0001477932-21-006768.txt : 20210928 0001477932-21-006768.hdr.sgml : 20210928 20210928132453 ACCESSION NUMBER: 0001477932-21-006768 CONFORMED SUBMISSION TYPE: 1-SA PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20210630 FILED AS OF DATE: 20210928 DATE AS OF CHANGE: 20210928 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Iron Bridge Mortgage Fund, LLC CENTRAL INDEX KEY: 0001462371 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 263458758 STATE OF INCORPORATION: OR FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 1-SA SEC ACT: 1933 Act SEC FILE NUMBER: 24R-00149 FILM NUMBER: 211285708 BUSINESS ADDRESS: STREET 1: 9755 SW BARNES ROAD SUITE 420 CITY: PORTLAND STATE: OR ZIP: 97225 BUSINESS PHONE: 503-225-0300 MAIL ADDRESS: STREET 1: 9755 SW BARNES ROAD SUITE 420 CITY: PORTLAND STATE: OR ZIP: 97225 FORMER COMPANY: FORMER CONFORMED NAME: Iron Bridge Mortgage Fund LLC DATE OF NAME CHANGE: 20090421 1-SA 1 iron_1sa.htm FORM 1-SA iron_1sa.htm

 

  

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 1-SA

 

SEMIANNUAL REPORT

 

SEMIANNUAL REPORT PURSUANT TO REGULATION A OF THE SECURITIES ACT OF 1933

 

For the six months ended June 30, 2021

 

IRON BRIDGE MORTGAGE FUND, LLC

(Exact name of issuer as specified in its charter)

 

Oregon

 

26-3458758

(State or other jurisdiction of

incorporation or organization)

 

(IRS Employer

Identification Number)

 

9755 SW Barnes Road, Suite 420,

Portland, OR

 

97225

(Address of principal executive offices)

 

(Zip code)

 

(503) 225-0300

(Registrant’s telephone number, including area code)

 

Senior Secured Demand Notes

(Title of each class of securities issued pursuant to Regulation A)

 

 

 

  

IRON BRIDGE MORTGAGE FUND, LLC

SEMIANNUAL REPORT FOR THE SIX MONTHS ENDED JUNE 30, 2021

TABLE OF CONTENTS

 

 

PAGE

 

ITEM 1

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

4

 

ITEM 2

OTHER INFORMATION

 

11

 

ITEM 3

FINANCIAL STATEMENTS

 

12

 

ITEM 4

EXHIBITS

 

35

 

 

 
2

Table of Contents

  

FORWARD-LOOKING STATEMENTS

 

This Semiannual Report on Form 1-SA (the “Form 1-SA”) of Iron Bridge Mortgage Fund, LLC (the “Company”) includes forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are generally identifiable by the use of words such as “may,” “should,” “expects,” “plans,” “believes,” “estimates,” “predicts,” “potential,” and other similar words or expressions. Such statements include information concerning our plans, expectations, possible or assumed future results of operations, trends, financial results and business plans, and involve risks and uncertainties that are difficult to predict and subject to change based on various important factors, many of which are beyond our control. Such factors include, but are not limited to, those discussed in the “Risk Factors” section of our most recently filed offering circular or Annual Report on Form 1-K. These and other important factors could cause actual results to differ materially from those contained in any forward-looking statement. You should not place undue reliance on our forward-looking information and statements. The forward-looking statements included in this Form 1-SA speak only as of the date on which they are made, and we do not intend, and assume no obligation, to update those forward-looking statements or to update the reasons why actual results could differ from those projected in the forward-looking statements. All forward-looking statements contained in this Form 1-SA are expressly qualified by these cautionary statements. Statements other than statements of historical fact are forward-looking statements.

 

The historical results described in this Form 1-SA with respect to previous mortgage lending are historical only, and were influenced by available opportunities, diverse market conditions and other factors beyond the control of the Company. Any projections made in this Form 1-SA are based on historical examples and the Company’s estimates of future conditions. There is no assurance that lending opportunities experienced in the past will occur in the future, that market conditions will be as favorable to the Company as they have been in the past, or that investors will enjoy returns on their investment comparable to those enjoyed by them or by others with respect to their participation in other investments sponsored by the Manager. The actual results experienced by the Company will differ, and such variation is likely to be material.

 

 
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ITEM 1 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following is management’s discussion and analysis of the Company’s results of operation, financial condition, and liquidity.

 

Overview

 

We are a private lender formed in 2009 as an Oregon limited liability company. The Company makes commercial purpose loans by lending funds to real estate investors to finance the ownership, entitlement, development and redevelopment of residential and commercial real estate throughout the United States. We generate most of our revenue from interest on loans and loan fees. Our loan portfolio consists of a mix of single-family and multi-family redevelopment and new construction projects. Our primary source of funding is private debt and Bank Borrowings. Our largest expenses are management fees paid to the Manager, Iron Bridge Management Group LLC, and interest paid on private debt and Bank Borrowings, as described in greater detail below. We measure our performance through various metrics, including our net income, net margin, net interest rate spread, net interest margin, ratio of interest-earning assets to interest-bearing liabilities, non-performing loans to total loans, late fee and default interest from non-performing loans, charge-offs on non-performing loans, estimated active portfolio loan-to-value compared to actual paid-off portfolio loan-to-sale price, and interest coverage ratios.

 

Effects of COVID-19 on business model and portfolio performance

 

Through the effective date of this Form 1-SA, the Company experienced no material financial impact from the COVID-19 pandemic and related stay-at-home orders. The Company remains hyper-focused on monitoring its borrowers, improvement loan draws, and the health of the underlying real estate sub-markets it serves. Our Portfolio Borrowers have continued to successfully buy, fix and sell properties despite the over 40% year over year decline in pending home sales following the April 2020 COVID-19 stay-at-home orders. Our observation during April and early May of 2020 was that the decline in buyer demand due to stay-at-home orders was more than offset by a decline in the number of homeowners willing to list their homes for sale due to their reluctance to have strangers enter their homes for showings. While this did lead to a significant decline in overall residential real estate transaction volume, our Portfolio Borrowers do not occupy their properties and generally had few problems securing buyers and selling their Projects consistent with anticipated timelines. However, during late May and June 2020 demand for residential real estate rebounded significantly, approaching pre-pandemic levels, while the supply of homes for sale remained low as many homeowners were hesitant to list their homes for sale. From July 2020 through September 2021, the supply of homes for sale has remained low while demand for housing has increased significantly, resulting in increasing home prices. A market environment that has generally benefited our Portfolio Borrowers.

 

It is also important to point out that the residential real estate market entered the pandemic with strong demand, very low inventory and generally conservative bank lending standards, a sharp contrast to the real estate bubble that existed prior to the great recession of 2008. In addition, the government has deployed many policy tools developed during the great recession that are designed to avoid a massive supply of foreclosures that could depress housing prices and lead to a financial/banking crisis. For example, all government backed mortgages currently allow borrowers to avoid foreclosure through forbearance. Similarly, many states and counties have implemented legislation or executive orders to delay foreclosure activity on non-government backed mortgages. While these foreclosure restrictions could affect the Company’s ability to foreclose on some of its Portfolio Loans under certain conditions, the Company has mitigated this risk by requiring interest reserves on almost all of its loans since mid-April 2020.

 

While the Company has not experienced an increase in delinquent loans so far, the Company is prepared to manage those situations individually. In an abundance of caution, the Company has taken the following actions to mitigate future risks, until the Company has determined the risks associated with the COVID-19 crisis have sufficiently dissipated: (1) new loans require borrowers to pre-pay interest; (2) new loans are being made at lower loan-to-value ratios; (3) the Company continues lending to only the highest quality borrowers; (4) the Company continues to focus its lending in non-judicial states, which it believes to be less risky than judicial states; and (5) the Company primarily lends on lower risk Projects (less complex scope of work, existing occupancy permits, resale prices in the liquid segments of each real estate sub-market).

 

Due to the complex nature of the impact of COVID-19 on the economy, it is difficult to predict future impacts, though we believe the structure of our business remains solid. Please see the Company’s most recent quarterly or annual results for any additional updates.

 

 
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Critical Accounting Policies and Accounting Estimates

 

Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and which could potentially result in materially different results under different assumptions and conditions. The Company believes that the most critical accounting policies upon which its financial condition depends, and which involve the most complex or subjective decisions or assessments, are set forth below.

  

Allowance for Loan Losses. The allowance for loan losses is established through a provision for loan losses charged to expense, which affects our earnings directly. Loans are charged against the allowance for loan losses when the Company believes that the collectability of all or some of the principal is unlikely. Subsequent recoveries are added to the allowance. The allowance is an amount that reflects the Company’s estimate of the level of probable incurred losses in the loan portfolio. Factors considered by the Company in determining the adequacy of the allowance include, but are not limited to, detailed reviews of individual loans, historical and current trends in loan charge-offs for the various portfolio segments evaluated, the level of the allowance in relation to total loans and to historical loss levels, levels and trends in non-performing and past due loans, external factors including regulatory, competition, and the Company’s assessment of economic conditions.

 

The provision for loan losses is the charge to operating earnings necessary to maintain an adequate allowance for loan losses. We have developed policies and procedures for evaluating the overall quality of our loan portfolio and the timely identification of problem loans. The Company continuously reviews these policies and procedures and makes further improvements as needed. However, the Company’s methodology may not accurately estimate inherent loss or external factors and changing economic conditions may impact the loan portfolio and the level of reserves in ways currently unforeseen.

 

Due to macroeconomic risks related to the COVID-19 pandemic, the Company’s expects to accrue a provision for loan losses at a rate higher than the historical rate of 0% and 1.0% annualized.

 

REO and Foreclosed Assets. Assets acquired through or in lieu of loan foreclosure are initially recorded at lower of cost or fair value less estimated costs to sell, establishing a new cost basis. Subsequent to foreclosure, valuations are performed annually and the assets are carried at the lower of carrying amount or fair value less estimated costs to sell. Revenue and expenses from operations and changes in the valuation allowance are included in other non-interest income or expense. Costs related to the development and improvement of REO assets are capitalized.

 

Due to the subjective nature of establishing the asset’s fair value when it is acquired, the actual fair value of the REO or foreclosed asset could differ from the original estimate. If it is determined that fair value declines subsequent to foreclosure, a valuation allowance is recorded through non-interest expense. Gains and losses on the disposition of REO and foreclosed assets are netted and posted to other non-interest income or expenses.

 

Fair Value of Mortgage Loans Receivable. The Company has the intent and ability to hold its mortgage loans to maturity. Therefore, mortgage loans are stated at their outstanding unpaid principal balance with interest thereon being accrued as earned. Mortgage loans receivable make up the only class of financing receivables within the Company’s lending portfolio.

 

If the probable ultimate recovery of the carrying amount of a loan, with due consideration for the fair value of collateral, is less than amounts due according to the contractual terms of the loan agreement and the shortfall in the amounts due are not insignificant, the carrying amount of the loan will be reduced to the present value of estimated future cash flows discounted at the loan’s effective interest rate. If a loan is collateral-dependent, it is valued at the estimated fair value of the related collateral. If events and or changes in circumstances cause the Company to have serious doubts about the further collectability of the contractual payments, a loan may be categorized as impaired and interest is no longer accrued. Any subsequent payments on impaired loans are applied to reduce the outstanding loan balances including accrued interest and advances.

 

Deferred Loan Origination Fees. The Company will capitalize loan origination fees and recognize the fees as an adjustment of the yield on the related loan. Deferred loan origination fees are accreted to income over the life of the loan under the effective interest method. 

 

The Company offers its borrowers loan options with a combination of low origination fees and high interest rates or loans with high origination fees and low interest rates. While the yield earned by the Company on these loan options is similar, changes in the percentage of Portfolio Loans with high origination fees can affect the amount of interest income derived from deferred loan origination fees.

 

Income Taxes. The Company is a limited liability company for federal and state income tax purposes. Under the laws pertaining to income taxation of limited liability companies, the Company as an entity pays no federal income tax. Accordingly, no provision for income taxes besides the minimum state franchise taxes and the LLC gross receipts fees are reflected in the Company’s financial statements. The Company has evaluated its current tax positions and has concluded that as of June 30, 2021, the Company does not have any significant uncertain tax positions for which a reserve would be necessary.

 

 
5

Table of Contents

 

Comparison of Operating Results for the Six Months Ended June 30, 2021 and 2020

 

Net Income, Net Margin and Net Interest Rate Spread. Net income was $2,004,740 for the six months ended June 30, 2021, compared to $1,149,088 for the six months ended June 30, 2020, an increase of $855,652 or 74.5%.

 

Net interest margin for the six months ended June 30, 2021 and 2019 was 9.457% and 7.633%, respectively. Similarly, the net interest rate spread for the six months ended June 30, 2021 and 2020 was 7.27% and 6.767%, respectively.

 

Net income, net interest margin and net interest rate spread saw a material increase between periods as the Company reduced the average interest rate paid on interest bearing liabilities by more than the reduction in the average interest rate earned on interest bearing assets. In addition, the Company restructured its equity, converting its Junior Note debt to Series C equity, effective February 1, 2021.

 

Interest Income. Total interest income increased $555,861, or 10.2%, to $5,989,773 for the six months ended June 30, 2021 compared to $5,433,912 for the six months ended June 30, 2020. The increase in interest income was primarily the result of an 44 basis point decline in the average yield earned on interest-earning assets being more than offset by a $12.5 million, or 14.5%, increase in average interest-earning assets.

 

The average daily balance of cash during the six months ended June 2021 and 2020 was $691,736 and $597,563, respectively. Interest income earned on those cash balances during that time was immaterial.

 

Interest Expense. Total interest expense decreased $819,064, or 38.1%, to $1,332,265 for the six months ended June 30, 2021 from $2,151,329 for the six months ended June 30, 2020.

 

Interest expense paid on Junior Notes decreased $720,049, or 85.0%, to $127,489 for the six months ended June 30, 2021 compared to $847,538 for the six months ended June 30, 2020. This decrease was driven by both a $3.8 million, or 13.5%, decrease in the average balance of Junior Notes outstanding to $24.3 million from $28.1 million, and a 73 basis point decrease in the yield paid on those Junior Notes to 6.284% from 7.018%. This decline in yield paid reflects the savings from Junior Note refinancing to 6% from 7%, which began in October 2020 and was partially completed upon the recapitalization, effective February 1, 2021.

 

Interest expense paid on Senior Notes decreased $26,679, or 3.9%, to $649,526 for the six months ended June 30, 2021 compared to $676,205 for the six months ended June 30, 2020. This decrease was driven by a $2.9 million, or 12.2%, increase in the average balance of Senior Notes outstanding to $25.4 million from $22.6 million being more than offset by an 85 basis point reduction in the interest rate paid on Senior Notes. This decline in interest rate paid reflects the savings from two Senior Note rate changes applicable to all Senior Notes outstanding. The first rate change to 5.5% from 6% became effective November 25, 2020, and the second rate change to 5% from 5.5% became effective February 23, 2021.

 

Interest expense on Bank Borrowings decreased $72,336, or 11.5%, to $555,250 for the six months ended June 30, 2021 from $627,586 for the six months ended June 30, 2020. This decrease was attributable to a 6.2% decrease in average Bank Borrowings to $24.3 million from $26.0 million, and a 26 basis point decrease in the interest rate paid on those Bank Borrowings. The decrease in interest rate paid on Bank Borrowings was the result of interest rate reductions by the Federal Reserve, and the refinancing of the Company’s bank line of credit. In May 2021, the Company refinanced its $40 million credit facility provided by Western Alliance Bank with a new $40 million credit facility provided by Umpqua Bank. The new credit facility is substantially the same but offers the Company more attractive pricing. The Western Alliance Bank financing was priced at the greater of 1-Month LIBOR plus 3.125% or 4.75% (floor rate), compared to the Umpqua Bank financing priced at the greater of 1-Month LIBOR plus 2.75% or 4.00% (floor rate). Effective August 10, 2021, the Umpqua Bank line of credit was increased to $50 million from $40 million.

 

 
6

Table of Contents

  

Net Interest Income. Net interest income increased $1,374,925, or 41.9%, to $4,657,508 for the six months ended June 30, 2021 from $3,282,583 for the six months ended June 30, 2020. The increase resulted primarily from a $555,861 increase in interest income and a $819,064 decrease in interest expense.

 

The increase in interest income was primarily the result of loan portfolio growth more than offsetting a modest decline in yield earned on Portfolio Loans, due to industry pricing pressure. The decrease in interest expense was primarily attributable to the Company’s recapitalization, effective February 1, 2021, and a reduction in interest expense as described above.

 

Rental Property Income. Rental property income decreased $334,879 to $9,936 for the six months ended June 30, 2021 from $344,815 for the six months ended June 30, 2020. The decrease resulted primarily from the sale of two rental properties during November 2020.

 

Other Income. Other income increased $114,253, or 98.7%, to $230,050 for the six months ended June 30, 2021 from $115,797 for the first six months of 2020. The increase was primarily attributable to an increase in late fees and default interest. Other income generally includes late payment fees and default interest related to non-performing loans, income from REO Assets held for sale, and reversals in the allowance for loan losses used to offset losses on the sale of REO Assets. We expect this income to vary between periods driven by the number of non-performing loans, timing of non-performing loan payoffs, collectability of default interest and late fees on non-performing loans, and the profitability of REO Asset sales.

 

Non-Interest Expense. Non-interest expense increased $262,178, or 10.1%, to $2,857,299 for the six months ended June 30, 2021 from $2,595,121 for the six months ended June 30, 2020. The largest increase in non-interest expense was a $245,384 increase in provision for loan losses to $788,954 from $543,570, as discussed in greater detail below. The largest decrease in non-interest expense was a $312,657 decrease in real estate owned holding costs to $27,153 from $339,810, resulting primarily from the sale of two rental properties during November 2020.

 

Provision for Loan losses. Based on our analysis of loan portfolio performance, as outlined above in “Critical Accounting Policies and Accounting Estimates – Allowance for Loan Losses,” the Company recorded a provision of $788,954 for the six months ended June 30, 2021, compared to $543,570 during the six months ended June 30, 2020. The allowance for loan losses was $1,261,491, or 1.1% of total unpaid principal balance at June 30, 2021, compared to $1,589,237, or 2.0% of total unpaid principal balance at June 30, 2020.

 

The Company recorded loan charge offs of $73,589 during the six months ended June 30, 2021, compared to no loan charge offs during the six months ended June 30, 2020. The Company anticipates that its provision-for-loan-losses accrual rate will fluctuate on a monthly basis between 0.0% and 1.0% annualized. However, due to macroeconomic risks related to the COVID-19 pandemic, the Company increased its provision for loan losses to an annualized rate greater than 1% during the six months ended June 30, 2020.

 

Total delinquent loans were $884,059 million, or 0.8%, of the total unpaid principal balance at June 30, 2021, compared to $2.4 million, or 2.9%, of the total unpaid principal balance at June 30, 2020. The allowance for loan losses reflects the estimate we believe to be appropriate to cover probable incurred losses inherent in the loan portfolio at June 30, 2021 and June 30, 2020.

 

The increase in provision-for-loan-losses during the six months ended June 30, 2021 was primarily attributable to loan portfolio growth, and the Company’s decision to increase its allowance for loan losses to mitigate any future risks related to COVID-19. It is important to point out that the Company’s policy is to categorize a loan as both a Delinquent Loan and Non-Performing Loan and to begin the foreclosure process if the Company has not received payment from the borrower within 30 days of the due date. Industry standard is to categorize a loan as Delinquent for the first 90 days and then to categorize the loan as Non-Performing after 90 days. We believe that our more aggressive policy is appropriate given that our loans have shorter maturities relative to traditional loans. This policy enables the Company to get an earlier start on the foreclosure process should the loan continue to remain delinquent (the time to foreclose on a property can range from 75 to 140 days in non-judicial states and longer in judicial states or if the borrower files bankruptcy). However, this more conservative policy does tend to generate more Non-Performing Loans that are ultimately cured.

 

 
7

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Income Taxes. Income tax expense for the six months ended June 30, 2021 and 2020 were $1,956 and $3,517, respectively. This tax expense is related to municipal franchise taxes. Under the laws pertaining to income taxation of limited liability companies, the Company as an entity pays no federal income tax.

   

Comparison of Financial Condition at June 30, 2021 and December 31, 2020

 

Total Assets. At June 30, 2021, total assets equaled $111.5 million, an increase of $16.7 million, or 17.7%, from $94.8 million at December 31, 2020. The increase in total assets compared to yearend was primarily attributable to an increase in the size of the loan portfolio, driven by an improvement in loan demand during the twelve months ended June 30, 2021.

 

Mortgage Loans Receivable, Net. Net loans are the unpaid principal balance of Portfolio Loans, net of deferred loan origination fees, allowance for loan losses and fair value adjustments related to impairment. See “Critical Accounting Policies and Accounting Estimates – Deferred Loan Origination Fees” Page 6, and “– Fair Value of Mortgage Loans Receivable” Page 6 for additional details.

 

At June 30, 2021, net loans equaled $108.8 million, an increase of $17.9 million, or 19.7%, from $90.9 million at December 31, 2020. The increase in net loans year-over-year and compared to yearend was primarily attributable to an increase in the size of the loan portfolio, driven by an improvement in loan demand during the twelve months ended June 30, 2021.

 

Real Estate Held for Sale (REO). As of June 30, 2021, the Company had REO asset inventory of $1.9 million (1.7% of total assets) comprised of 1 property located in Alameda County, California. Repairs to the California property are 90% complete and the Company is waiting for a public works permit to be issued prior to listing the property for sale. During the six months ended June 30, 2021, no REO asset were acquired and two REO asset was sold.

 

This compares to December 31, 2020 when the Company had REO asset inventory of $1.9 million (2.0% of total assets) comprised of 1 property located in Alameda County, California. Repairs to the California property are 90% complete and the Company is waiting for a public works permit to be issued prior to listing the property for sale. During the twelve months ended December 31, 2020, no REO asset were acquired and two REO asset was sold.

 

Rental Property. As of June 30, 2021, the Company had no rental property. During the quarter ended March 31, 2021, the Company sold its two remaining 3 unit Rental Properties in Cook County, Illinois, resulting in a net loss $33,499. This loss was charged-off against the Company’s allowance for loan losses. Due to operating challenges related to the COVID-19 pandemic and civil unrest in Chicago, the Company determined that managing these buildings was no longer in the best interest of the Company. The Company was able to secure one buyer for both buildings. The sale proceeds were redeployed into higher yielding Portfolio Loans with less operating challenges.

 

 
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This compares to December 31, 2020 when the Company had rental property of $733,355 (2.8% of total assets) comprised of two 3-unit apartment buildings located in Illinois (redevelopment was completed during 2019). A majority of the redevelopment costs for these projects have been capitalized.

 

Liquidity and Capital Resources

 

The Company’s primary sources of funds include Portfolio Loan payoffs, monthly interest payments received on Portfolio Loans, and Bank Borrowings. Other sources of funds may include proceeds from Equity Program investors and Senior Notes as well as the disposition of non-performing assets.

 

As previously disclosed, effective February 1, 2021, all of the Junior Notes were converted into Class C Units or other equity interests in the Company, and the Junior Notes are no longer outstanding.

 

Equity Program. On April 1, 2009, the Company commenced a private placement equity offering of 10% Preferred, Participating LLC ownership interests. The private placement offering represented all of the Company’s equity until the capital restructuring on February 1, 2021, and is a continuous offering that allows the Company to raise additional equity as needed. Equity Program investors are able to demand redemption of their equity units, subject to certain restrictions.

 

At June 30, 2021, equity totaled $48.4 million, an increase of $26.7 million, or 124.7%, from $21.7 million at December 31, 2020. The Company’s equity balance was in compliance with bank covenants and Senior Note covenants at June 30, 2021 and December 31, 2020.

 

Bank Borrowings. As of December 31, 2020, the Company had a $40 million line of credit from Western Alliance Bank. This revolving line of credit was collateralized by all of the Company’s assets, including all of its Portfolio Loans, and was senior in priority to the Senior Notes and the Junior Notes. While the line of credit provided leverage and a source of low cost capital to make loans, the primary benefit to the Company was cash management. Because the revolving line of credit allowed the Company to draw on and pay down the line of credit daily, the Company could use the line of credit to efficiently manage the ebbs and flows of Portfolio Loan funding and payoffs while keeping investor capital fully utilized. The revolving line of credit could also provide the Company with liquidity to meet investor withdrawal requests.

 

The line of credit was subject to a “borrowing base” limitation. The borrowing base was an amount equal to the lesser of (i) 60 percent of the outstanding balance of the Company’s Portfolio Loans or, (ii) 45 percent of the appraised value of the collateral securing a defined segment of the Company’s Portfolio Loans; subject to certain adjustments and exclusions and subject to a cap of $40 million. At December 31, 2020, the borrowing base was $40 million. Under the line of credit, the Company was also required to maintain compliance with certain financial covenants, including maintenance at the end of each calendar quarter of (a) a debt to equity ratio that did not exceed 0.50 to 1.00 (calculated as the outstanding line of credit balance divided by the sum of equity, Junior Notes and Senior Notes); (b) a minimum tangible net worth of $20,000,000; (c) compensating average balances of $750,000 in account at Western Alliance Bank; (d) minimum annual profitability of not less than $1 million recorded on a trailing 12 month basis; (e) minimum adjusted equity of $40 million; and (f) a debt service coverage ratio of not less than 2.00 to 1.00. As of December 31, 2020, the Company was in compliance with all of the foregoing financial covenants.

 

As of December 31, 2020, $40 million was available under the Company’s line of credit agreement. During the first quarter of 2016, the Company replaced its previous line of credit with a $20 million line of credit with Western Alliance Bank. During the first quarter of 2017, Western Alliance Bank increased the line of credit from $20 million to $25 million. Effective as of January 1, 2018, Western Alliance Bank increased the line of credit from $25 million to $40 million. Effective February 24, 2020, Western Alliance Bank extended the maturity from March 1, 2020 to March 1, 2022.

 

 
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On May 13, 2021, the Company entered into a Business Loan and Security Agreement (Revolving Line of Credit) dated effective May 7, 2021 (the “Umpqua Loan Agreement”) with Umpqua Bank (“Umpqua”), an Oregon state-chartered bank, with respect to a revolving credit line (“Umpqua Credit Line”) from Umpqua, and in connection therewith issued to Umpqua a promissory note (the “Umpqua Note”) for a maximum principal amount of up to $40,000,000. The conditions precedent to the effectiveness of the Umpqua Credit Line were satisfied, and the transactions contemplated thereunder consummated, on May 14, 2021. The Umpqua Credit Line refinanced the Company’s $40,000,000 revolving line of credit from Western Alliance Bank and the agreements associated with the Western Alliance Bank line of credit were terminated. Effective August 10, 2021, the Umpqua Loan Agreement was amended to increase the maximum amount of funds available under the Umpqua Credit Line to $50,000,000.

 

For the six months ended June 30, 2021 and for the year ending December 31, 2020, average line of credit utilization during these periods was 61% and 56%, respectively.

 

The Company targets a line of credit utilization rate of 50-80%, which allows the Company to meet unanticipated loan requests from borrowers or unanticipated withdrawal requests from investors. Similarly, if the Company’s Portfolio Loans pay off faster than anticipated or if new loan originations do not match the rate of loan payoffs, the line of credit can be paid down while keeping investor capital fully utilized.

 

Senior Notes. The Securities and Exchange Commission qualified the Senior Secured Demand Notes offering effective February 23, 2018, and the Company began issuing Senior Notes on March 1, 2018.

 

The following table sets forth the Company’s Senior Notes at the dates indicated:

 

 

 

As of or for the

Six Months Ended

June 30,

 

 

As of or for

the Year

Ended

December 31,

 

 

 

2021

 

 

2020

 

 

2020

 

Total assets

 

$ 111,541,549

 

 

$ 89,913,321

 

 

$ 94,794,888

 

Senior Notes

 

 

29,389,128

 

 

 

24,862,216

 

 

 

24,229,442

 

Percentage of total assets

 

 

26.3 %

 

 

27.7 %

 

 

25.6 %

 

As of June 30, 2021 and 2020, and December 31, 2020, Senior Notes were $29.4 million (26.3% of total assets), $24.9 million (27.7% of total assets) and $24.2 million (25.6% of total assets), respectively. Senior Notes increased in absolute dollars as a result of the Company closing Equity Program to new investors and issuing additional Senior Notes.

 

Junior Notes. On May 1, 2010, the Company commenced a private placement offering of secured promissory notes with six-month maturities offering an interest rate of 12% per annum. On April 1, 2015, the Company amended the offering, reducing the interest rate to 10% per annum. On April 1, 2017, the Company amended the offering again, reducing the interest rate to 8% per annum. On May 1, 2019, the Company amended the offering again, reducing the interest rate to 7% per annum. On October 1, 2020, the Company amended the offering again, reducing the interest rate to 6% per annum. Junior Notes were subordinate to the Senior Notes and Bank Borrowings. As of December 31, 2020, Junior Notes were $23.8 million (25.2% of total assets). Effective February 1, 2021, all of the Junior Notes were converted into Class C Units or other forms of equity in the Company.

 

 
10

Table of Contents

 

Off-Balance Sheet Arrangements. In the normal course of operations, the Company engages in financial transactions that, in accordance with generally accepted accounting principles, are not recorded in its financial statements. Specifically, the Company does not charge interest to borrowers on loan proceeds held back for construction until the funds are disbursed. Upon disbursement, the incremental loan proceeds are added to the existing unpaid principal balance of the loan. This practice requires the Company to categorize these held back loan proceeds as an unfunded loan balance.

 

The Company provides further information about these off-balance sheet arrangements in the quarterly financial results it provides to investors and files with the Securities and Exchange Commission.

  

Inflation

 

The effect of changing prices on financial institutions is typically different than on non-banking companies since a substantial portion of a lender’s assets and liabilities are monetary in nature. In particular, interest rates are significantly affected by inflation, but neither the timing nor magnitude of the changes to interest rates can be directly correlated to price level indices; therefore, the Company can best counter inflation over the long term by managing sensitivity to interest rates of its net interest income and controlling levels of noninterest income and expenses. In addition, the short-term duration of the Company’s Portfolio Loans minimizes interest rate risk compared to loan portfolios with longer durations.

 

ITEM 2 OTHER INFORMATION

 

None.

 

 
11

Table of Contents

 

ITEM 3 FINANCIAL STATEMENTS

 

INDEX TO FINANCIAL STATEMENTS

 

Interim Unaudited Financial Statements

 

 

 

Interim Balance Sheets as of June 30, 2021 and December 31, 2020

 

 

13

 

Interim Statements of Income and Changes in Members Equity for the six months ended June 30, 2021 and June 30, 2020

 

 

14

 

Interim Statements of Cash Flow for the six months ended June 30, 2021 and June 30, 2020

 

 

15

 

Notes to Interim Unaudited Financial Statements

 

 

16

 

 

 
12

Table of Contents

  

IRON BRIDGE MORTGAGE FUND, LLC

(An Oregon Limited Liability Company)

Balance Sheets

June 30, 2021 and December 31, 2020

(unaudited)

_____________________________

 

 

 

As of

June 30,

 

 

As of

December 31,

 

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

Cash and cash equivalents

 

$ 33,463

 

 

$ 424,361

 

Mortgage interest receivable

 

 

832,550

 

 

 

847,165

 

Mortgage loans receivable, net

 

 

108,793,835

 

 

 

90,908,306

 

Real estate held for sale

 

 

1,881,701

 

 

 

1,881,701

 

Rental property, net

 

 

-

 

 

 

733,355

 

Total assets

 

$ 111,541,549

 

 

$ 94,794,888

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND MEMBERS’ EQUITY

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Accounts payable and other accrued liabilities

 

$ 84,017

 

 

$ 107,415

 

Servicer fees payable

 

 

262,606

 

 

 

232,400

 

Incentive fees payable

 

 

-

 

 

 

873

 

Interest payable

 

 

195,100

 

 

 

319,363

 

Notes payable - junior notes

 

 

-

 

 

 

23,843,628

 

Notes payable - senior notes

 

 

29,389,128

 

 

 

24,229,442

 

Line of credit, net

 

 

31,195,342

 

 

 

22,201,226

 

Deferred interest

 

 

2,355,111

 

 

 

2,135,113

 

Total liabilities

 

 

63,481,304

 

 

 

73,069,460

 

 

 

 

 

 

 

 

 

 

Members’ equity

 

 

48,060,245

 

 

 

21,725,428

 

Total liabilities and members’ equity

 

$ 111,541,549

 

 

$ 94,794,888

 

 

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

 

 
13

Table of Contents

  

IRON BRIDGE MORTGAGE FUND, LLC

(An Oregon Limited Liability Company)

Statements of Income and Changes in Members’ Equity

June 30, 2021 and 2020

(unaudited)

_____________________________

 

 

 

Six Months Ended June 30,

 

 

 

2021

 

 

2020

 

Revenues

 

 

 

 

 

 

Mortgage interest income

 

$ 5,989,773

 

 

$ 5,433,912

 

Rental property income

 

 

9,936

 

 

 

344,815

 

Other income

 

 

230,050

 

 

 

115,797

 

Total revenues

 

 

6,229,759

 

 

 

5,894,524

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

Interest expense

 

 

1,332,265

 

 

 

2,151,329

 

Servicer fees

 

 

1,480,748

 

 

 

1,300,501

 

Incentive fees

 

 

895

 

 

 

78,590

 

Provision for loan losses

 

 

788,954

 

 

 

543,570

 

Professional fees

 

 

283,072

 

 

 

111,807

 

Real estate holding costs

 

 

27,153

 

 

 

339,810

 

Other expense

 

 

276,477

 

 

 

220,843

 

Total operating expenses

 

 

4,189564

 

 

 

4,746,450

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

 

Gain (loss) on sale of real estate held for sale

 

 

(33,499 )

 

 

4,531

 

Total other income (expense)

 

 

(33,499 )

 

 

4,531

 

 

 

 

 

 

 

 

 

 

Income before income tax and LLC fees

 

 

2,006,696

 

 

 

1,152,605

 

Income tax and LLC fees

 

 

1,956

 

 

 

3,517

 

 

 

 

 

 

 

 

 

 

Net income

 

$ 2,004,740

 

 

$ 1,149,088

 

 

 

 

 

 

 

 

 

 

Members’ equity, beginning of year

 

 

21,725,428

 

 

 

21,183,026

 

Members’ contributions

 

 

33,341,083

 

 

 

1,163,611

 

Members’ earning distributions

 

 

(200,120 )

 

 

(9,961 )

Members’ capital withdrawals

 

 

(8,810,886 )

 

 

(2,095,930 )

 

 

 

 

 

 

 

 

 

Members’ equity, end of period

 

$ 48,060,245

 

 

$ 21,389,834

 

 

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

 

 
14

Table of Contents

  

IRON BRIDGE MORTGAGE FUND, LLC

(An Oregon Limited Liability Company)

Statements of Cash Flows

June 30, 2021 and 2020

(unaudited)

_____________________________

 

 

 

Six Months Ended June 30,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities

 

 

 

 

 

 

Net income

 

$ 2,004,740

 

 

$ 1,149,088

 

Adjustments to reconcile net income to net cash provided by operating activities

 

 

 

 

 

 

 

 

Provision for loan losses

 

 

788,954

 

 

 

543,570

 

Amortization of deferred loan origination fees

 

 

(1,143,036 )

 

 

(1,045,325 )

Depreciation

 

 

5,525

 

 

 

132,346

 

Loss (gain) on sales of real estate held for sale

 

 

33,499

 

 

 

(4,531 )

Junior notes interest expense converted to debt

 

 

200,753

 

 

 

678,095

 

Senior notes interest expense converted to debt

 

 

377,441

 

 

 

338,939

 

Change in operating assets and liabilities

 

 

 

 

 

 

 

 

Mortgage interest receivable

 

 

(58,974 )

 

 

61,051

 

Accounts payable and other accrued liabilities

 

 

(23,398 )

 

 

47,540

 

Servicer fees payable

 

 

30,206

 

 

 

(27,724 )

Incentive fees payable

 

 

(873 )

 

 

(32,068 )

Interest payable

 

 

(124,263 )

 

 

(43,318 )

Deferred interest

 

 

219,998

 

 

 

698,547

 

Net cash provided by operating activities

 

 

2,310,572

 

 

 

2,496,210

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Loans funded

 

 

(101,867,572 )

 

 

(56,830,451 )

Principal collected on loans

 

 

84,409,715

 

 

 

65,863,860

 

Improvement costs on real estate held for sale

 

 

-

 

 

 

(125,268 )

Improvement costs on rental property

 

 

-

 

 

 

(59,667 )

Proceeds from sales of real estate held for sale

 

 

-

 

 

 

94,739

 

Net cash used in investing activities

 

 

(17,457,857 )

 

 

8,943,213

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Borrowings on notes payable - junior notes

 

 

48,250

 

 

 

638,051

 

Repayments on notes payable - junior notes

 

 

(24,174,742 )

 

 

(3,349,288 )

Borrowings on notes payable - senior notes

 

 

12,300,983

 

 

 

8,743,966

 

Repayments on notes payable - senior notes

 

 

(7,518,738 )

 

 

(5,135,678 )

Net borrowings on line of credit

 

 

8,994,116

 

 

 

(12,108,353 )

Members’ contributions

 

 

33,341,083

 

 

 

1,163,611

 

Members’ earnings distributions

 

 

(200,120 )

 

 

(9,960 )

Members’ capital withdrawals

 

 

(8,728,775 )

 

 

(1,540,728 )

Net cash provided by (used in) financing activities

 

 

14,062,057

 

 

 

(11,598,379 )

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

 

(390,898 )

 

 

(158,956 )

Cash and cash equivalents at beginning of year

 

 

424,361

 

 

 

880,205

 

Cash and cash equivalents at end of period

 

$ 33,463

 

 

$ 721,249

 

 

 

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information

 

 

 

 

 

 

 

 

Cash paid for interest

 

$ 1,456,529

 

 

$ 2,194,648

 

Cash paid for income tax and LLC fees

 

$ 1,956

 

 

$ 3,517

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of non-cash investing and financing transactions

 

 

 

 

 

 

 

 

Mortgage loans receivable converted to real estate held for sale

 

$ -

 

 

$ 1,396,135

 

Mortgage interest receivable transferred to real estate held for sale

 

$ -

 

 

$ 2,687

 

Sale of real estate financed with mortgage loan receivable

 

$ 767,920

 

 

$ -

 

Real estate held for sale converted to rental property

 

$ -

 

 

$ -

 

Notes payable converted to members’ equity

 

$ -

 

 

$ -

 

Member’s equity converted to notes payable

 

$ 82,111

 

 

$ 555,202

 

 

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

 

 
15

Table of Contents

 

IRON BRIDGE MORTGAGE FUND, LLC

(An Oregon Limited Liability Company)

Notes to Financial Statements

June 30, 2021 and 2020

(unaudited)

_____________________________

 

1. Organization

 

Iron Bridge Mortgage Fund, LLC (the “Fund”) is an Oregon limited liability company that was organized to engage in business as a mortgage lender for the purpose of making and arranging various types of loans to the general public and businesses, acquiring existing loans and selling loans, all of which are or will be secured, in whole or in part, by real or personal property throughout the United States. The Fund is managed by Iron Bridge Management Group, LLC, an Oregon limited liability company (the “Manager”). The Fund receives certain operating and administrative services from the Manager. The Fund is responsible for its operating expenses, while the Manager is generally responsible for costs of its own personnel (including compensation and benefits), office space and general overhead expenses incurred in performing duties to the Fund. Because of the Manager’s role in operating the Fund, as a matter of administrative convenience, the Manager may from time to time incur certain expenses on behalf of the Fund that are reimbursable to the Manager, or with respect to certain de minimis expenses, absorbed by the Manager at its election.

 

Term of the Fund

 

The Fund will continue in perpetuity, at the sole discretion of the Manager, unless dissolved under provisions of the operating agreement at an earlier date.

 

2. Summary of Significant Accounting Policies

 

Management estimates and related risks

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions about the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities, at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Such estimates relate principally to the determination of the allowance for loan losses and fair value of real estate owned. Although these estimates reflect management’s best estimates, it is at least reasonably possible that a material change to these estimates could occur.

 

The fair value of real estate, in general, is impacted by current real estate and financial market conditions. Should these markets experience significant declines, the resulting collateral values of the Fund's loans will likely be negatively impacted. The impact to such values could be significant and as a result, the Fund's actual loan losses and proceeds from the sales of real estate held could differ significantly from management's current estimates.

 

 
16

Table of Contents

  

IRON BRIDGE MORTGAGE FUND, LLC

(An Oregon Limited Liability Company)

Notes to Financial Statements

June 30, 2021 and 2020

(unaudited)

_____________________________

 

2. Summary of Significant Accounting Policies (continued)

 

Cash and cash equivalents

 

The Fund considers all highly liquid financial instruments with maturities of three months or less at the time of purchase to be cash equivalents. Cash on deposit occasionally exceeds federally insured limits. The Fund believes that it mitigates this risk by maintaining deposits with major financial institutions.

 

Mortgage loans receivable

 

Mortgage loans, which the Fund has the intent and ability to hold to maturity, generally are stated at their outstanding unpaid principal balance with interest thereon being accrued as earned. Mortgage loans receivable make up the only class of financing receivables within the Fund’s lending portfolio. As a result, further segmentation of the loan portfolio is not considered necessary.

 

If the probable ultimate recovery of the carrying amount of a loan, with due consideration for the fair value of collateral, is less than amounts due according to the contractual terms of the loan agreement and the shortfall in the amounts due are not insignificant, the carrying amount of the investment shall be reduced to the present value of estimated future cash flows discounted at the loan’s effective interest rate. If a loan is collateral dependent, it is valued at the estimated fair value of the related collateral.

 

Interest is accrued daily based on the principal of the loans. If events and or changes in circumstances cause management to have serious doubts about the further collectability of the contractual payments, a loan may be categorized as impaired and interest is no longer accrued. Any subsequent payments on impaired loans are applied to reduce the outstanding loan balances including accrued interest and advances.

 

Allowance for loan losses

 

Loans and the related accrued interest are analyzed on a periodic basis for recoverability. Delinquencies are identified and followed as part of the loan system. A provision is made for loan losses to adjust the allowance for loan losses to an amount considered by management to be adequate, with due consideration to collateral value, to provide for unrecoverable loans and receivables, including impaired loans, accrued interest and advances on loans. As a collateral-based lender, the Fund does not consider credit risks which may be inherent in a further segmented loan portfolio as a basis for determining the adequacy of its allowance for loan losses but rather focuses solely on the underlying collateral value of the loans in its portfolio to do so. As a result, the Fund does not consider further segmentation of its loan portfolio and related disclosures necessary. The Fund writes off uncollectible loans and related receivables directly to the allowance for loan losses once it is determined that the full amount is not collectible.

 

 
17

Table of Contents

  

IRON BRIDGE MORTGAGE FUND, LLC

(An Oregon Limited Liability Company)

Notes to Financial Statements

June 30, 2021 and 2020

(unaudited)

_____________________________

 

2. Summary of Significant Accounting Policies (continued)

 

Rental property

 

Rental property is recorded at cost and allocated between land and building based upon their relative fair values at acquisition. Improvements and replacements are capitalized when they extend the useful life, increase capacity or improve the efficiency of the asset. Investment costs are capitalized while activities are ongoing to prepare an asset for its intended use. Expenditures for repairs and maintenance are charged to expense when incurred.

 

Depreciation begins once the asset is ready to be placed into service and is recorded on a straight-line basis over the estimated useful lives of the assets. Buildings and improvements are depreciated over periods ranging from 15 to 27.5 years.

 

Impairment of long-lived assets

 

The Fund continually monitors events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances occur, the Fund assesses the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total future cash flows is less than the carrying amount of those assets, the Fund records an impairment charge based on the excess of the carrying amount over the fair value, less selling costs, of the asset.

 

Impairment of long-lived assets

 

The Fund continually monitors events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances occur, the Fund assesses the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total future cash flows is less than the carrying amount of those assets, the Company records an impairment charge based on the excess of the carrying amount over the fair value, less selling costs, of the asset.

 

Fair value measurements

 

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Fund determines the fair values of its assets and liabilities based on a fair value hierarchy that includes three levels of inputs that may be used to measure fair value (Level 1, Level 2 and Level 3).

 

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Fund has the ability to access at the measurement date. An active market is a market in which transactions occur with sufficient frequency and volume to provide pricing information on an ongoing basis. Level 2 inputs are inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. Unobservable inputs reflect the Fund’s own assumptions about the assumptions market participants would use in pricing the asset or liability (including assumptions about risk). Unobservable inputs are developed based on the best information available in the circumstances and may include the Fund’s own data.

 

 
18

Table of Contents

  

IRON BRIDGE MORTGAGE FUND, LLC

(An Oregon Limited Liability Company)

Notes to Financial Statements

June 30, 2021 and 2020

(unaudited)

_____________________________

 

2. Summary of Significant Accounting Policies (continued)

 

Fair value measurements (continued)

 

The Fund does not record loans at fair value on a recurring basis but uses fair value measurements of collateral security in the determination of its allowance for loan losses. The fair value for real estate owned and impaired secured loans is determined using the sales comparison, income and other commonly used valuation approaches.

 

The following table reflects the Fund’s assets and liabilities measured at fair value on a non-recurring basis as of June 30, 2021 and December 31, 2020:

 

Item

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Real estate owned (June 30, 2021)

 

$ -

 

 

$ -

 

 

$ 1,881,701

 

 

$ 1,881,701

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate owned (December 31, 2020)

 

$ -

 

 

$ -

 

 

$ 1,881,701

 

 

$ 1,881,701

 

 

The following methods and assumptions were used to estimate the fair value of assets and liabilities:

 

 

(a)

Secured loans (Level 2 and Level 3). For loans in which a specific allowance is established based on the fair value of the collateral, the Fund records the loan as nonrecurring Level 2 if the fair value of the collateral is based on an observable market price or a current appraised value. If an appraised value is not available or the fair value of the collateral is considered impaired below the appraised value and there is no observable market price, the Fund records the loan as nonrecurring Level 3.

 

 

 

 

(b)

Real estate owned (Level 2 and Level 3). At the time of foreclosure, real estate owned is recorded at the lower of the recorded investment in the loan, plus any senior indebtedness, or at the property’s estimated fair value, less estimated costs to sell, as applicable. The Fund periodically compares the carrying value of real estate held for use to expected undiscounted future cash flows for the purpose of assessing the recoverability of the recorded amounts. If the carrying value exceeds future undiscounted cash flows, the assets are reduced to estimated fair value. If the future undiscounted cash flows of real estate held for use exceed the carrying value or the fair value less estimated costs to sell for other than held for use real estate exceeds the carrying value, the asset value is recaptured to the estimated fair value, but not to exceed the original basis in the property after reversion. The Fund records real estate owned as nonrecurring Level 2 if the fair value of the real estate owned is based on an observable market price or a current appraised value. If an appraised value is not available and there is no observable market price, the Fund records real estate owned as nonrecurring Level 3.

 

 
19

Table of Contents

  

IRON BRIDGE MORTGAGE FUND, LLC

(An Oregon Limited Liability Company)

Notes to Financial Statements

June 30, 2021 and 2020

(unaudited)

_____________________________

 

2. Summary of Significant Accounting Policies (continued)

 

Real estate held for sale

 

Real estate acquired through or in lieu of loan foreclosure that is to be held for any purpose other than use in operations, is initially recorded at the lower of the recorded investment in the loan, plus any senior indebtedness, or at fair value less estimated selling cost at the date of foreclosure if the plan of disposition is by way of sale. Any write-downs based on the asset’s fair value at the date of acquisition are charged to the allowance for loan losses. After foreclosure, real estate held for sale is carried at the lower of the new cost basis or fair value less estimated costs to sell.

 

Costs of real estate improvements are capitalized, whereas costs relating to holding real estate are expensed. The portion of interest costs relating to development of real estate is capitalized.

 

Impairment losses of real estate held and held for sale are measured as the amount by which the carrying amount of a property exceeds its fair value less estimated costs to sell. Impairment losses of real estate held for use are determined by comparing the expected future undiscounted cash flows of the property, including any costs that must be incurred to achieve those cash flows, to the carrying amount of the property. If those net cash flows are less than the carrying amount of the property, impairment is measured as the amount by which the carrying amount of the asset exceeds its fair value. Valuations are periodically performed by management, and any subsequent write-downs are recorded as a charge to operations.

 

Deferred loan origination fees

 

The Fund will capitalize loan origination fees and recognize the fees as an adjustment of the yield on the related loan. Deferred loan origination fees are amortized to income over the life of the loan under the effective interest method. Deferred loan origination fees of $808,120 at June 30, 2021 and $492,063 at June 30, 2020 have been included in mortgage loans receivable, net, on the accompanying balance sheet. Deferred loan origination fees of $1,143,036 during the first six months of 2021, and $1,045,325 during the first six months of 2020 were amortized into income during each applicable period.

 

 
20

Table of Contents

  

IRON BRIDGE MORTGAGE FUND, LLC

(An Oregon Limited Liability Company)

Notes to Financial Statements

June 30, 2021 and 2020

(unaudited)

_____________________________

 

2. Summary of Significant Accounting Policies (continued)

 

Line of credit origination fees

 

The Fund has capitalized the related costs incurred in connection with its borrowings under the line of credit. These costs are being amortized using the straight-line method through maturity of the line of credit. The prepaid loan fees related to the line of credit are presented in the balance sheets as a direct deduction from the carrying amount of the line of credit.

 

Subscription liability

 

The Fund accepts subscription agreements and funds from prospective investors who wish to become members of the Fund. If approved for admittance into the Fund, the subscription funds are maintained in a separate subscription account until such time as the funds are needed in the normal course of the Fund’s operations. Due to the calculation of the incentive fee, the Fund does not allow mid-month contributions or withdrawals. If the subscription funds are needed in the normal course of the Fund’s operations on any day other than the first day of the month, the subscription funds will be borrowed at an annual rate of 6% for the odd days within the month the borrowing took place. After the monthly distribution is processed, the subscription fund borrowings, plus any interest accrued thereon, will be recognized as member contributions on behalf of the subscribing member. There were no subscription fund borrowings as of June 30, 2021 and 2020.

 

Income taxes

 

The Fund is a limited liability company for federal and state income tax purposes. Under the laws pertaining to income taxation of limited liability companies, no federal income tax is paid by the Fund as an entity. Individual members report on their federal and state income tax returns their share of Fund income, gains, losses, deductions and credits, whether or not any actual distribution is made to such member during a taxable year. Accordingly, no provision for income taxes besides the applicable minimum state tax or fees would be reflected in the accompanying financial statements.

 

The Fund has evaluated its current tax positions and has concluded that as of the periods ending June 30, 2021 and 2020, the Fund does not have any significant uncertain tax positions for which a reserve would be necessary.

 

Subsequent events

 

The Fund has evaluated subsequent events through the date hereof, the date the financial statements were available to be issued. No subsequent events have occurred that would have a material impact on the presentation of the Fund’s financial statements.

 

 
21

Table of Contents

  

IRON BRIDGE MORTGAGE FUND, LLC

(An Oregon Limited Liability Company)

Notes to Financial Statements

June 30, 2021 and 2020

(unaudited)

_________________________

 

3. Fund Provisions

 

The Fund is an Oregon limited liability company. The rights, duties and powers of the members of the Fund are governed by the operating agreement. The operating agreement provides for four classes of equity units, Class A, Class B, Class C and Class D. The following description of the Fund’s operating agreement provides only general information. Members should refer to the Fund’s operating agreement and offering circular for a more complete description of the provisions.

 

The Manager is in complete control of the Fund business, subject to the voting rights of the members on specified matters. The Manager acting alone has the power and authority to act for and bind the Fund.

 

Members may remove the Manager if: (i) the Manager commits an act of willful misconduct which materially adversely damages the Fund; or (ii) holders of at least seventy five percent of the outstanding membership interests, excluding the membership interests held by the Manager, vote in favor of such removal.

 

Profits and losses

 

Profits and losses accrued during any accounting period shall be allocated among the members in accordance with their respective membership interests maintained throughout that accounting period.

 

Election to receive distributions

 

Under the Second Amended Operating Agreement, there are two potential sources of distributions: (a) Net Cash Flow From Operations, and (b) Net Cash Flow from Sale or Refinance.

 

“Net Cash Flow from Operations” means the cash flow resulting from the operation of the Investments, including, but not limited to, monthly interest payments and fees and charges associated with or related to the ownership, operation and management of any Investments, or any other source, less cash expenditures of the Company and the amount of any funds the Manager, in its reasonable discretion, determines to set aside for contingencies and the establishment of reasonable and prudent working capital and reserves, or for investment in additional Investments.

 

The Manager shall cause Net Cash Flow from Operations, to the extent available for distribution, to be distributed to holders of Units promptly following the end of each month as follows:

 

(i) first, 100% to the holders of Class D Units pro rata based on the Class D Preferred Return payable to the holders of Class D Units, until each such Person has received the accrued but unpaid Class D Preferred Return payable to such Person;

 

(ii) second, 100% to the holders of Class C Units pro rata based on the Class C Preferred Return payable to the holders of Class C Units, until each such Person has received the accrued but unpaid Class C Preferred Return payable to such Person;

 

(iii) third, 100% to the holders of Class B Units pro rata based on the Class B Preferred Return payable to the holders of Class B Units, until each such Person has received the accrued but unpaid Class B Preferred Return payable to such Person; and

 

 
22

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IRON BRIDGE MORTGAGE FUND, LLC

(An Oregon Limited Liability Company)

Notes to Financial Statements

June 30, 2021 and 2020

(unaudited)

_________________________

 

3. Fund Provisions (continued)

 

(iv) thereafter, (A) 90% to the holders of Class A Units pro rata based on the number of Class A Units held by each such Person; and (B) 10% to the holders of Class B Units, Class C Units, and Class D Units pro rata based on the number of Units held by each such person.

 

“Net Cash Flow from Sale or Refinance” means the cash flow resulting from the repayment of all or any portion of any Investments, or the sale, financing or refinancing of all or any portion of any real estate owned properties held by the Company, less cash expenditures of the Company and the amount of any funds the Manager, in its reasonable discretion, determines to set aside for contingencies and the establishment of reasonable and prudent working capital and reserves, or for investment in additional Investments.

 

Net Cash Flow From Sale or Refinance, if any, shall be distributed at such times as the Manager may determine in the following priority:

 

(i) first, 100% to the holders of Class D Units pro rata based on the Class D Preferred Return payable to the holders of Class D Units, until each such Person has received the accrued but unpaid Class D Preferred Return payable to such Person;

 

(ii) second, 100% to the holders of Class D Units pro rata based on the Unreturned Capital Contributions of the holders of Class D Units, until each holder of Class D Units has received an amount equal to such Person’s Unreturned Capital Contributions with respect to such Class D Units;

 

(iii) third, 100% to the holders of Class C Units pro rata based on the Class C Preferred Return payable to the holders of Class C Units, until each such Person has received the accrued but unpaid Class C Preferred Return payable to such Person;

 

(iv) fourth, 100% to the holders of Class C Units pro rata based on the Unreturned Capital Contributions of the holders of Class C Units, until each holder of Class C Units has received an amount equal to such Person’s Unreturned Capital Contributions with respect to such Class C Units;

 

(v) fifth, 100% to the holders of Class B Units pro rata based on the Class B Preferred Return payable to the holders of Class B Units, until each such Person has received the accrued but unpaid Class B Preferred Return payable to such Person;

 

(vi) sixth, 100% to the holders of Class B Units pro rata based on the Unreturned Capital Contributions of the holders of Class B Units, until each holder of Class B Units has received an amount equal to such Person’s Unreturned Capital Contributions with respect to such Class B Units; and

 

(vii) seventh, 100% to the holders of Class A Units pro rata based on the Unreturned Capital Contributions of the holders of Class A Units, until each holder of Class A Units has received an amount equal to such Person’s Unreturned Capital Contributions with respect to such Class A Units; and

 

(viii) thereafter, (A) 90% to the holders of Class A Units pro rata based on the number of Class A Units held by each such Person; and (B) 10% to the holders of Class B Units, Class C Units, and Class D Units pro rata based on the number of Units held by each such Person.

 

“Unreturned Capital Contributions” mean the amount of Capital Contributions attributable to a Unit, less any distributions received with respect to such Unit from Net Cash Flow From Sale or Refinance.

 

Reinvestment

 

Members have the option to compound their proportionate share of the Fund’s monthly earnings.

 

Liquidity, capital withdrawals and early withdrawals

 

Redemption at the Election of the Company. The Manager shall have the right to unilaterally redeem on behalf of the Company all or any portion of a Member’s Class A, Class B, Class C, or Class D Units, as applicable, at any time by payment of any accrued but unpaid Preferred Return applicable to such Units being redeemed together with the Unreturned Capital Contribution of such Units. This Manager right will be suspended however during any period when the Manager has suspended processing Redemption Requests as discussed below, or with respect to the Class A Units or Class B Units if such redemption would cause the Unreturned Capital Contributions of the Class A Units and the Class B Units, in the aggregate, to equal an amount less than 20% of the total assets of the Company (the “Class Limitation”).

 

Redemption at the Election of the Members. Any Member shall have the right to require a redemption of all or a portion of its Units by submitting a written request (a “Redemption Request”) to the Manager; provided, however, any Member submitting a Redemption Request that holds less than 50,000 Units must submit a Redemption Request with respect to all Units held by such Member. In connection with a Redemption Request, the Member requesting redemption shall be entitled to receive an amount equal to any accrued but unpaid Preferred Return applicable to such Units being redeemed, together with the Unreturned Capital Contribution of such Units being redeemed, with each Member expressly acknowledging that no amounts will be paid to a Member seeking redemption except for any accrued and unpaid Preferred Return and any Unreturned Capital Contributions applicable to such redeemed Units. Redemption Requests will generally be completed in the order received, except as described below.

 

 
23

Table of Contents

 

IRON BRIDGE MORTGAGE FUND, LLC

(An Oregon Limited Liability Company)

Notes to Financial Statements

June 30, 2021 and 2020

(unaudited)

_________________________

 

3. Fund Provisions (continued)

 

It is the intention of the Company to complete all Redemption Requests in sixty (60) days of receipt of a Redemption Request, provided however, (i) if the Company receives a Redemption Request from a Member (or group of affiliated Members) for an aggregate amount over $1 million, then the Company may, at the Manager's election, as determined in its sole discretion, complete any such Redemption Request in multiple monthly payment intervals of $1,000,000 for each such payment date and (i) if the Company has unfulfilled Redemptions Requests at any time from Members collectively holding more than thirty percent (30%) of outstanding Units, or to the extent that the processing of Redemption Requests may otherwise be prohibited by law, then the Company may elect to (A) suspend processing of any additional Redemption Requests by Members in the order received; (B) extend the redemption date for all Members until such time as the Company has sufficient liquidity to complete such redemptions without causing a material adverse impact on the Company, as determined by the Manager in its reasonable discretion, with no requirement of the Company or the Manager to market or sell any Investments or other assets at fire sale or discount prices to complete any outstanding Redemption Requests, (C) make payments, or prepayments as applicable, to Members who have submitted a Redemption Request, provided, however, that any such payments or prepayments during such extension shall be made in accordance with the distribution waterfall associated with the Net Cash Flow From Sale or Refinance instead of in the order received (subject to the Class Limitation); and (D) give notice to all Members that the Company is electing to take the actions set forth in subsections (A), (B) and (C) above.

 

Notwithstanding the above, the Manager does not intend to cause the Company to redeem any Units, if the redemption could cause the Company to become a “publicly traded partnership”. If the Manager determines that limiting the redemptions in any calendar year, or otherwise delaying such redemption, might avoid causing the Company to become a “publicly traded partnership”, the Manager may take such action as the Manager determines is required to avoid the Company being treated as a “publicly traded partnership”, including, without limitation: (1) requiring a notice period before effectuating the redemption, (2) establishing the fair market value of the Units after the expiration of the notice period, (3) limiting the number of redemptions in any calendar year, and (4) limiting the number of times in each calendar year when Units may be redeemed.

 

4. Mortgage Loans Receivable, Net

 

Mortgage loans receivable, net, consisted of the following at June 30, 2021:

 

Outstanding mortgage loans receivable

 

$ 110,863,446

 

Unamortized deferred loan origination fees

 

 

(808,120 )

Allowance for loan losses

 

 

(1,261,491 )

Mortgage loans receivable, net

 

$ 108,793,835

 

 

Mortgage loans receivable, net, consisted of the following at December 31, 2020:

 

Outstanding mortgage loans receivable

 

$ 92,048,404

 

Unamortized deferred loan origination fees

 

 

(634,060 )

Allowance for loan losses

 

 

(506,036 )

Mortgage loans receivable, net

 

$ 90,908,308

 

 

 
24

Table of Contents

  

IRON BRIDGE MORTGAGE FUND, LLC

(An Oregon Limited Liability Company)

Notes to Financial Statements

June 30, 2021 and 2020

(unaudited)

_________________________

 

4. Mortgage Loans Receivable, Net (continued)

 

Activity in the allowance for loan losses was as follows for the year ended December 31, 2020 and the six months ended June 30, 2021:

 

2020 Beginning balance

 

$ 1,045,668

 

Provision for loan losses

 

 

1,070,991

 

Write-offs

 

 

(1,881,999 )

Ending balance as of December 31, 2020

 

$ 506,037

 

 

 

 

 

 

2021 Beginning balance

 

$ 506,037

 

Provision for loan losses

 

 

788,954

 

Write-offs

 

 

(33,499 )

Ending balance as of June 30, 2021

 

$ 1,261,492

 

 

Allocation of the allowance for loan losses by collateral type as of June 30, 2021 and December 31, 2020 consisted of the following (allocation of allowance is not an indication of expected future use):

 

As of June 30, 2021:

 

Single family residential (1 - 4 units)

 

$ 1,060,872

 

Multi-family residential (5 or more units)

 

 

130,902

 

Commercial

 

 

35,276

 

Land/Construction

 

 

34,442

 

Total

 

$ 1,261,492

 

 

As of December 31, 2020:

 

Single family residential (1 - 4 units)

 

$ 424,294

 

Land/Construction

 

 

32,184

 

Commercial

 

 

32,889

 

Multi-family residential (5 or more units)

 

 

16,670

 

Total

 

$ 506,037

 

 

 
25

Table of Contents

  

IRON BRIDGE MORTGAGE FUND, LLC

(An Oregon Limited Liability Company)

Notes to Financial Statements

June 30, 2021 and 2020

(unaudited)

_________________________

 

5. Notes Payable - Junior Notes

 

The junior note program is a private debt offering by the Fund. Between April and September 2017, the Fund refinanced all junior notes from an interest rate of 10% to 8%. Between March and October 2019, the Fund refinanced all junior notes from an interest rate of 8% to 7%. Between October 2020 and January 2021, the Fund refinanced a portion of junior notes from an interest rate of 7% to 6%. Effective February 1, 2021, all junior notes were converted to Class C equity.

 

6. Notes Payable - Senior Notes

 

On March 1, 2018, the Company commenced a debt offering of 6% Senior Secured Demand Notes pursuant to Regulation A. The offering was qualified by the Security and Exchange Commission in February 2018. On November 25, 2020, the Fund effected a rate change on all outstanding senior notes from 6.0% to 5.5%. On February 23, 2020, the Fund effected a rate change on all outstanding senior notes from 5.5% to 5.0%

 

As of June 30, 2021 and December 31, 2020 the senior notes payable within the note program held a balance of $29,389,128 and $24,229,442, respectively.

 

Interest expense on these senior notes amounted to $331,919 and $352,208 for the six months ended June 30, 2021 and 2020, respectively.

 

7. Line of Credit, Net

 

On January 31, 2013, the Fund entered into a revolving line of credit agreement with a financial institution that included a maximum borrowing limit of $5,000,000. The agreement was subject to a borrowing base calculation and was secured by substantially all of the Fund’s assets. On April 30, 2014, the line of credit was extended and increased to include a maximum borrowing limit of $10,000,000. On December 11, 2015, the line of credit was extended and increased to include a maximum borrowing limit of $12,000,000. The annual interest rate was equal to the greater of 4.75% plus the 90 day LIBOR rate from time to time in effect or 5.75%.

 

During December 2015, the Fund entered into a new revolving line of credit agreement with a financial institution that included a maximum borrowing limit of $20,000,000. The credit agreement took effect on January 5, 2016. On March 20, 2017, the line of credit was amended to increase the borrowing limit to $25,000,000. The agreement was subject to a borrowing base calculation and was secured by substantially all of the Fund’s assets. The annual interest rate was equal to the greater of 4.50% plus the one month LIBOR rate from time to time in effect or 4.75%.

 

 
26

Table of Contents

  

IRON BRIDGE MORTGAGE FUND, LLC

(An Oregon Limited Liability Company)

Notes to Financial Statements

June 30, 2021 and 2020

(unaudited)

_________________________

 

7. Line of Credit, Net (continued)

 

On January 1, 2018, the line of credit was extended to January 1, 2020, the maximum borrowing limit was increased from $25,000,000 to $40,000,000, and the interest rate was lowered from one month LIBOR plus 4.50% to one month LIBOR plus 4.00%. On January 24, 2019, the line of credit was amended to lower the interest rate from one month LIBOR plus 4.00% to one month LIBOR plus 3.50%. On April 16, 2019, the line of credit was amended to lower the interest rate from one month LIBOR plus 3.5% to one month LIBOR plus 3.125%. On December 5, 2019, the line of credit was extended to March 1, 2020. On February 24, 2020, the line of credit was extended to March 1, 2022.

 

On May 13, 2021, the Company entered into a Business Loan and Security Agreement (Revolving Line of Credit) dated effective May 7, 2021 with Umpqua Bank, an Oregon state-chartered bank, with respect to a revolving credit line from Umpqua, and in connection therewith issued to Umpqua a promissory note for a maximum principal amount of up to $40,000,000. The conditions precedent to the effectiveness of the Umpqua Credit Line were satisfied, and the transactions contemplated thereunder consummated, on May 14, 2021. The Umpqua Credit Line refinanced the Company’s $40,000,000 revolving line of credit from Western Alliance Bank and the agreements associated with the Western Alliance Bank line of credit were terminated. Effective August 10, 2021, the Umpqua Loan Agreement was amended to increase the maximum amount of funds available under the Umpqua Credit Line to $50,000,000.

 

The interest rate as of June 30, 2021, December 31, 2020 and June 30, 2020 was 4.00%, 4.75% and 4.75%, respectively.

 

As of June 30, 2021 and December 31, 2020, the outstanding balance on the line of credit was $31,195,342 and $22,201,226, respectively.

 

For the six months ended June 30, 2021 and 2020, and the twelve months ended December 31, 2020, interest expense on the line of credit amounted to $555,250, $627,586 and $1,088,265, respectively.

 

The line of credit agreement contains certain covenants and restrictions. The Fund was in compliance with these covenants and restrictions at June 30, 2021 and December 31, 2020.

 

Line of credit, net, consisted of the following at June 30, 2021:

 

Line of credit

 

$ 31,259,241

 

Line of credit origination fees

 

 

(93,899 )

Line of credit, net

 

$ 31,195,342

 

 

Line of credit, net, consisted of the following at December 31, 2020:

 

Line of credit

 

$ 22,296,965

 

Line of credit origination fees

 

 

(95,739 )

Line of credit, net

 

$ 22,201,226

 

 

 
27

Table of Contents

  

IRON BRIDGE MORTGAGE FUND, LLC

(An Oregon Limited Liability Company)

Notes to Financial Statements

June 30, 2021 and 2020

(unaudited)

_________________________

 

8. Related Party Transactions

 

Servicing fees

 

Servicing fees of .25% (3% annually) of the principal amount of each Fund loan are payable monthly to the Manager. During the six months ended June 30, 2021 and 2020, servicing fees earned by the Manager amounted to $1,480,748 and $1,300,501, respectively. As of June 30, 2021 and December 31, 2020, servicing fees payable to the Manager were $262,606 and $232,400, respectively.

 

Operating expenses

 

For the six months ended June 30, 2021 and 2020, the Manager elected to absorb all operating expenses of the Fund besides those which have been recorded in the Fund’s statement of income and changes in members’ equity.

 

9. Loan Concentrations and Characteristics

 

The loans are secured by recorded deeds of trust or mortgages. At June 30, 2021, there were 321 secured loans outstanding with 160 borrowers with the following characteristics:

 

Number of secured loans outstanding

 

 

321

 

Total secured loans outstanding

 

$ 110,860,000

 

Average secured loan outstanding

 

$ 345,000

 

Average secured loan as percent of total secured loans

 

 

0.31 %

Average secured loan as percent of members’ equity

 

 

0.72 %

Largest secured loan outstanding

 

$ 2,100,000

 

Largest secured loan as percent of total secured loans

 

 

1.89 %

Largest secured loan as percent of members’ equity

 

 

4.37 %

Number of secured loans over 90 days past due and still accruing interest

 

 

1

 

 

 
28

Table of Contents

  

IRON BRIDGE MORTGAGE FUND, LLC

(An Oregon Limited Liability Company)

Notes to Financial Statements

June 30, 2021 and 2020

(unaudited)

_________________________

 

9. Loan Concentrations and Characteristics (continued)

 

Approximate investment in secured loans over 90 days past due interest and still accruing interest

 

$ 884,000

 

Number of secured loans in foreclosure

 

 

1

 

Approximate principal of secured loans in foreclosure

 

$ 884,000

 

Number of secured loans on non-accrual status

 

 

-

 

Approximate investment in secured loans on non-accrual status

 

$ -

 

Number of secured loans considered to be impaired

 

 

-

 

Approximate investment in secured loans considered to be impaired

 

$ -

 

Average investment in secured loans considered to be impaired

 

$ -

 

Approximate amount of foregone interest on loans considered to be impaired

 

$ -

 

Estimated amount of impairment on loans considered to be impaired (included in the allowance for loan losses)

 

$ -

 

Number of secured loans over 90 days past maturity

 

 

1

 

Approximate principal of secured loans over 90 days past maturity

 

$ 884,000

 

Number of states where security is located

 

 

16

 

Number of counties where security is located

 

 

79

 

 

At June 30, 2021, all of the Fund’s loans are secured by recorded deeds of trust or mortgages in a first lien position on real property located throughout the United States. The various states within the United States in which secured property is located are as follows at June 30, 2021:

 

 

 

Loan Balances

 

 

Percentage

 

California

 

$ 48,171,037

 

 

 

43.45 %

Oregon

 

 

15,659,985

 

 

 

14.13 %

Texas

 

 

14,470,490

 

 

 

13.05 %

Other **

 

 

32,561,935

 

 

 

29.37 %

Totals

 

$ 110,863,446

 

 

 

100.00 %

 

 
29

Table of Contents

  

IRON BRIDGE MORTGAGE FUND, LLC

(An Oregon Limited Liability Company)

Notes to Financial Statements

June 30, 2021 and 2020

(unaudited)

_________________________

 

9. Loan Concentrations and Characteristics (continued)

 

The various counties in which secured property is located are as follows at June 30, 2021:

 

 

 

Loan Balances

 

 

Percentage

 

Santa Clara, California

 

$ 12,785,970

 

 

 

11.53 %

Multnomah, Oregon

 

 

9,403,840

 

 

 

8.48 %

Other **

 

 

88,673,636

 

 

 

79.99 %

Totals

 

$ 110,863,446

 

 

 

100.00 %

 

** None of the states or counties included in the “Other” category above include loan concentrations greater than 9%.

 

Loans by type of property at June 30, 2021:

 

Single family residential (1 - 4 units)

 

$ 93,232,386

 

Land/Construction

 

 

11,504,064

 

Commercial

 

 

3,100,137

 

Multi-family residential (5 or more units)

 

 

3,026,859

 

Total

 

$ 110,863,446

 

 

The schedule below reflects the balances of the Fund’s secured loans with regards to the aging of interest payments due at June 30, 2021:

 

Current (0 to 30 days)

 

$ 109,979,386

 

31 to 90 days

 

 

-

 

91 days and greater

 

 

884,060

 

Total

 

$ 110,863,446

 

 

At June 30, 2021, all of the Fund’s loans carry a term of six to 12 months; therefore the entire loan balance of $110,863,446 is scheduled to mature on or before June 30, 2022. The scheduled maturities includes 1 loan totaling approximately $884,060 which was past maturity at June 30, 2021.

 

It is the Fund’s experience that often times mortgage loans are either extended or repaid before contractual maturity dates, refinanced at maturity or may go into default and not be repaid by the contractual maturity dates. Therefore, the above tabulation is not a forecast of future cash collections.

 

 
30

Table of Contents

  

IRON BRIDGE MORTGAGE FUND, LLC

(An Oregon Limited Liability Company)

Notes to Financial Statements

June 30, 2021 and 2020

(unaudited)

_________________________

 

9. Loan Concentrations and Characteristics (continued)

 

The loans are secured by recorded deeds of trust or mortgages. At December 31, 2020, there were 267 secured loans outstanding with 175 borrowers with the following characteristics:

 

Number of secured loans outstanding

 

 

276

 

Total secured loans outstanding

 

$ 92,048,404

 

Average secured loan outstanding

 

$ 333,509

 

Average secured loan as percent of total secured loans

 

 

0.36 %

Average secured loan as percent of members’ equity

 

 

1.54 %

Largest secured loan outstanding

 

$ 2,500,000

 

Largest secured loan as percent of total secured loans

 

 

2.72 %

Largest secured loan as percent of members’ equity

 

 

11.51 %

Number of secured loans over 90 days past due and still accruing interest

 

 

3

 

Approximate investment in secured loans over 90 days past due interest and still accruing interest

 

$ 2,700,000

 

Number of secured loans in foreclosure

 

 

-

 

Approximate principal of secured loans in foreclosure

 

$ 530,000

 

Number of secured loans on non-accrual status

 

 

-

 

Approximate investment in secured loans on non-accrual status

 

$ -

 

Number of secured loans considered to be impaired

 

 

-

 

Approximate investment in secured loans considered to be impaired

 

$ -

 

Average investment in secured loans considered to be impaired

 

$ -

 

Approximate amount of foregone interest on loans considered to be impaired

 

$ -

 

Estimated amount of impairment on loans considered to be impaired (included in the allowance for loan losses)

 

$ -

 

Number of secured loans over 90 days past maturity

 

 

3

 

Approximate principal of secured loans over 90 days past maturity

 

$ 2,700,000

 

Number of states where security is located

 

 

18

 

Number of counties where security is located

 

 

79

 

 

 
31

Table of Contents

  

IRON BRIDGE MORTGAGE FUND, LLC

(An Oregon Limited Liability Company)

Notes to Financial Statements

June 30, 2021 and 2020

(unaudited)

_________________________

 

9. Loan Concentrations and Characteristics (continued)

 

At December 31, 2020, all of the Fund’s loans are secured by recorded deeds of trust or mortgages in a first lien position on real property located throughout the United States. The various states within the United States in which secured property is located are as follows at December 31, 2020:

 

 

 

Loan Balances

 

 

Percentage

 

California

 

$ 45,258,345

 

 

 

49.17 %

Oregon

 

 

14,405,301

 

 

 

15.65 %

Other **

 

 

32,384,758

 

 

 

35.18 %

Totals

 

$ 92,048,404

 

 

 

100.00 %

 

The various counties in which secured property is located are as follows at December 31, 2020:

 

 

 

Loan Balances

 

 

Percentage

 

Santa Clara, California

 

$ 9,654,493

 

 

 

10.49 %

Other **

 

 

82,393,911

 

 

 

89.51 %

Totals

 

$ 92,048,404

 

 

 

100.00 %

 

** None of the states or counties included in the “Other” category above include loan concentrations greater than 10%.

 

Loans by type of property at December 31, 2020:

 

Single family residential (1 - 4 units)

 

$ 77,179,312

 

Commercial

 

 

5,982,527

 

Land/Construction

 

 

5,854,282

 

Multi-family residential (5 or more units)

 

 

3,032,283

 

Total

 

$ 92,048,404

 

 

The schedule below reflects the balances of the Fund’s secured loans with regards to the aging of interest payments due at December 31, 2020:

 

Current (0 to 30 days)

 

$ 89,348,906

 

31 to 90 days

 

 

-

 

91 days and greater

 

 

2,699,498

 

Total

 

$ 92,048,404

 

 

 
32

Table of Contents

  

IRON BRIDGE MORTGAGE FUND, LLC

(An Oregon Limited Liability Company)

Notes to Financial Statements

June 30, 2021 and 2020

(unaudited)

_________________________

 

9. Loan Concentrations and Characteristics (continued)

 

At December 31, 2020, all of the Fund’s loans carry a term of six to twelve months; therefore, the entire loan balance of $92,048,404 is scheduled to mature in 2021. The scheduled maturities for 2020 include 4 loans totaling approximately $3,540,000 which are past maturity at December 31, 2020.

 

It is the Fund’s experience that often times mortgage loans are either extended or repaid before contractual maturity dates, refinanced at maturity or may go into default and not be repaid by the contractual maturity dates. Therefore, the above tabulation is not a forecast of future cash collections.

 

10. Real Estate Held for Sale Concentrations and Characteristics

 

The following schedule reflects the net costs of real estate properties acquired through or in lieu of foreclosure and held for sale, if any, and the recorded reductions to estimated fair values, including estimated costs to sell when applicable, and other related activity as of and for the six months ended June 30, 2021:

 

Beginning balance (as of December 31, 2020)

 

$ 1,881,701

 

Costs of real estate acquired through or in lieu of foreclosure

 

 

-

 

Improvement costs

 

 

-

 

Converted to held for use

 

 

-

 

Sales of real estate

 

 

-

 

Ending balance

 

$ 1,881,701

 

 

At June 30, 2021, the real estate held for sale properties included one single family residential property in Alameda County, California.

 

11. Rental Property

 

The Company rented two residential rental properties during 2021 and disposed of both rental properties during 2021.

 

At June 30, 2021, the Company had no rental properties.

 

 
33

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IRON BRIDGE MORTGAGE FUND, LLC

(An Oregon Limited Liability Company)

Notes to Financial Statements

June 30, 2021 and 2020

(unaudited)

_________________________

 

12. Commitments and Contingencies

 

Construction loans

 

At June 30, 2021, the Fund had 136 approved construction loans with a total borrowing limit of approximately $22,358,974. 107 loans had undisbursed construction funds, totaling approximately $14,051,571. Disbursements are made at various completed phases of the construction project. Undistributed amounts will be funded by a combination of new note program borrowings, line of credit draws, member contributions, reinvestments of earnings, and the payoff of principal on current loans.

 

At December 31, 2020, the Fund had 114 approved construction loans with a total borrowing limit of approximately $17,929,765. 97 loans had undisbursed construction funds, totaling approximately $8,826,235. Disbursements are made at various completed phases of the construction project. Undistributed amounts will be funded by a combination of new note program borrowings, line of credit draws, member contributions, reinvestments of earnings, and the payoff of principal on current loans.

 

Legal proceedings

 

The Fund is involved in various legal actions arising in the normal course of business. In the opinion of management, such matters will not have a significant adverse effect on the results of operations or financial position of the Fund.

 

 
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ITEM 4 EXHIBITS

 

Exhibit

No.

 

Description

 

2.1

Articles of Organization of Iron Bridge Mortgage Fund, LLC (Incorporated by reference to Exhibit 2.1 to Iron Bridge Mortgage, LLC Regulation A Offering Statement on Form 1-A as filed with the Securities and Exchange Commission on December 19, 2017 (File No. 024-10777))

 

2.2

Second Amended and Restated Operating Agreement of Iron Bridge Mortgage Fund, LLC, as amended (Incorporated by reference to Exhibit 2.1 to the Current Report on Form 1-U as filed with the Securities and Exchange Commission on February 1, 2021 (File No. 24R-00149))

 

 

 

3.1

Form of Senior Secured Demand Note (Incorporated by reference to Exhibit 3.1 to Iron Bridge Mortgage, LLC Amendment No. 1 to Regulation A Offering Statement on Form 1-A as filed with the Securities and Exchange Commission on February 8, 2018 (File No. 024-10777))

 

3.2

Form of Senior Secured Demand Note Security Agreement (Incorporated by reference to Exhibit 3.2 to Iron Bridge Mortgage, LLC Amendment No. 1 to Regulation A Offering Statement on Form 1-A as filed with the Securities and Exchange Commission on February 8, 2018 (File No. 024-10777))

 

3.3

 

Subordination Agreement, dated effective May 7, 2021, by and among Carr Butterfield, LLC, Iron Bridge Mortgage Fund, LLC and Umpqua Bank (Incorporated by reference to Exhibit 3.1 to the Current Report on Form 1-U as filed with the Securities and Exchange Commission on May 19, 2021 (File No. 24R-00149))

 

 

 

3.4

Subordination Agreement among Iron Bridge Mortgage Fund LLC, Iron Bridge Management Group, LLC and Western Alliance Bank dated as of December 22, 2015 (Incorporated by reference to Exhibit 3.4 to Iron Bridge Mortgage, LLC Regulation A Offering Statement on Form 1-A as filed with the Securities and Exchange Commission on December 19, 2017 (File No. 024-10777))

 

4.1

Form of Senior Secured Demand Note Subscription Agreement (Incorporated by reference to Exhibit 4.1 to Iron Bridge Mortgage, LLC Amendment No. 1 to Regulation A Offering Statement on Form 1-A as filed with the Securities and Exchange Commission on February 8, 2018 (File No. 024-10777))

 

4.2

Form of Senior Secured Demand Note Purchase Agreement (Incorporated by reference to Exhibit 4.2 to Iron Bridge Mortgage, LLC Amendment No. 1 to Regulation A Offering Statement on Form 1-A as filed with the Securities and Exchange Commission on February 8, 2018 (File No. 024-10777))

 

 

 

6.1

 

Business Loan and Security Agreement (Revolving Line of Credit), dated effective May 7, 2021, by and between Iron Bridge Mortgage Fund, LLC and Umpqua Bank (Incorporated by reference to Exhibit 6.1 to the Current Report on Form 1-U as filed with the Securities and Exchange Commission on May 19, 2021 (File No. 24R-00149))

 

 

 

6.2

 

First Amendment to Loan Documents, dated August 10, 2021, by and between Iron Bridge Mortgage Fund, LLC and Umqua Bank (Incorporated by reference to Exhibit 6.22 to the Offering Statement on Form 1-A/A as filed with the Securities and Exchange Commission on August 31, 2021 (File No. 024-11462))

 

 

 

6.3

 

Promissory Note, dated effective May 7, 2021, issued by Iron Bridge Mortgage Fund, LLC in favor of Umpqua Bank (Incorporated by reference to Exhibit 6.2 to the Current Report on Form 1-U as filed with the Securities and Exchange Commission on May 19, 2021 (File No. 24R-00149))

 

6.4

Loan and Security Agreement between Iron Bridge Mortgage Fund, LLC and Western Alliance Bank dated as of December 22, 2015 (Incorporated by reference to Exhibit 6.1 to Iron Bridge Mortgage, LLC Regulation A Offering Statement on Form 1-A as filed with the Securities and Exchange Commission on December 19, 2017 (File No. 024-10777))

 

6.5

Custodial Agreement by and among Western Alliance Bank, Iron Bridge Mortgage Fund, LLC and U.S. Bank National Association dated as of January 5, 2016 (Incorporated by reference to Exhibit 6.2 to Iron Bridge Mortgage, LLC Regulation A Offering Statement on Form 1-A as filed with the Securities and Exchange Commission on December 19, 2017 (File No. 024-10777))

 

6.6

Amendment No. 1 to Loan and Security Agreement between Iron Bridge Mortgage Fund, LLC and Western Alliance Bank dated as of March 20, 2017 (Incorporated by reference to Exhibit 6.3 to Iron Bridge Mortgage, LLC Regulation A Offering Statement on Form 1-A as filed with the Securities and Exchange Commission on December 19, 2017 (File No. 024-10777))

 

 
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SIGNATURES

 

Pursuant to the requirements of Regulation A, the issuer has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Portland, State of Oregon, on September 28, 2021.

 

 

IRON BRIDGE MORTGAGE FUND, LLC

 

By:

IRON BRIDGE MANAGEMENT GROUP, LLC

 

Its:

Manager

 

By:

/s/ Gerard Stascausky

 

Name:

Gerard Stascausky

 

Title:

Managing Director

 

Pursuant to the requirements of Regulation A, this report has been signed below by the following persons on behalf of the issuer in the capacities indicated, and on September 28, 2021.

 

 

IRON BRIDGE MANAGEMENT GROUP, LLC

 

By:

/s/ Gerard Stascausky

 

Name:

Gerard Stascausky

 

Title:

Managing Director of

Iron Bridge Management Group, LLC

(Principal Executive Officer)

 

By:

/s/ Sarah Gragg Stascausky

 

Name:

Sarah Gragg Stascausky

 

Title:

Managing Director of

Iron Bridge Management Group, LLC

(Principal Financial Officer and Principal Accounting Officer)

 

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