DEBT

Lines of Credit

Lines of credit outstanding, net of unamortized debt issuance costs, consist of the following as of September 30, 2018 and December 31, 2017 (in thousands):



	September 30, 2018			December 31, 2017
Revolving credit facility	$	57,500		$	32,000
Unsecured revolving credit facility	142,500			75,000
Debt issuance costs, net of amortization	(1,035		)	(1,227		)
Total lines of credit	$	198,965		$	105,773

Revolving Credit Facility

On July 30, 2015, the Company entered into a revolving credit facility (the “Credit Facility”) with Inwood National Bank, which initially provided for up to $50.0 million. Amounts outstanding under the Credit Facility are secured by mortgages on real property and security interests in certain personal property that is owned by certain of the Company’s subsidiaries. Outstanding borrowings under the Credit Facility bear interest payable monthly at a floating rate per annum equal to the Bank of America, N.A. “Prime Rate” (the “Index”) with adjustments to the interest rate being made on the effective date of any change in the Index. The interest may not, at any time, be less than 4% per annum or more than the lesser amount of 18% and the highest maximum rate allowed by applicable law. The entire unpaid principal balance and any accrued but unpaid interest is due and payable on the maturity date. As of September 30, 2018, the interest rate on outstanding borrowings under the Credit Facility was 5.25% per annum.

On May 3, 2016, the Company amended the Credit Facility and extended the maturity date to May 1, 2019. The amended Credit Facility is subject to a borrowing base limitation equal to the sum of 50% of the total value of land and 65% of the total value of lots owned by certain of the Company’s subsidiaries, each as determined by an independent appraiser, with the value of land being restricted from being more than 65% of the borrowing base. A non-usage fee equal to 0.25% of the average unfunded amount of the commitment amount over a trailing 12-month period is due on or before August 1^st of each year. Costs of $0.1 million associated with the amendment were deferred and reduce the carrying amount of debt on the condensed consolidated balance sheets. The Company is capitalizing these debt issuance costs to inventory over the term of the Credit Facility using the straight-line method.

During 2017, the Company amended the Credit Facility several times for the purpose of adding additional land holdings as collateral. On October 27, 2017, the Company amended the Credit Facility to increase the commitment amount from $50.0 million to $75.0 million. This amendment temporarily waived the borrowing base through March 31, 2018, after which the borrowing base was reinstated. During the temporary borrowing base waiver, the Credit Facility was governed by a loan-to-value ratio not permitted to exceed 70%.

On October 26, 2018, the Company amended the Credit Facility. The amendment extended the maturity date to May 1, 2022 and lowered the floating interest rate to the Index less 0.25%.

Under the terms of the amended Credit Facility, the Company is required to maintain a minimum amount of tangible net worth, minimum interest coverage and maximum leverage ratios. The Company was in compliance with these financial covenants as of September 30, 2018.

Unsecured Revolving Credit Facility

On December 15, 2015, the Company entered into a credit agreement (the “Credit Agreement”) with the lenders named therein, and Citibank, N.A. ("Citibank"), as administrative agent, providing for a senior, unsecured revolving credit facility with an aggregate lending commitment of $40.0 million (the “Unsecured Revolving Credit Facility”). Before the First Amendment increased the maximum amount of the Unsecured Revolving Credit Facility, the Company could, at its option and subject to certain terms and conditions, prior to the termination date, increase the amount of the Unsecured Revolving Credit Facility up to a maximum aggregate amount of $75.0 million. Citibank and Credit Suisse AG, Cayman Islands Branch (“Credit Suisse”) initially committed to provide $25.0 million and $15.0 million, respectively.

The Unsecured Revolving Credit Facility provides for interest rate options at rates equal to either: (a) in the case of base rate advances, the highest of (i) Citibank’s base rate, (ii) the federal funds rate plus 0.5%, and (iii) one-month LIBOR plus 1.0%, in each case plus 1.5%; or (b) in the case of Eurodollar rate advances, the reserve adjusted LIBOR plus 2.5%. Interest is payable quarterly in arrears on the last day of each March, June, September and December. As of September 30, 2018, the interest rates on outstanding borrowings under the Unsecured Revolving Credit Facility range from 4.56% to 4.58% per annum. The Company pays the lenders a commitment fee on the amount of the unused commitments on a quarterly basis at a rate equal to 0.45% per annum.

Outstanding borrowings under the Unsecured Revolving Credit Facility are subject to a borrowing base. The borrowing base limitation is equal to the sum of: 100% of unrestricted cash in excess of $15.0 million; 85% of the book value of model homes, construction in progress homes, completed sold homes and completed speculative homes (subject to certain limitations on the age and number of completed speculative homes and model homes); 65% of the book value of finished lots and land under development; and 50% of the book value of entitled land (subject to certain limitations on the value of entitled land and land under development as a percentage of the borrowing base).

On August 31, 2016, the Company entered into a First Amendment to the Credit Agreement (the “First Amendment”). The First Amendment added Flagstar Bank, FSB (“Flagstar Bank”) as a lender, with an initial commitment of $20.0 million, which increased the aggregate lending commitment available under the Unsecured Revolving Credit Facility from $40.0 million to $60.0 million. The First Amendment also increased the maximum aggregate amount of the Unsecured Revolving Credit Facility to $110.0 million.

On December 1, 2016, the Company entered into a Second Amendment to the Credit Agreement (the “Second Amendment”). The Second Amendment extended the termination date with respect to commitments under the Unsecured Revolving Credit Facility from December 14, 2018 to December 14, 2019 and required an upfront fee of 0.15% of the aggregate amount of extended commitments. Additionally, Citibank increased its commitment from $25.0 million to $35.0 million, which increased the aggregate lending commitment available from $60.0 million to $70.0 million.

On March 6, 2017, Flagstar Bank increased its commitment from $20.0 million to $35.0 million, which increased the aggregate lending commitment available under the Unsecured Revolving Credit Facility from $70.0 million to $85.0 million. Costs of $0.1 million were incurred associated with this increase in commitment.

On September 1, 2017, the Company entered into a Third Amendment to the Credit Agreement (the “Third Amendment”). Pursuant to the Third Amendment, Flagstar Bank increased its commitment from $35.0 million to $70.0 million and Credit Suisse increased its commitment from $15.0 million to $25.0 million, which increased the aggregate lending commitment available under the Unsecured Revolving Credit Facility from $85.0 million to $130.0 million. The Third Amendment also increased the maximum aggregate amount of the Unsecured Revolving Credit Facility from $110.0 million to $200.0 million. Further increases are available at the Company’s option, prior to the termination date, subject to certain terms and conditions. In addition, the Third Amendment appointed Flagstar Bank in the roles of sole lead arranger and administrative agent. Costs of $0.4 million were incurred associated with the Third Amendment.

On December 1, 2017, the Company entered into a Fourth Amendment to the Credit Agreement (the “Fourth Amendment”). The Fourth Amendment extended the termination date to December 14, 2020. The extension required an upfront fee of 0.15% of the aggregate amount of extended commitments.

Effective March 27, 2018, JPMorgan Chase Bank, N.A. (“JPMorgan”) was added as a lender under the Credit Agreement, with an initial commitment of $30.0 million, which increased the aggregate lending commitment available under the Unsecured Revolving Credit Facility from $130.0 million to $160.0 million. Costs of $0.2 million associated with the additional commitment were incurred.

Effective July 24, 2018, Citibank, Credit Suisse, and JPMorgan each increased their commitment by $5.0 million, for a total of $15.0 million, thereby increasing the aggregate lending commitment available under the Unsecured Revolving Credit Facility from $160.0 million to $175.0 million. Costs of $0.1 million were incurred associated with this additional commitment.

Effective October 22, 2018, Chemical Financial Corporation (“Chemical”) was added as a lender under the Credit Agreement, with an initial commitment of $25.0 million, which increased the aggregate lending commitment available under the Unsecured Revolving Credit Facility from $175.0 million to $200.0 million. Costs of $0.3 million were incurred associated with this additional commitment.

On November 2, 2018, the Company entered into a Fifth Amendment to the Credit Agreement ( the “Fifth Amendment”). Pursuant to the Fifth Amendment, Flagstar Bank increased its commitment from $70.0 million to $80.0 million and Chemical increased its commitment from $25.0 million to $30.0 million, which increased the aggregate lending commitment available under the Unsecured Revolving Credit Facility from $200.0 million to $215.0 million. The Fifth Amendment also increased the maximum aggregate amount of the Unsecured Revolving Credit Facility from $200.0 million to $275.0 million. Additionally, the Fifth Amendment extended the termination date to December 14, 2021. Total fees and other costs of $0.5 million were incurred associated with the Fifth Amendment.

All fees and other debt issuance costs associated with changes in commitments are deferred and reduce the carrying amount of debt in our condensed consolidated balance sheets. The Company is capitalizing these costs to inventory over the term of the Unsecured Revolving Credit Facility using the straight-line method.

Under the terms of the Unsecured Revolving Credit Facility, the Company is required to maintain compliance with various financial covenants, including a maximum leverage ratio, a minimum interest coverage ratio, and a minimum consolidated tangible net worth. The Company was in compliance with these financial covenants as of September 30, 2018.

Notes Payable

Notes payable outstanding as of September 30, 2018 and December 31, 2017 consist of the following (in thousands):



	September 30, 2018		December 31, 2017
Briar Ridge Investments, LTD	$	—	$	9,000
Graham Mortgage Corporation	895		926
Bower Hills, LLC	150		—
Total notes payable	$	1,045	$	9,926

Briar Ridge Investments, LTD

On December 13, 2013, a subsidiary of the Company signed a promissory note for $9.0 million maturing on December 13, 2017, bearing interest at 6.0%, and collateralized by land in Allen, Texas. In December 2016, this note was extended through December 31, 2018. The note was paid in full on June 5, 2018.

Graham Mortgage Corporation

On November 30, 2016, a subsidiary of the Company signed a promissory note for $1.2 million maturing on December 1, 2018, bearing interest at 3.0% per annum and collateralized by land located in Sunnyvale, Texas. Accrued interest as of September 30, 2018 was $0.1 million.

Bower Hills, LLC

In conjunction with the purchase of GRBK GHO Homes, a subsidiary of GRBK GHO Homes assumed interest free mortgage debt in the amount of $0.3 million maturing on April 18, 2019 and collateralized by land located in Indian River County, Florida.