500		500
Subordinated Promissory Note	December 2027		10.0	%		20		20
Subordinated Promissory Note	February 2024		11.0	%		–		20
Subordinated Promissory Note	January 2025		10.0	%		15		15
Subordinated Promissory Note	February 2027		8.5	%		200		-200
Subordinated Promissory Note	March 2027		10.0	%		26		26
Subordinated Promissory Note	November 2026		9.5	%		200		200
Subordinated Promissory Note	~~October~~March ~~2024~~2027		109.05	%		–1,000		~~700~~–
Subordinated Promissory Note	~~December~~April ~~2024~~2025		10.0	%		–		~~100~~202
Subordinated Promissory Note	~~April~~July 2025		108.0	%		~~202~~–		~~202~~100
Subordinated Promissory Note	July 2025		8.0	%		100		100
Subordinated Promissory Note	September 2027		10	%		108		108
Subordinated Promissory Note	October 2025		8.0	%		~~100~~–		100
Subordinated Promissory Note	~~December~~July ~~2025~~2028		8.05	%		~~180~~100		~~180~~–
Senior Subordinated Promissory Note	March 2026(3)		8.0	%		–		374
Subordinated Promissory Note	December 2025		8.0	%		–		180
Subordinated Promissory Note	August 2026		8.0	%		291		291
Senior Subordinated Promissory Note	July 2026(42)		1.0	%		740		740
Junior Subordinated Promissory Note	July 2026(42)		20.0	%		460		460
Senior Subordinated Promissory Note	October ~~2024~~2028(42)		1.0	%		–1,072		~~720~~1,072
Senior Subordinated Promissory Note	October 2028(4)		1.0	%		1,072		–
Junior Subordinated Promissory Note	October 2028(2)		20.0	%		666		666
Junior Subordinated Promissory Note	October 2024(4)		20.0	%		–		447
Junior Subordinated Promissory Note	October 2028(4)		20.0	%		666		–
Subordinated Promissory Note	March 2029		10.0	%		1,200		1,200
Subordinated Promissory Note	~~April~~May ~~2024~~2027		10.0	%		–97		~~750~~97
Subordinated Promissory Note	May 2027		10.0	%		97		98
Subordinated Promissory Note	November 2027		10.0	%		120		120
Subordinated Promissory Note	June 2025		10.0	%		~~1,000~~–		–1,000
Subordinated Promissory Note	April 2028		10.0	%		149		–149
Subordinated Promissory Note	April 2029		11.0	%		2,000		–2,000
Subordinated Promissory Note	January 2025		11.0	%		~~1,007~~–		–1,007
Subordinated Promissory Note	October 2027		8.50	%		200		–200
Subordinated Promissory Note	October 2028		10.0	%		1,043		–1,043
Subordinated Promissory Note	December 2028		10.0	%		149		–149
Subordinated Promissory Note	~~Varies~~October ~~(5)~~2026		~~Prime+1~~10.50	%		~~700~~1,142		–
					$	15,395	$	11,167
Subordinated Promissory Note	April 2029		9.0	%		301		–
Subordinated Promissory Note	December 2029		8.0	%		248		–
Subordinated Promissory Note	October 2028		8.5	%		100		–
Subordinated Promissory Note	Varies (3)		Prime+1.5	%		–		700
					$	13,839	$	15,395

(1)	Interest rate per annum, based upon actual days outstanding and a 365/366-day year.	~~Interest rate per annum, based upon actual days outstanding and a 365/366-day year.~~
(2)	These notes were issued to the same holder and, when calculated together, yield a blended rate of 10% per annum.	~~Due six months after lender gives notice.~~
(3)	Lender may elect to terminate, effective semi-annually as of August 16 and/or February 16 of any given year.	~~Lender may require us to repay $20 of principal and all unpaid interest with 10 days’ notice.~~
(4)		These notes were issued to the same holder and, when calculated together, yield a blended rate of 11% per annum.

Priority of Borrowings

The following table displays our borrowings and a ranking of priority~~. The lower the number, the higher the priority~~:

	Priority Rank	December 31, ~~2024~~2025			December 31, ~~2023~~2024
Borrowing Source
Purchase and sale agreements and other secured borrowings	1	$	2018,~~359~~431		$	2120,~~196~~359
Secured line of credit from affiliates	2		~~743~~26			~~326~~743
Unsecured line of credit (senior)	3		~~750~~-			~~1,160~~750
Other unsecured debt (senior subordinated)	4		1,812			1,~~094~~812
Unsecured Notes through our public offering, gross	5		1922,~~968~~164			2019,~~854~~968
Other unsecured debt (subordinated)	5		1110,~~707~~901			811,~~006~~707
Other unsecured debt (junior subordinated)	6		1,126			~~907~~1,126
Less deferred financing fees			(~~150~~241	)		(~~238~~150	)
Total		$	5654,~~315~~219		$	5356,~~305~~315

Liquidity and Capital Resources

Our primary liquidity management objective is to meet expected cash flow needs while continuing to service our business and customers. As of December 31, ~~2024~~2025, and ~~2023~~2024, we had combined loans outstanding of ~~183~~161 and ~~236~~183, respectively. Gross loans outstanding were $5161,~~138~~683 and $6151,~~293~~138 as of December 31, ~~2024~~2025 and ~~2023~~2024, respectively.

Our net cash provided by operating activities decreased $723 to $6,478 as of December 31, 2024 compared to $7,201 for the same period of 2023. The decrease was primarily due to lower net income, which was $1,737 for the period ended December 31, 2024 compared to $2,578 for the same period of 2023 which was offset by the change in the accrued interest receivable balance which was $327 as of December 31, 2024 compared to $(501) for the same period of 2023.57

56Our net cash provided by operating activities increased $538 to $4,415 as of December 31, 2025 compared to $3,877 for the same period of 2024. The increase was primarily due to an increase in interest expense where our investor chose to reinvest interest rather than receive it monthly, which was $1,718 for the period ended December 31, 2025 compared to $392 for the same period of 2024.

Unfunded commitments to extend credit, which have similar collateral, credit and market risk to our outstanding loans, were $2223,~~515~~557 and $2522,~~263~~515 as of December 31, ~~2024~~2025 and ~~2023~~2024, respectively. As of December 31, ~~2024~~2025, other than unfunded commitments, we had no off-balance sheet transactions, nor do we currently have any such arrangements or obligations.

To fund our combined loans, we rely on secured debt, unsecured debt, and equity, which are described in the following table:

Source of Liquidity	As of December 31, ~~2024~~2025		As of December 31, ~~2023~~2024
Secured debt, net of deferred financing costs	$	2118,~~102~~445	$	21,~~519~~102
Unsecured debt, net of deferred financing costs	$	35,~~213~~774	$	3135,~~786~~213
Equity*	$	8,~~573~~211	$	68,~~767~~573
Cash and cash equivalents	$	3,~~347~~490	$	3,~~522~~347

* Equity includes Members’ Capital and Preferred Equity.

As of December 31, ~~2024~~2025 and ~~2023~~2024, cash and cash equivalents was $3,~~347~~490 and $3,~~522~~3472, respectively. Secured debt, net of deferred financing costs decreased $~~417~~2,658 to $2118,~~102~~445 as of December 31, ~~2024~~2025, compared to $21,~~519~~102 for the same period of ~~2023~~2024. The decrease in secured debt was due primarily to borrowings pursuant to our loan purchase and sale agreements. ~~However~~On December 31, 2025, we had room in our secured lines of credit (had already posted the collateral necessary) to borrow $3,525 which we had not borrowed. In addition, we had the capacity to sell more loans to one of our purchase and sale agreement counterparties. We anticipate secured debt to ~~decrease~~increase during ~~2025~~ 2026 as our loan receivable balances ~~decrease~~increase.

Unsecured debt, net of deferred financing costs increased $~~3,427~~315 to $35,~~213~~775 as of December 31, ~~2024~~2025 compared to $3135,~~786~~213 ~~for~~at ~~the~~December ~~same~~31, ~~period~~2024. ofIn ~~2023.~~addition, ~~The~~we ~~increase~~had $750 in availability on an unsecured ~~debt~~line ~~primarily~~which ~~related~~was tounborrowed ~~unsecured~~at ~~notes~~December ~~sold~~31, ~~outside~~2025. We plan on funding some of the anticipated growth of loan assets in 2026 from increases in our Notes ~~Program~~program.

Equity ~~increased~~was ~~$1,806~~relatively toflat $8in 2025. We may increase our equity in 2026 by retaining some earnings from 2026,~~573~~ and by bringing in more preferred investment if our equity decreases as a percent of ~~December~~loan ~~31,~~assets ~~2024~~(if ~~compared~~loan assets grow faster than equity). If we are not able to $6maintain our equity,~~767~~ ~~for~~we ~~the~~will ~~same~~rely ~~period~~more ofheavily ~~2023~~on raising additional funds through the Notes Program.

WeThe ~~anticipate~~total anamount ~~increase~~of inour ~~both~~debt ~~common~~maturing ~~and~~through ~~preferred~~year ~~equity~~ending ~~during the 12 months subsequent to~~ December 31, ~~2024.~~2026 Ifis ~~we are not able to maintain our equity~~$22,990, wewhich ~~will~~consists ~~rely~~of ~~more~~secured ~~heavily~~borrowings onof ~~raising~~$16,182 ~~additional~~and unsecured ~~funds~~borrowings ~~through~~of ~~the Notes Program~~$6,808.

~~The~~Secured ~~total~~borrowings ~~amount of our debt~~ maturing through the year ending December 31, ~~2025~~2026 issignificantly ~~33,642, which~~ consists of ~~secured~~loan ~~borrowings~~purchase ofand ~~$20,752~~sale ~~and~~agreements with two ~~unsecured~~loan purchasers (Builder Finance and S. K. Funding) and several lenders. These secured borrowings ofare $listed as maturing over the next 12~~,890~~ months due primarily to their related demand loan collateral. The following are secured facilities listed as maturing in 2026 with actual maturity and renewal dates:

~~Secured borrowings~~● ~~maturing~~Judith ~~through~~Swanson ~~the~~– ~~year~~$6,407 ~~ending~~due ~~December~~July ~~31,~~2026 ~~2025~~and ~~significantly~~automatically ~~consists~~renews ofunless ~~loan~~notice ~~purchase~~given; ~~and~~● ~~sale~~Shuman ~~agreements~~– ~~with~~$125 ~~two~~due ~~loan purchasers~~July ~~(Builder~~2026 ~~Finance~~ and automatically renews unless notice is given; ● S. K. Funding) – $4,500 due July 2026 and ~~several~~automatically ~~lenders.~~renews ~~These~~unless ~~secured~~notice ~~borrowings~~is ~~are~~given; ~~listed~~● asS. ~~maturing~~K. ~~over~~Funding ~~the~~– ~~next~~$2,000 ~~12 months~~of the total due ~~primarily~~July to2026; ~~their~~● ~~related~~Builder ~~demand~~Finance, ~~loan~~Inc ~~collateral.~~– ~~The~~$1,459 ~~following~~with ~~are~~no ~~secured~~expiration ~~facilities~~date; ~~listed~~● asOther ~~maturing~~LOC inAgreements ~~2025~~- $1,666 generally one-month notice and six months to reduce principal balance to zero; ● Line of credits with ~~actual maturity~~affiliates - $26 and ~~renewal~~due ~~dates:~~upon demand.

● Judith Swanson – $6,000 due March 2026 and automatically renews unless notice given; ● Shuman – $125 due July 2025 and automatically renews unless notice is given; ● S. K. Funding – $4,500 due July 2025 and automatically renews unless notice is given; ● S. K. Funding – $2,000 of the total due January 2026; ● Builder Finance, Inc – $4,418 with no expiration date; ● New LOC Agreements - $2,965 generally one-month notice and six months to reduce principal balance to zero; ● Line of credits with affiliates - $743 and due upon demand58

57Unsecured borrowings due by December 31, 2026 consist of Notes issued pursuant to the Notes Program and other unsecured debt of $2,383 and $4,425, respectively. To the extent that Notes issued pursuant to the Notes Program are not reinvested upon maturity, we will be required to fund the maturities, which we anticipate funding through the issuance of new Notes in our Notes Program. Historically, approximately 74% of our Note holders reinvest upon maturity. The 36 month Note in our Notes program has a mandatory early redemption option, subject to certain conditions. As of December 31, 2025, the 36-month Notes were $9,120. Our other unsecured debt has historically been renewed. For more information on other unsecured borrowings, see Note 9 – Borrowings. If other unsecured borrowings are not renewed in the future, we anticipate funding such maturities through investments in our Notes Program.

Unsecured borrowings due by December 31, 2025 consist of Notes issued pursuant to the Notes Program and other unsecured debt of $6,736 and $6,154, respectively. To the extent that Notes issued pursuant to the Notes Program are not reinvested upon maturity, we will be required to fund the maturities, which we anticipate funding through the issuance of new Notes in our Notes Program. Historically, approximately 74% of our Note holders reinvest upon maturity. The 36 month Note in our Notes program has a mandatory early redemption option, subject to certain conditions. As of December 31, 2024, the 36-month Notes were $2,896. Our other unsecured debt has historically been renewed. For more information on other unsecured borrowings, see Note 9 – Borrowings. If other unsecured borrowings are not renewed in the future, we anticipate funding such maturities through investments in our Notes Program.

Summary

We have the funding available to address the loans we have today, including our unfunded commitments. We anticipate our assets to increase during ~~2025~~2026, ~~however~~and we ~~are~~intend ~~prepared~~to ~~for~~fund anthe increase ofin ~~our~~ assets through the net sources and uses (12-month liquidity) listed above as well as future capital from debt, preferred equity, and regular equity. Our expectation to ~~reduce~~increase loan asset balances is subject to changes in demand, the housing market and competition. Although our secured debt is almost entirely listed as currently due because of the underlying collateral being demand notes, the vast majority of our secured debt is either contractually set to automatically renew unless notice is given or, in the case of purchase and sale agreements, has no end date as to when the purchasers will not purchase new loans (although they are never required to purchase additional loans).

Inflation, Interest Rates, and Housing Starts

Since we are in the housing industry, we are affected by factors that impact that industry. Housing starts impact our customers’ ability to sell their homes. Faster sales generally mean higher effective interest rates for us, as the recognition of fees we charge is spread over a shorter period. Slower sales generally mean lower effective interest rates for us. Slower sales also are likely to increase the default rate.

Housing inflation has a positive impact on our operations. When we lend initially, we are lending a percentage of a home’s expected value, based on historical sales. If those estimates prove to be low (in an inflationary market), the percentage we loaned of the value ~~actually~~ decreases, reducing potential losses on defaulted loans. The opposite is true in a deflationary housing price market. It is our opinion that values are well above average in many of the housing markets in the U.S. today, and our lending against these values is resulting in more risk than prior years. In some of our markets, prices of homes sold are dropping. This is both because some homes are selling for less and because the average home selling is smaller (more affordable). We anticipate declines in home values in many markets over the next 12 6 months. The second half home price change is mirky and unpredictable at this point, based on a new Federal Reserve Chairman being installed soon. In addition, our LTV increased to 6870% as of December 31, ~~2024~~2025 compared to 6468% for the same period of the prior year.

Interest rates have several impacts on our business. First, rates affect housing (starts, home size, etc.). High long-term interest rates may decrease housing starts, having the effects listed above. Higher interest rates will also affect our investors. We believe that there will be a spread between the rate our Notes yield to our investors and the rates the same investors could get on deposits at FDIC insured institutions. We also believe that the spread may need to widen if these rates rise. For instance, if we pay 7% above average CD rates when CDs are paying 0.5%, when CDs are paying 3%, we may have to have a larger than 7% difference. This may cause our lending rates, which are based on our cost of funds, to be uncompetitive. High interest rates may also increase builder defaults, as interest payments may become a higher portion of operating costs for the builder. Below is a chart showing three-year U.S. treasury rates and 30-year fixed mortgage rates. The U.S. treasury rates are used by us here to approximate CD rates Short-term interest rates have risen significantly, and long-term interest rates have risen and then fallen; ~~meanwhile,~~ they are low historically.

5859

Housing prices are also generally correlated with housing starts, so that increases in housing starts usually ~~coincide~~coinciding with increases in housing values, and the reverse is generally true. Below is a graph showing single family housing starts from 2000 through today.

(Source: U.S. Census Bureau)

To date, changes in housing starts, CD rates, and inflation have not had a material impact on our business.

Recent Accounting Pronouncements

See Note 2 to our consolidated financial statements for a description of new or recent accounting pronouncements.

Subsequent Events

See Note 17 to our consolidated financial statements for subsequent events.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statements and supplementary data filed as part of this annual report are set forth beginning on page F-1 of this report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As of the end of the period covered by this report, management including our CEO (our principal executive officer) and CFO (our principal financial officer) evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Based upon, and as of the date of, the evaluation, our CEO (our principal executive officer) and CFO (our principal financial officer) concluded that the disclosure controls and procedures were effective as of the end of the period covered by this report to ensure that information required to be disclosed in the reports we file and submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported as and when required. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file and submit under the Exchange Act is accumulated and communicated to our management, including our CEO (our principal executive officer) and CFO (our principal financial officer), as appropriate to allow timely decisions regarding required disclosure.

Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for us. Management evaluated, as of December 31, ~~2024~~2025, the effectiveness of our internal control over financial reporting. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control—Integrated Framework (2013). Based on this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, ~~2024~~2025.

There has been no change in our internal control over financial reporting during the quarter ended December 31, ~~2024~~2025, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

(a) During the fourth quarter of ~~2024~~2025, there was no information required to be disclosed in a report on Form 8-K which was not disclosed in a report on Form 8-K.

(b) During the fourth quarter of ~~2024~~2025, no manager or officer (as defined in Rule 16a-1(f) under the Exchange Act) of the Company adopted, terminated, or modified any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements (in each case, as defined in Item 408(a) of Regulation S-K).

ITEM 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Managers and Executive Officers

Included below is certain information about our managers and executive officers. Mr. Wallach was initially elected to a three-year term that expired in March 2016 and his current three-year term expires in March 2025. Mr. Summers was initially elected to a two-year term that expired in March 2014 and his current three-year term expires in March ~~2026~~2029. Mr. Rauscher was initially elected to a three-year term that expired in March 2018 and his current three-year term expires in March 2027. Mr. Sheldon was initially elected to a one-year term that expired in March 2020 and his current three-year term expires in March 2025.

Daniel M. Wallach, age 5758, is our CEO and a

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