10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended June 30, 2018

or

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

For the Transition Period From                       to

Commission File Number 333-203707

SHEPHERD’S FINANCE, LLC

(Exact name of registrant as specified on its charter)

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

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

(Address of principal executive offices)

(302)752-2688

(Registrant’s telephone number including area code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ]

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

Large accelerated filer	[  ]	Accelerated filer	[  ]
Non-accelerated filer	[  ]	Smaller reporting company	[X]
Emerging growth company	[X]

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

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

FORM 10-Q

SHEPHERD’S FINANCE, LLC

TABLE OF CONTENTS

	Page
Cautionary Note Regarding Forward-Looking Statements	3
PART I. FINANCIAL INFORMATION	4
Item 1. Financial Statements	4
Interim Condensed Consolidated Balance Sheets as of June 30, 2018 (Unaudited) and December 31, 2017	4
Interim Condensed Consolidated Statements of Operations (Unaudited) for the Three Months and Six Months Ended June 30, 2018 and 2017	5
Interim Condensed Consolidated Statement of Changes in Members’ Capital (Unaudited) for the Six Months Ended June 30, 2018	6
Interim Condensed Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 2018 and 2017	7
Notes to Interim Condensed Consolidated Financial Statements (Unaudited)	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3. Quantitative and Qualitative Disclosure About Market Risk	38
Item 4. Controls and Procedures	38
PART II. OTHER INFORMATION	39
Item 1. Legal Proceedings	39
Item 1A. Risk Factors	39
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3. Defaults upon Senior Securities	40
Item 4. Mine Safety Disclosures	40
Item 5. Other Information	40
Item 6. Exhibits	40

2

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this Form 10-Q of Shepherd’s Finance, LLC, other than historical facts, may be considered forward-looking statements within the meaning of the federal securities laws. Words such as “may,” “will,” “expect,” “anticipate,” “believe,” “estimate,” “continue,” “predict,” or other similar words identify forward-looking statements. Forward-looking statements appear in a number of places in this report, including without limitation, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and include statements regarding our intent, belief or current expectation about, among other things, trends affecting the markets in which we operate, our business, financial condition and growth strategies. Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual results may differ materially from those predicted in the forward-looking statements as a result of various factors, including but not limited to those set forth in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2017, as filed with the Securities and Exchange Commission. If any of the events described in “Risk Factors” occur, they could have an adverse effect on our business, consolidated financial condition, results of operations, and cash flows.

When considering forward-looking statements, you should keep these risk factors, as well as the other cautionary statements in this report and in our 2017 Form 10-K in mind. You should not place undue reliance on any forward-looking statement. We are not obligated to update forward-looking statements.

3

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Shepherd’s Finance, LLC

Interim Condensed Consolidated Balance Sheets

	As of
(in thousands of dollars)	June 30, 2018		December 31, 2017
	(Unaudited)
Assets
Cash and cash equivalents	$	247	$	3,478
Accrued interest receivable		653		720
Loans receivable, net		41,819		30,043
Foreclosed assets		5,636		1,036
Property, plant and equipment, net		1,045		1,020
Other assets		176		58
Total assets	$	49,576	$	36,355
Liabilities, Redeemable Preferred Equity and Members’ Capital
Liabilities
Customer interest escrow	$	544	$	935
Accounts payable and accrued expenses		482		705
Accrued interest payable		1,654		1,353
Notes payable secured, net of deferred financing costs		21,058		11,644
Notes payable unsecured, net of deferred financing costs		20,769		16,904
Due to preferred equity member		31		31
Total liabilities		44,538		31,572
Commitments and Contingencies (Notes 3 and 9)
Redeemable Preferred Equity
Series C preferred equity		1,165		1,097
Members’ Capital
Series B preferred equity		1,280		1,240
Class A common equity		2,593		2,446
Members’ capital		3,873		3,686
Total liabilities, redeemable preferred equity and members’ capital	$	49,576	$	36,355

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

4

Shepherd’s Finance, LLC

Interim Condensed Consolidated Statements of Operations - Unaudited

For the Three and Six Months ended June 30, 2018 and 2017

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(in thousands of dollars)	2018		2017		2018		2017
Interest Income
Interest and fee income on loans	$	2,045	$	1,356	$	3,872	$	2,530
Interest expense:
Interest related to secured borrowings		517		215		928		394
Interest related to unsecured borrowings		513		401		963		768
Interest expense		1,030		616		1,891		1,162
Net interest income		1,015		740		1,981		1,368
Less: Loan loss provision		19		15		59		26
Net interest income after loan loss provision		996		725		1,922		1,342
Non-Interest Income
Gain from sale of foreclosed assets		–		–		–		77
Total non-interest income		–		–		–		77
Income		996		725		1,922		1,419
Non-Interest Expense
Selling, general and administrative		691		450		1,308		898
Depreciation and amortization		21		6		38		12
Impairment loss on foreclosed assets		80		106		85		155
Total non-interest expense		792		562		1,431		1,065
Net Income	$	204		163	$	491	$	354
Earned distribution to preferred equity holders		67		57		130		88
Net income attributable to common equity holders	$	137		106	$	361	$	266

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

5

Shepherd’s Finance, LLC

Interim Condensed Consolidated Statements of Changes in Members’ Capital - Unaudited

For the Six Months Ended June 30, 2018

(in thousands of dollars)	Six Months Ended June 30, 2018
Members’ capital, beginning balance	$	3,686
Net income		491
Contributions from members (preferred)		40
Earned distributions to preferred equity holders		(130	)
Distributions to common equity holders		(214	)
Members’ capital, ending balance	$	3,873

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

6

Shepherd’s Finance, LLC

Interim Condensed Consolidated Statements of Cash Flows - Unaudited

For the Six Months Ended June 30, 2018 and 2017

	Six Months Ended June 30,
(in thousands of dollars)	2018			2017
Cash flows from operations
Net income	$	491		$	354
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Amortization of deferred financing costs		95			121
Provision for loan losses		59			26
Net loan origination fees deferred (earned)		351			254
Change in deferred origination expense		(87	)		(71	)
Impairment of foreclosed assets		85			155
Depreciation and amortization		38			12
Gain from sale of foreclosed assets		-			(77	)
Net change in operating assets and liabilities
Other assets		(118	)		10
Accrued interest receivable		(176	)		(74	)
Customer interest escrow		(391	)		17
Accounts payable and accrued expenses		78			39
Net cash provided by (used in) operating activities		425			742
Cash flows from investing activities
Loan originations and principal collections, net		(15,996	)		(9,090	)
Investment in foreclosed assets		(545	)		(265	)
Proceeds from sale of foreclosed assets		-			1,890
Property plant and equipment additions		(63	)		(583	)
Net cash provided by (used in) investing activities		(16,564	)		(8,048	)
Cash flows from financing activities
Contributions from redeemable preferred equity		-			1,004
Contributions from members (preferred)		40			10
Distributions to preferred equity holders		(62	)		(58	)
Distributions to common equity holders		(214	)		(117	)
Proceeds from secured note payable		13,538			5,775
Repayments of secured note payable		(4,118	)		(4,277	)
Proceeds from unsecured notes payable		8,784			9,218
Redemptions/repayments of unsecured notes payable		(4,953	)		(5,687	)
Deferred financing costs paid		(67	)		(40	)
Net cash provided by (used in) financing activities		12,948			5,828
Net increase (decrease) in cash and cash equivalents		(3,231	)		(1,478	)
Cash and cash equivalents
Beginning of period		3,478			1,566
End of period	$	247		$	88
Supplemental disclosure of cash flow information
Cash paid for interest	$	1,533		$	1,062
Non-cash investing and financing activities
Earned but not paid distribution of preferred equity holders	$	68		$	29
Foreclosure of assets	$	3,897		$	–
Accrued interest reduction due to foreclosure	$	243		$	–

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

7

Shepherd’s Finance, LLC

Notes to Interim Condensed Consolidated Financial Statements (unaudited)

Information presented throughout these notes to the interim condensed consolidated financial statements (unaudited) is in thousands of dollars.

1. Description of Business and Basis of Presentation

Description of Business

Shepherd’s Finance, LLC and subsidiary (the “Company”) was originally formed as a Pennsylvania limited liability company on May 10, 2007. The Company is a sole member of a consolidating subsidiary, 84 REPA, LLC. The Company operates pursuant to its Second Amended and Restated Operating Agreement by and among Daniel M. Wallach and the other members of the Company effective as of March 16, 2017.

As of June 30, 2018, the Company extends commercial loans to residential homebuilders (in 17 states) to:

● construct single family homes,

● develop undeveloped land into residential building lots, and

● purchase and improve for sale older homes.

Basis of Presentation

The accompanying (a) interim condensed consolidated balance sheet as of December 31, 2017, which has been derived from audited consolidated financial statements, and (b) unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. While certain information and disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), management believes that the disclosures herein are adequate to make the unaudited interim condensed consolidated information presented not misleading. In the opinion of management, the unaudited interim condensed consolidated financial statements reflect all adjustments necessary for a fair presentation of the consolidated financial position, results of operations, and cash flows for the periods presented. Such adjustments are of a normal, recurring nature. The consolidated results of operations for any interim period are not necessarily indicative of results expected for the fiscal year ending December 31, 2018. These unaudited interim condensed consolidated financial statements should be read in conjunction with the 2017 consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K as of and for the year ended December 31, 2017 (the “2017 Statements”). The accounting policies followed by the Company are set forth in Note 2 – Summary of Significant Accounting Policies in the 2017 Statements.

Accounting Standards Adopted in the Period

Accounting Standards Update (“ASU”) 2016-01, “Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (An Amendment of FASB ASC 825).” The Financial Accounting Standards Board (“FASB”) issued ASU 2016-01 in January 2016, and it was intended to enhance the reporting model for financial instruments to provide users of financial statements with improved decision-making information. The amendments of ASU 2016-01 include: (i) requiring equity investments, except those accounted for under the equity method of accounting or those that result in the consolidation of an investee, to be measured at fair value, with changes in fair value recognized in net income; (ii) requiring a qualitative assessment to identify impairment of equity investments without readily determinable fair values; and (iii) clarifying that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets.

8

ASU 2016-01 became effective for the Company on January 1, 2018. The adoption of ASU 2016-01 did not have a material impact on the Company’s consolidated financial statements.

ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).” Issued in May 2014, ASU 2014-09 added FASB Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers,” and superseded revenue recognition requirements in FASB ASC Topic 605, “Revenue Recognition,” and certain cost guidance in FASB ASC Topic 605-35, “Revenue Recognition – Construction-Type and Production-Type Contracts.” ASU 2014-09 requires an entity to recognize revenue when (or as) an entity transfers control of goods or services to a customer at the amount to which the entity expects to be entitled. Depending on whether certain criteria are met, revenue should be recognized either over time, in a manner that depicts the entity’s performance, or at a point in time, when control of the goods or services is transferred to the customer. ASU 2014-09 became effective for the Company on January 1, 2018. The adoption of ASU 2014-09 did not have a material impact on the Company’s consolidated financial statements.

Revenue

On January 1, 2018, the Company implemented ASU 2014-09, codified at ASC Topic 606. The Company adopted ASC Topic 606 using the modified retrospective transition method. As of December 31, 2017, the Company had no uncompleted customer contracts and, as a result, no cumulative transition adjustment was made during the first quarter of 2018. Results for reporting periods beginning January 1, 2018 are presented under ASC Topic 606, while prior period amounts continue to be reported under legacy U.S. GAAP.

The majority of the Company’s revenue is generated through interest earned on financial instruments, including loans, which falls outside the scope of ASC Topic 606. All of the Company’s revenue that is subject to ASC Topic 606 would be included in non-interest income; however, not all non-interest income is subject to ASC Topic 606. The Company had no contract liabilities or unsatisfied performance obligations with customers as of June 30, 2018.

Reclassifications

Certain prior year amounts have been reclassified for consistency with current period presentation.

2. Fair Value

The Company had no financial instruments measured at fair value on a recurring basis as of June 30, 2018 and December 31, 2017.

The following tables present the balances of non-financial instruments measured at fair value on a non-recurring basis as of June 30, 2018 and December 31, 2017.

June 30, 2018

	Carrying		Estimated		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Amount		Fair Value		Level 1		Level 2		Level 3
Foreclosed assets	$	5,636	$	5,636	$	–	$	–	$	5,636

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December 31, 2017

					Quoted Prices
					in Active		Significant
					Markets for		Other		Significant
					Identical		Observable		Unobservable
	Carrying		Estimated		Assets		Inputs		Inputs
	Amount		Fair Value		Level 1		Level 2		Level 3
Foreclosed assets	$	1,036	$	1,036	$	–	$	–	$	1,036

The Company had no impaired loans as of June 30, 2018 and December 31, 2017.

The table below is a summary of fair value estimates for financial instruments and the level of the fair value hierarchy within which the fair value measurements are categorized at the periods indicated:

June 30, 2018

					Quoted Prices
					in Active		Significant
					Markets for		Other		Significant
					Identical		Observable		Unobservable
	Carrying		Estimated		Assets		Inputs		Inputs
	Amount		Fair Value		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	247	$	247	$	247	$	–	$	–
Loans receivable, net		41,819		41,819		–		–		41,819
Accrued interest receivable		653		653		–		–		653
Financial Liabilities:
Customer interest escrow		544		544		–		–		544
Notes payable secured		21,058		21,058		–		–		21,058
Notes payable unsecured, net		20,769		20,769		–		–		20,769
Accrued interest payable		1,654		1,654		–		–		1,654

December 31, 2017

					Quoted Prices
					in Active		Significant
					Markets for		Other		Significant
					Identical		Observable		Unobservable
	Carrying		Estimated		Assets		Inputs		Inputs
	Amount		Fair Value		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	3,478	$	3,478	$	3,478	$	–	$	–
Loans receivable, net		30,043		30,043		–		–		30,043
Accrued interest receivable		720		720		–		–		720
Financial Liabilities:
Customer interest escrow		935		935		–		–		935
Notes payable secured		11,644		11,644		–		–		11,644
Notes payable unsecured, net		16,904		16,904		–		–		16,904
Accrued interest payable		1,353		1,353		–		–		1,353

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3. Financing Receivables

Financing receivables are comprised of the following as of June 30, 2018 and December 31, 2017:

	June 30, 2018			December 31, 2017
Loans receivable, gross	$	44,803		$	32,375
Less: Deferred loan fees		(1,197	)		(847	)
Less: Deposits		(1,827	)		(1,497	)
Plus: Deferred origination expense		196			109
Less: Allowance for loan losses		(156	)		(97	)
Loans receivable, net	$	41,819		$	30,043

Commercial Construction and Development Loans

Commercial Loans – Construction Loan Portfolio Summary

As of June 30, 2018, the Company has 68 borrowers, all of whom, including four development loan customers (the “Hoskins Group,” consisting of Benjamin Marcus Homes, LLC, Investor’s Mark Acquisitions, LLC, and Mark Hoskins, being the largest of the four), borrow money for the purpose of building new homes.

The following is a summary of the loan portfolio to builders for home construction loans as of June 30, 2018 and December 31, 2017:

Year	Number of States		Number of Borrowers		Number of Loans		Value of Collateral(1)		Commitment Amount		Gross Amount Outstanding		Loan to Value Ratio(2)			Loan Fee
2018		17		68		245	$	93,976	$	60,551	$	38,888		64	%(3)		5	%
2017		16		52		168		75,931		47,087		29,564		62	%(3)		5	%

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

Commercial Loans – Real Estate Development Loan Portfolio Summary

The following is a summary of our loan portfolio to builders for land development as of June 30, 2018 and December 31, 2017:

Year	Number of States		Number of Borrowers		Number of Loans(4)		Gross Value of Collateral(1)		Commitment Amount(3)		Gross Amount Outstanding		Loan to Value Ratio(2)			Loan Fee
2018		3		4		7	$	8,249	$	6,367	$	5,915		72	%	$	1,000
2017		1		1		3		4,997		4,600		2,811		56	%		1,000

(1)	The value is determined by the appraised value adjusted for remaining costs to be paid. A portion of this collateral is $1,280 and $1,240 as of June 30, 2018 and December 31, 2017, respectively of preferred equity in our Company. In the event of a foreclosure on the property securing these loans, the portion of our collateral that is preferred equity might be difficult to sell, which may impact our ability to recover the loan balance. In addition, a portion of the collateral value is estimated based on the selling prices anticipated for the homes.
(2)	The loan to value ratio is calculated by taking the outstanding amount and dividing by the appraised value calculated as described above.
(3)	The commitment amount does not include letters of credit and cash bonds.
(4)	As of December 31, 2017, our development loans consisted of borrowings which originated in December 2011 and to which we refer throughout this report as the “Pennsylvania Loans”. During the first six months of 2018, the Company originated one additional development loan to the Pennsylvania Loans.

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Credit Quality Information

The following tables present credit-related information at the “class” level in accordance with FASB ASC 310-10-50, “Disclosures about the Credit Quality of Finance Receivables and the Allowance for Credit Losses.” See our Form 10-K for the year ended December 31, 2017, as filed with the SEC, for more information.

Gross finance receivables – By risk rating:

	June 30, 2018		December 31, 2017
Pass	$	39,327	$	25,656
Special mention		5,476		6,719
Total	$	44,803	$	32,375

Gross finance receivables – Method of impairment calculation:

	June 30, 2018		December 31, 2017
Performing loans evaluated individually	$	18,409	$	14,992
Performing loans evaluated collectively		26,394		17,383
Total	$	44,803	$	32,375

As of June 30, 2018 and December 31, 2017, there were no loans acquired with deteriorated credit quality.

Concentrations

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of loans receivable. Our concentration risks for individual borrowers are summarized in the table below:

	June 30, 2018				December 31, 2017
		Percent of				Percent of
	Borrower	Loan			Borrower	Loan
	City	Commitments			City	Commitments
Highest concentration risk	Pittsburgh, PA		23	%	Pittsburgh, PA		22	%
Second highest concentration risk	Cape Coral, FL		4	%	Sarasota, FL		7	%
Third highest concentration risk	Orlando, FL		4	%	Savannah, GA		5	%

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4. Foreclosed Assets

The following table is a roll forward of foreclosed assets:

	Six Months Ended June 30, 2018			Year Ended December 31, 2017			Six Months Ended June 30, 2017
Beginning balance	$	1,036		$	2,798		$	2,798
Additions from loans		4,140			-			-
Additions for construction/development		545			317			265
Sale proceeds		-			(1,890	)		(1,890	)
Gain on sale		-			77			77
Impairment loss on foreclosed assets		(85	)		(266	)		(155	)
Ending balance	$	5,636		$	1,036		$	1,095

During April 2018, we entered into a Deed in Lieu of Foreclosure Agreement with a certain borrower who defaulted on a loan by failing to make an interest payment that was due. The Company reclassified $4,140, consisting of $3,897 of principal from Loan receivable, net and $243 of interest from Accrued interest receivable, to Foreclosed assets on the balance sheet as of June 30, 2018.

5. Borrowings

The following table displays our borrowings and a ranking of priority:

	Priority Rank		June 30, 2018		December 31, 2017
Borrowing Source
Purchase and sale agreements		1	$	19,186	$	11,644
Secured line of credit from affiliates		2		1,877		-
Unsecured line of credit (senior)		3		500		-
Other unsecured borrowings (senior subordinated)		4		1,008		279
Unsecured Notes through our public offering, gross		5		15,274		14,121
Other unsecured borrowings (subordinated)		5		3,649		2,617
Other unsecured borrowings (junior subordinated)		6		590		173
Total			$	42,084	$	28,834

The following table shows the maturity of outstanding borrowings as of June 30, 2018:

Year Maturing	Total Amount Maturing		Public Offering		Other Unsecured		Purchase and Sale Agreements and Other Secured Borrowings
2018	$	25,728	$	2,306	$	3,007	$	20,415
2019		7,556		6,499		1,043		14
2020		2,270		2,155		100		15
2021		3,788		3,773		-		15
2022 and thereafter		2,742		541		1,597		604
Total	$	42,084	$	15,274	$	5,747	$	21,063

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Secured Borrowings

Purchase and Sale Agreements

In March 2018, we entered into the Seventh Amendment (the “Seventh Amendment”) to our Loan Purchase and Sale Agreement (the “S.K. Funding LPSA”) with S.K. Funding, LLC (“S.K. Funding”).

The purpose of the Seventh Amendment was to allow S.K. Funding to purchase a portion of the Pennsylvania Loans for a purchase price of $649.

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

● If the total principal amount exceeds $1,000, S.K. Funding must fund the amount between $1,000 and less than or equal to $3,500.

● If the total principal amount is less than $4,500 then the Company will also repay S.K. Funding’s principal as principal payments are received on the Pennsylvania Loans from the underlying borrowers in the amount by which the total principal amount is less than $4,500 until S.K. Funding’s principal has been repaid in full.

● The interest rate accruing to S.K. Funding under the Seventh Amendment is 10.5% calculated on a 365/366-day basis.

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

Lines of Credit

Amendments to the Lines of Credit with Mr. Wallach and His Affiliates

During June 2018, we entered into a First Amendment to the line of credit with our Chief Executive Officer and his wife (the “Wallach LOC”) which modified the interest rate to generally equal the prime rate plus 3%. The interest rate for the Wallach LOC was 6.8% and 4.4% as of June 30, 2018 and 2017, respectively. We borrowed $877 and $0 against the Wallach LOC as of June 30, 2018 and 2017, respectively. Interest was $6 and $10 for the quarter and six months ended June 30, 2018, respectively. As of June 30, 2018, there was $373 remaining availability on the Wallach LOC.

During June 2018, we entered into a First Amendment to the line of credit with the 2007 Daniel M. Wallach Legacy Trust, which our Chief Executive Officer’s trust (the “Wallach Trust LOC”) which modified the interest rate to generally equal the prime rate plus 3%. The interest rate for this borrowing was 6.8% and 4.4% as of June 30, 2018 and 2017, respectively. As of June 30, 2018, we borrowed $0 against the Wallach Trust LOC. As of June 30, 2018, there the was $250 remaining availability on the Wallach Trust LOC.

Line of Credit (Shuman)

During July 2017, we entered into a line of credit agreement (the “Shuman LOC Agreement”) with a group of lenders (collectively, “Shuman”). Pursuant to the Shuman LOC Agreement, Shuman provides us with a revolving line of credit (the “Shuman LOC”) with the following terms:

● Principal not to exceed $1,325;

● Secured with assignments of certain notes and mortgages;

● Cost of funds to us of 10%; and

● Due in July 2019 unless extended by Shuman for one or more additional 12-month periods.

The Shuman LOC was fully borrowed as of June 30, 2018. Interest expense was $33 and $67 for the quarter and six months ended June 30, 2018, respectively.

Modification to the Line of Credit with Paul Swanson 

During April 2018, we entered into a Master Loan Modification Agreement (the “Swanson Modification Agreement”) with Paul Swanson which modified the Line of Credit Agreement between us and Mr. Swanson dated October 23, 2017. Pursuant to the Swanson Modification Agreement, Mr. Swanson provides us with a revolving line of credit (the “Swanson LOC”) with the following terms:

● Principal not to exceed $7,000;

● Secured with assignments of certain notes and mortgages;

● Cost of funds to us of 10%; and

● Due in January 2019 unless extended by Mr. Swanson for one or more additional 15-month periods.

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The Swanson LOC was fully borrowed as of June 30, 2018. Interest expense was $165 and $265 for the quarter and six months ended June 30, 2018, respectively.

New Line of Credit with William Myrick

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

● Principal not to exceed $1,000;

● Secured by a lien against all of our assets;

● Cost of funds to us generally equal to the prime rate plus 3%; and

● Due upon demand.

The Myrick LOC was fully borrowed as of June 30, 2018. Interest expense was $3 for both the quarter and six months ended June 30, 2018.

Mortgage Payable

During the first six months of 2018, we entered into a commercial mortgage on our office building with the following terms:

● Principal not to exceed $660;

● Interest rate at 5.07% per annum based on a year of 360 days; and

● Due in January 2033.

The principal amount of the Company’s commercial mortgage was $654 as of June 30, 2018. Interest expense was $7 and $18 for the quarter and six months ended June 30, 2018.

Summary

The purchase and sale agreements and lines of credit are summarized below:

	June 30, 2018				December 31, 2017
			Due From				Due From
	Book Value of		Shepherd’s		Book Value of		Shepherd’s
	Loans which		Finance to Loan		Loans which		Finance to Loan
	Served as Collateral		Purchaser or Lender		Served as Collateral		Purchaser or Lender
Loan Purchaser
Builder Finance, Inc.	$	8,538	$	4,843	$	7,483	$	4,089
S.K. Funding		10,108		6,625		9,128		4,134
Lender
Shuman		2,160		1,325		1,747		1,325
Paul Swanson		8,214		5,738		2,518		2,096
Total	$	29,020	$	18,531	$	20,876	$	11,644

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Unsecured Borrowings

Other Unsecured Debts

Our other unsecured debts are detailed below:

	Maturity	Interest			Principal Amount Outstanding as of
Loan	Date	Rate (1)			June 30, 2018		December 31, 2017
Unsecured Note with Seven Kings Holdings, Inc.	August 2018		7.5	%		500		500
Unsecured Line of Credit from Builder Finance, Inc.	January 2019		10.0	%		500		-
Unsecured Line of Credit from Paul Swanson	December 2018(2)		10.0	%		1,262		1,904
Subordinated Promissory Note	Demand(3)		7.5	%		1,125		-
Subordinated Promissory Note	December 2019		10.5	%		263		113
Subordinated Promissory Note	April 2020		10.0	%		100		100
Senior Subordinated Promissory Note	March 2022(4)		10.0	%		400		-
Senior Subordinated Promissory Note	March 2022(5)		1.0	%		728		-
Junior Subordinated Promissory Note	March 2022(5)		22.5	%		417		-
Senior Subordinated Promissory Note	October 2022(6)		1.0	%		279		279
Junior Subordinated Promissory Note	October 2022(6)		20.0	%		173		173
					$	5,747	$	3,069

⁽¹⁾ Interest rate per annum, based upon actual days outstanding and a 365/366 day year.

⁽²⁾ Due in December 2018 unless extended by Mr. Swanson for one or more additional 15-month periods.

⁽³⁾ Principal due six months after lender gives notice. This note may be prepaid without fee, premium, or penalty.

⁽⁴⁾ This note may be prepaid upon lender’s request at least 10 days prior to an interest payment and up to $20 of principal.

⁽⁵⁾ These notes were issued to the same holder and, when calculated together, yield a blended return of 11% per annum.

⁽⁶⁾ These notes were issued to the same holder and, when calculated together, yield a blended return of 10% per annum.

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

The effective interest rate on the Notes (“Notes”) offered pursuant to the Notes Program at June 30, 2018 and December 31, 2017 was 9.39% and 9.21%, respectively, not including the amortization of deferred financing costs. There are limited rights of early redemption. The following table shows the roll forward of the Notes Program:

	Six Months Ended June 30, 2018			Year Ended December 31, 2017			Six Months Ended June 30, 2017
Gross Notes outstanding, beginning of period	$	14,121		$	11,221		$	11,221
Notes issued		3,350			8,375			8,105
Note repayments / redemptions		(2,197	)		(5,475	)		(5,087	)
Gross Notes outstanding, end of period	$	15,274		$	14,121		$	14,239
Less deferred financing costs, net		252			286			330
Notes outstanding, net	$	15,022		$	13,835		$	13,909

The following is a roll forward of deferred financing costs:

	Six Months			Year			Six Months
	Ended			Ended			Ended
	June 30, 2018			December 31, 2017			June 30, 2017
Deferred financing costs, beginning balance	$	1,102		$	1,014		$	1,014
Additions		61			88			40
Deferred financing costs, ending balance	$	1,163		$	1,102		$	1,054
Less accumulated amortization		(911	)		(816	)		(724	)
Deferred financing costs, net	$	252		$	286		$	330

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

	Six Months		Year		Six Months
	Ended		Ended		Ended
	June 30, 2018		December 31, 2017		June 30, 2017
Accumulated amortization, beginning balance	$	816	$	603	$	603
Additions		95		213		121
Accumulated amortization, ending balance	$	911	$	816	$	724

6. Redeemable Preferred Equity

The following is a roll forward of Series C cumulative preferred equity (“Series C Preferred Units”):

	Six Months Ended June 30, 2018		Year Ended December 31, 2017		Six Months Ended June 30, 2017
Beginning balance	$	1,097	$	–	$	–
Additions from new investment		–		1,004		1,004
Additions from reinvestment		68		93		29
Ending balance	$	1,165	$	1,097	$	1,033

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The following table shows the earliest redemption options for investors in our Series C Preferred Units as of June 30, 2018:

Year of Available Redemption	Total Amount Redeemable
2023	$	1,165
Total	$	1,165

7. Members’ Capital

There are currently two classes of equity units outstanding that the Company classifies as Members’ Capital: Class A common units (“Class A Common Units”) and Series B cumulative preferred units (“Series B Preferred Units”). As of June 30, 2018, the Class A Common Units are held by nine members, all of whom have no personal liability. All Class A common members have voting rights in proportion to their capital account. There were 2,629 Class A Common Units outstanding at both June 30, 2018 and December 31, 2017.

In January 2018, our Chief Financial Officer and Executive Vice President of Operations purchased 2% and 1% of our outstanding Class A Common Units, respectively, from our CEO. In March 2018, our Executive Vice President of Sales purchased 14.3% of our outstanding Class A Common Units from our CEO.

8. Related Party Transactions

As of June 30, 2018, each of the Company’s two independent managers own 1% of our Class A Common Units. As of June 30, 2018, our CFO, Executive Vice President of Operations, and Executive Vice President of Sales each own 2%, 2%, and 15.3% of our Class A Common Units, respectively.

As of June 30, 2018, the Company borrowed $877 against the Wallach LOC, which is a line of credit with our CEO and his wife. A more detailed description is included in Note 5 above. This borrowing is included in notes payable secured, net of deferred financing costs on the interim condensed consolidated balance sheet.

As of June 30, 2018, the Company borrowed $1,000 against the Myrick LOC, which is a line of credit with our Executive Vice President of Sales. A more detailed description is included in Note 5 above. This borrowing is included in notes payable secured, net of deferred financing costs on the interim condensed consolidated balance sheet.

In February 2018, the Company issued a Subordinated Promissory Note in the principal amount of $1,125 to a trust affiliated with Seven Kings Holdings, Inc. One of our independent managers, Kenneth R. Summers, is the trustee of that trust. This borrowing is included in notes payable unsecured, net of deferred financing costs on the interim condensed consolidated balance sheet.

In March 2018, the Company issued a Senior Subordinated Promissory Note in the principal amount of $400 to family members of our CEO. This borrowing is included in the notes payable unsecured, net of deferred financing costs on the interim condensed consolidated balance sheet.

9. Commitments and Contingencies

Unfunded commitments to extend credit, which have similar collateral, credit risk, and market risk to our outstanding loans, were $21,676 and $19,312 at June 30, 2018 and December 31, 2017, respectively.

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10. Selected Quarterly Condensed Consolidated Financial Data (Unaudited)

Summarized unaudited quarterly condensed consolidated financial data for the two quarters of 2018 and four quarters of 2017 are as follows:

	Quarter 2		Quarter 1		Quarter 4		Quarter 3		Quarter 2		Quarter 1
	2018		2018		2017		2017		2017		2017
Net Interest Income after Loan Loss Provision	$	996	$	926	$	802	$	917	$	725	$	617
Non-Interest Income		–		–		–		–		–		77
SG&A expense		691		617		643		537		456		454
Depreciation and Amortization		21		17		–		–		–		6
Impairment loss on foreclosed assets		80		5		64		47		106		49
Net Income	$	204	$	287	$	95	$	333	$	163	$	191

11. Non-Interest expense detail

The following table displays our selling, general and administrative (“SG&A”) expenses:

	For the Six Months Ended June 30,
	2018		2017
Selling, general and administrative expenses
Legal and accounting	$	223	$	125
Salaries and related expenses		833		583
Board related expenses		37		55
Advertising		35		25
Rent and utilities		20		14
Loan and foreclosed asset expenses		38		26
Travel		51		32
Other		71		38
Total SG&A	$	1,308	$	898

12. Subsequent Events

Management of the Company has evaluated subsequent events through August 8, 2018, the date these consolidated financial statements were issued.

On July 31, 2018, we redeemed all of our outstanding Series C Cumulative Preferred Units (the “Preferred Units”), which were held by two investors. On August 1, 2018, we sold 12 of our Preferred Units to Daniel M. Wallach, our Chief Executive Officer and Chairman of our board of managers, and his wife, Joyce S. Wallach, for the total price of $1,200.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our interim condensed consolidated financial statements and the notes thereto contained elsewhere in this report. The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should also be read in conjunction with our audited annual consolidated financial statements and related notes and other consolidated financial data included in the Company’s Annual Report on Form 10-K as of and for the year ended December 31, 2017. See also “Cautionary Note Regarding Forward-Looking Statements” preceding Part I.

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Overview

We had $41,819 and $30,043 in loan assets as of June 30, 2018 and December 31, 2017, respectively. As of June 30, 2018, we have 245 construction loans in 17 states with 68 borrowers and seven development loans in three states with 4 borrowers. As of June 30, 2018, and December 31, 2017, we had four and three development loans, respectively, in Pittsburgh, Pennsylvania (the “Pennsylvania Loans”).

We have various sources of capital, detailed below:

	June 30, 2018		December 31, 2017
Capital Source
Purchase and sale agreements and other secured borrowings	$	19,186	$	11,644
Secured line of credit from affiliates		1,877		–
Unsecured senior line of credit from a bank		500		–
Unsecured Notes through our Notes Program		15,274		14,121
Other unsecured debt		5,247		3,069
Preferred equity, Series B units		1,280		1,240
Preferred equity, Series C units		1,165		1,097
Common equity		2,593		2,446
Total	$	47,122	$	33,617

Our net income increased for the second quarter and six months ended June 30, 2018 as compared to the same period in 2017 due primarily to increased loan originations which was partially offset by payroll cost increases due to an increase the number of employees, and an increase in our loan loss reserve.

Cash provided by operations was $425 as of June 30, 2018 as compared to $742 for the same period of 2017. Our decrease in operating cash flow in 2018 compared to the same period of 2017 was due to a decrease in customer interest escrow of $408 offset by an increase in net loan origination fee deferred of $97.

Critical Accounting Estimates

To assist in evaluating our consolidated financial statements, we describe below the critical accounting estimates that we use. We consider an accounting estimate to be critical if: (1) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (2) changes in the estimate that are reasonably likely to occur from period to period, or use of different estimates that we reasonably could have used, would have a material impact on our consolidated financial condition or results of operations. See our Form 10-K as of and for the year ended December 31, 2017, as filed with the SEC, for more information on our critical accounting estimates. No material changes to our critical accounting estimates have occurred since December 31, 2017 unless listed below.

Loan Losses

Fair value of collateral has the potential to impact the calculation of the loan loss provision (the amount we have expensed over time in anticipation of loan losses we have not yet realized). Specifically, relevant to the allowance for loan loss reserve is the fair value of the underlying collateral supporting the outstanding loan balances. Fair value measurements are an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Due to a rapidly changing economic market, an erratic housing market, the various methods that could be used to develop fair value estimates, and the various assumptions that could be used, determining the collateral’s fair value requires significant judgment.

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	June 30, 2018
	Loan Loss
	Provision
Change in Fair Value Assumption	Higher/(Lower)
Increasing fair value of the real estate collateral by 35%*	$	–
Decreasing fair value of the real estate collateral by 35%**	$	(2,092	)

* Increases in the fair value of the real estate collateral do not impact the loan loss provision, as the value generally is not “written up.”

** Assumes the loans were nonperforming and a book amount of the loans outstanding of $42,153.

Foreclosed Assets

The fair value of real estate will impact our foreclosed asset value, which is recorded at 100% of fair value (after selling costs are deducted).

	June 30, 2018
	Foreclosed
	Assets
Change in Fair Value Assumption	Higher/(Lower)
Increasing fair value of the foreclosed asset by 35%*	$	–
Decreasing fair value of the foreclosed asset by 35%	$	(1,973	)

* Increases in the fair value of the foreclosed assets do not impact the carrying value, as the value generally is not “written up.” Those gains would be recognized at the sale of the asset.

** Assumes a book amount of the foreclosed  assets of $5,636.

Consolidated Results of Operations

Key financial and operating data for the three and six months ended June 30, 2018 and 2017 are set forth below. For a more complete understanding of our industry, the drivers of our business, and our current period results, this discussion should be read in conjunction with our consolidated financial statements, including the related notes and the other information contained in this document.

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
Interest Income
Interest and fee income on loans	$	2,045	$	1,356	$	3,872	$	2,530
Interest expense:
Interest related to secured borrowings		517		215		928		394
Interest related to unsecured borrowings		513		401		963		768
Interest expense		1,030		616		1,891		1,162
Net interest income		1,015		740		1,981		1,368
Less: Loan loss provision		19		15		59		26
Net interest income after loan loss provision		996		725		1,922		1,342
Non-Interest Income
Gain from foreclosure of assets		–		–		–		–
Gain from sale of foreclosed assets		–		–		–		77
Total non-interest income		–		–		–		77
Income		996		725		1,922		1,419
Non-Interest Expense
Selling, general and administrative		691		450		1,308		898
Depreciation and amortization		21		6		38		12
Impairment loss on foreclosed assets		80		106		85		155
Total non-interest expense		792		562		1,431		1,065
Net Income	$	204	$	163	$	491	$	354
Earned distribution to preferred equity holders		67		57		130		88
Net income attributable to common equity holders	$	137	$	106	$	361	$	266

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Interest Spread

The following table displays a comparison of our interest income, expense, fees, and spread:

	Three Months Ended								Six Months Ended
	June 30,								June 30,
	2018				2017				2018				2017
Interest Income				*				*				*				*
Interest income on loans	$	1,416	13	%	$	851	12	%	$	2,708	13	%	$	1,631	12	%
Fee income on loans		629	6	%		505	7	%		1,164	6	%		899	7	%
Interest and fee income on loans		2,045	19	%		1,356	19	%		3,872	19	%		2,530	19	%
Interest expense unsecured		467	4	%		344	5	%		868	4	%		647	5	%
Interest expense secured		513	4	%		215	3	%		928	4	%		394	3	%
Amortization offering costs		50	1	%		57	1	%		95	1	%		121	1	%
Interest expense		1,030	10	%		616	9	%		1,891	9	%		1,162	9	%
Net interest income (spread)		1,015	9	%		740	10	%		1,981	10	%		1,368	10	%
Weighted average outstanding loan asset balance	$	42,439			$	28,211			$	40,135			$	25,983

*annualized amount as percentage of weighted average outstanding gross loan balance

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

● Difference between the interest rate received (on our loan assets) and the interest rate paid (on our borrowings). The loans we have originated have interest rates which are based on our cost of funds, with a minimum cost of funds of 5%. For most loans, the margin is fixed at 2%; however, for our development loans the margin is fixed at 7%. Future loans are anticipated to be originated at an increase of 1% to approximately 3% margin. This component is also impacted by the lending of money with no interest cost (our equity). For the six months ended June 30, 2018, the difference between interest income and interest expense was 4% compared to 3% for the same period of 2017. The increase relates to an increase in default interest rate for the classified accruing loan during the first quarter of 2018.

For the quarter ended June 30, 2018 and quarter and six months ended June 30, 2017 the difference between interest income and interest expense was 3%. We currently anticipate that the difference between our interest income and interest expense will continue to be 3% for the remainder of 2018.

● Fee income. Our construction loans have a 5% fee on the amount we commit to lend, which is amortized over the expected life of each of those loans; however, we do not recognize a loan fee on our development loans. When loans terminate quicker than their expected life, the remaining unrecognized fee is recognized upon the termination of the loan. When loans exceed their expected life, no additional fee income is recognized. In 2018 our fee income decreased 1% due to an increase in loans that exceeded their expected life. We currently anticipate that fee income will continue at the same 6% rate for the remainder of 2018.

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● Amount of nonperforming assets. Generally, we can have three types of nonperforming assets that negatively affect interest spread: loans not paying interest, foreclosed assets, and cash. All of our loans were paying interest in the quarter ended June 30, 2018 and quarter and six months ended June 30, 2017. One loan was not paying interest in the six months ended June 30, 2018.

Foreclosed assets do not provide a monthly interest return. In April 2018, we recorded $3,897 from Loan receivables, net to Foreclosed assets on the balance sheet as of June 30, 2018, which resulted in a negative impact on our interest spread.

The amount of nonperforming assets is expected to rise over the next twelve months, due to expected development costs related to foreclosed assets, anticipated foreclosure of assets, and idle cash increases related to anticipated large borrowing inflows.

Non-Interest Income

For the three and six months ended June 30, 2018, we did not recognize non-interest income compared to the same period of 2017. In the first six months of 2017, we sold a foreclosed asset and recognized a gain of $77. We do not anticipate Non-interest income for 2018.

SG&A Expenses

The following table displays our SG&A expenses:

	Three Months				Six Months
	Ended June 30,				Ended June 30,
	2018		2017		2018		2017
Selling, general and administrative expenses
Legal and accounting	$	80	$	29	$	223	$	125
Salaries and related expenses		477		329		833		583
Board related expenses		15		26		37		55
Advertising		18		8		35		25
Rent and utilities		10		9		20		14
Loan foreclosed asset expenses		30		19		38		26
Travel		28		17		51		32
Other		33		13		71		38
Total SG&A	$	691	$	450	$	1,308	$	898

Legal and accounting expenses increased due to additional work performed related to the growth of the Company. Salaries and related expenses increased due to our hiring of 11 new employees, which was partially offset by a reduction in our CEO’s salary.

Impairment Loss on Foreclosed Assets

We owned five foreclosed assets as of June 30, 2018, compared four as of December 31, 2017. Three of the foreclosed assets are lots under construction and the remaining two have completed homes on the lots. We do not anticipate losses on the sale of foreclosed assets in the future; however, this may be subject to change based on the final selling price of the foreclosed assets.

Loan Loss Provision

Our loan loss provision increased $19 and $59 for the quarter and six month ended June 30, 2018 compared to $15 and $26 for the same periods of 2017 due to an increase in loan balances and qualitative reserve percentage as a result of the change in housing values.

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Consolidated Financial Position

Loans Receivable

Commercial Loans – Construction Loan Portfolio Summary

We anticipate that the aggregate balance of our construction loan portfolio will increase as loans near maturity and as we have new loan originations.

The following is a summary of our loan portfolio to builders for home construction loans as of June 30, 2018.

State	Number of Borrowers		Number of Loans		Value of Collateral(1)		Commitment Amount		Gross Amount Outstanding		Loan to Value Ratio(2)			Loan Fee
Arizona		1		4	$	1,071	$	750	$	218		70	%		5	%
Colorado		3		7		3,878		2,621		1,729		68	%		5	%
Florida		17		73		22,652		15,143		9,392		67	%		5	%
Georgia		8		12		8,246		5,594		3,929		68	%		5	%
Indiana		2		3		932		652		273		70	%		5	%
Michigan		5		30		7,754		4,697		2,723		61	%		5	%
New Jersey		4		14		5,188		3,494		2,233		67	%		5	%
New York		1		7		2,567		1,496		1,375		58	%		5	%
North Carolina		5		9		2,656		1,859		925		70	%		5	%
North Dakota		1		1		375		263		205		70	%		5	%
Ohio		1		3		2,331		1,497		1,145		64	%		5	%
Oregon		1		1		607		348		280		57	%		5	%
Pennsylvania		3		29		21,708		12,424		8,860		57	%		5	%
South Carolina		11		40		10,357		7,188		4,349		69	%		5	%
Tennessee		1		2		640		426		262		67	%		5	%
Utah		1		2		920		634		264		69	%		5	%
Virginia		3		8		2,094		1,465		726		70	%		5	%
Total		68		245	$	93,976	$	60,551	$	38,888		64	%(3)		5	%

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

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The following is a summary of our loan portfolio to builders for home construction loans as of December 31, 2017.

State	Number of Borrowers			Number of Loans		Value of Collateral(1)		Commitment Amount		Gross Amount Outstanding		Loan to Value Ratio(2)			Loan Fee
Colorado		3			6	$	3,224	$	2,196	$	925		68	%		5	%
Delaware		1			1		244		171		147		70	%		5	%
Florida		15			54		25,368		16,555		10,673		65	%		5	%
Georgia		7			13		8,932		5,415		3,535		61	%		5	%
Indiana		2			2		895		566		356		63	%		5	%
Michigan		4			25		7,570		4,717		2,611		62	%		5	%
New Jersey		2			11		3,635		2,471		1,227		68	%		5	%
New York		1			5		1,756		929		863		53	%		5	%
North Carolina		3			6		1,650		1,155		567		70	%		5	%
Ohio		1			1		711		498		316		70	%		5	%
Oregon		1			1		607		425		76		70	%		5	%
Pennsylvania		2			20		15,023		7,649		5,834		51	%		5	%
South Carolina		7			18		4,501		3,058		1,445		68	%		5	%
Tennessee		1			2		690		494		494		72	%		5	%
Utah		1			2		790		553		344		70	%		5	%
Virginia		1			1		335		235		150		70	%		5	%
Total		52	(4)		168	$	75,931	$	47,087	$	29,564		62	%(3)		5	%

(1)	The value is determined by the appraised value.
(2)	The loan to value ratio is calculated by taking the commitment amount and dividing by the appraised value.
(3)	Represents the weighted average loan to value ratio of the loans.
(4)	One builder in multiple states.

Commercial Loans – Real Estate Development Loan Portfolio Summary

The following is a summary of our loan portfolio to builders for land development as of June 30, 2018 and December 31, 2017. A significant portion of our development loans consist of the Pennsylvania Loans. Our additional development loans are in South Carolina and Florida.

Year	Number of States		Number of Borrowers		Number of Loans		Value of Collateral(1)		Commitment Amount			Gross Amount Outstanding		Loan to Value Ratio(2)			Loan Fee
2018		3		4		7	$	8,249	$	6,367	(3)	$	5,915		72	%	$	1,000
2017		1		1		3		4,997		4,600	(3)		2,811		56	%		1,000

(1)	The value is determined by the appraised value adjusted for remaining costs to be paid. Part of this collateral is $1,280 as of June 30, 2018 and $1,240 as of December 31, 2017 of preferred equity in our Company. In the event of a foreclosure on the property securing these loans, the portion of our collateral that is preferred equity might be difficult to sell, which may impact our ability to eliminate the loan balance. Part of the collateral value is estimated based on the selling prices anticipated for the homes. Appraised values will replace these estimates in the third quarter of 2018.
(2)	The loan to value ratio is calculated by taking the outstanding amount and dividing by the appraised value calculated as described above.
(3)	The commitment amount does not include letters of credit and cash bonds.

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Combined Loan Portfolio Summary

Financing receivables are comprised of the following as of June 30, 2018 and December 31, 2017:

	June 30, 2018			December 31, 2017
Loans receivable, gross	$	44,803		$	32,375
Less: Deferred loan fees		(1,197	)		(847	)
Less: Deposits		(1,827	)		(1,497	)
Plus: Deferred origination expense		196			109
Less: Allowance for loan losses		(156	)		(97	)
Loans receivable, net	$	41,819		$	30,043

The following is a roll forward of combined loans:

	Six Months Ended June 30, 2018			Year Ended December 31, 2017			Six Months Ended June 30, 2017
Beginning balance	$	30,043		$	20,091		$	20,091
Additions		19,870			33,451			16,081
Payoffs/sales		(11,337	)		(22,645	)		(6,229	)
Moved to foreclosed assets		3,897			-			–
Change in deferred origination expense		87			55			71
Change in builder deposit		(331	)		(636	)		(762	)
Change in loan loss provision		(59	)		(44	)		(26	)
New loan fees		(1,528	)		(2,127	)		(1,153	)
Earned loan fees		1,177			1,898			899
Ending balance	$	41,819		$	30,043		$	28,972

Finance Receivables – By risk rating:

	June 30, 2018		December 31, 2017
Pass	$	39,327	$	25,656
Special mention		5,476		6,719
Classified – accruing		-		-
Classified – nonaccrual		-		-
Total	$	44,803	$	32,375

Finance Receivables – Method of impairment calculation:

	June 30, 2018		December 31, 2017
Performing loans evaluated individually	$	18,409	$	14,992
Performing loans evaluated collectively		26,394		17,383
Non-performing loans without a specific reserve		-		-
Non-performing loans with a specific reserve		-		-
Total	$	44,803	$	32,375

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At June 30, 2018 and December 31, 2017, there were no loans acquired with deteriorated credit quality.

Below is an aging schedule of gross loans receivable as of June 30, 2018, on a recency basis:

	No. Accts.		Unpaid Balances		%
Current loans (current accounts and accounts on which more than 50% of an original contract payment was made in the last 59 days)		252	$	44,803		100	%
60-89 days		–		–		0	%
90-179 days		–		–		0	%
180-269 days		–		–		0	%
Subtotal		252	$	44,803		100	%
Interest only accounts (Accounts on which interest, deferment, extension and/or default charges were received in the last 60 days)		–	$	–		0	%
Partial Payment accounts (Accounts on which the total received in the last 60 days was less than 50% of the original contractual monthly payment. “Total received” to include interest on simple interest accounts, as well as late charges on deferment charges on pre-computed accounts.)		–	$	–		0	%
Total		252	$	44,803		100	%

Below is an aging schedule of gross loans receivable as of June 30, 2018, on a contractual basis:

	No. Accts.		Unpaid Balances		%
Contractual Terms - All current Direct Loans and Sales Finance Contracts with installments past due less than 60 days from due date.		252	$	44,803		100	%
60-89 days		–		–		0	%
90-179 days		–		–		0	%
180-269 days		–		–		0	%
Subtotal		252	$	44,803		100	%
Interest only accounts (Accounts on which interest, deferment, extension and/or default charges were received in the last 60 days)		–	$	–		0	%
Partial Payment accounts (Accounts on which the total received in the last 60 days was less than 50% of the original contractual monthly payment. “Total received” to include interest on simple interest accounts, as well as late charges on deferment charges on pre-computed accounts.)		–	$	–		0	%
Total		252	$	44,803		100	%

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Below is an aging schedule of gross loans receivable as of December 31, 2017, on a recency basis:

	No. Accts.		Unpaid Balances		%
Current loans (current accounts and accounts on which more than 50% of an original contract payment was made in the last 59 days)		153	$	26,421		82	%
60-89 days		18		5,954		18	%
90-179 days		–		–		0	%
180-269 days		–		–		0	%
Subtotal		171	$	32,375		100	%
Interest only accounts (Accounts on which interest, deferment, extension and/or default charges were received in the last 60 days)		–	$	–		0	%
Partial Payment accounts (Accounts on which the total received in the last 60 days was less than 50% of the original contractual monthly payment. “Total received” to include interest on simple interest accounts, as well as late charges on deferment charges on pre-computed accounts.)		–	$	–		0	%
Total		171	$	32,375		100	%

Below is an aging schedule of gross loans receivable as of December 31, 2017, on a contractual basis:

	No. Accts.		Unpaid Balances		%
Contractual Terms - All current Direct Loans and Sales Finance Contracts with installments past due less than 60 days from due date.		153	$	26,421		82	%
60-89 days		18		5,954		18	%
90-179 days		–		–		0	%
180-269 days		–		–		0	%
Subtotal		171	$	32,375		100	%
Interest only accounts (Accounts on which interest, deferment, extension and/or default charges were received in the last 60 days)		–	$	–		0	%
Partial Payment accounts (Accounts on which the total received in the last 60 days was less than 50% of the original contractual monthly payment. “Total received” to include interest on simple interest accounts, as well as late charges on deferment charges on pre-computed accounts.)		–	$	–		0	%
Total		171	$	32,375		100	%

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Foreclosed Assets

Below is a roll forward of foreclosed assets:

	Six Months Ended June 30, 2018			Year Ended December 31, 2017			Six Months Ended June 30, 2017
Beginning balance	$	1,036		$	2,798		$	2,798
Additions from loans		4,140			-			-
Additions for construction/development		545			317			265
Sale proceeds		-			(1,890	)		(1,890	)
Gain on sale		-			77			77
Impairment loss on foreclosed assets		(85	)		(266	)		(155	)
Ending balance	$	5,636		$	1,036		$	1,095

During April 2018, we entered into a Deed in Lieu of Foreclosure Agreement (the “Deed Agreement”) with a certain borrower who defaulted on a loan by failing to make an interest payment that was due. As a result, the Company reclassified $4,140, consisting of $3,897 of principal from Loan receivable, net and $243 of interest from Accrued interest receivable, to Foreclosed assets on the balance sheet as of June 30, 2018.

Customer Interest Escrow

Below is a roll forward of interest escrow:

	Six Months Ended June 30, 2018			Year Ended December 31, 2017			Six Months Ended June 30, 2017
Beginning balance	$	935		$	812		$	812
Preferred equity dividends		62			115			57
Additions from Pennsylvania Loans		101			480			51
Additions from other loans		160			1,163			901
Interest, fees, principal or repaid to borrower		(714	)		(1,635	)		(992	)
Ending balance	$	544		$	935		$	829

Related Party Borrowings

During June 2018, we entered into a First Amendment to the line of credit with our Chief Executive Officer and his wife (the “Wallach LOC”) which modified the interest rate to generally equal the prime rate plus 3%. The interest rate for this borrowing was 6.8% and 4.4% as of June 30, 2018 and 2017, respectively. We borrowed $877 and $0 against the Wallach LOC as of June 30, 2018 and 2017, respectively. Interest expense was $6 and $10 for the quarter and six months ended June 30, 2018, respectively, and $0 for the quarter and six months ended June 30, 2017.

During June 2018, we entered into a First Amendment to the line of credit with the 2007 Daniel M. Wallach Legacy Trust, which our Chief Executive Officer’s trust (the “Wallach Trust LOC”) which modified the interest rate to generally equal the prime rate plus 3%. The interest rate for this borrowing was 6.8% and 4.4% as of June 30, 2018 and 2017, respectively. We borrowed $0 against the Wallach Trust LOC as of June 30, 2018 and 2017.

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

● Principal not to exceed $1,000;

● Secured by a lien against all of our assets;

● Cost of funds to us generally equal to the prime rate plus 3%; and

● Due upon demand.

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The Myrick LOC was fully borrowed as of June 30, 2018. The interest rate for the Myrick LOC was 6.8% as of June 30, 2018. Interest expense on the Myrick LOC was $3 for both the quarter and six months ended June 30, 2018.

Secured Borrowings

Purchase and Sale Agreements

In March 2018, we entered into the Seventh Amendment (the “Seventh Amendment”) to our Loan Purchase and Sale Agreement (the “S.K. Funding LPSA”) with S.K. Funding, LLC (“S.K. Funding”).

The purpose of the Seventh Amendment was to allow S.K. Funding to purchase a portion of the Pennsylvania Loans for a purchase price of $649 under parameters different from those specified in the S.K. Funding LPSA.

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

● If the total principal amount exceeds $1,000, S.K. Funding must fund the amount between $1,000 and less than or equal to $3,500.

● If the total principal amount is less than $4,500 the Company will also repay S.K. Funding’s principal as principal payments are received on the Pennsylvania Loans from the underlying borrowers in the amount by which the total principal amount is less than $4,500 until S.K. Funding’s principal has been repaid in full.

● The interest rate accruing to S.K. Funding under the Seventh Amendment is 10.5% calculated on a 365/366-day basis.

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

Lines of Credit

During July 2017, we entered into a line of credit agreement (the “Shuman LOC Agreement”) with a group of lenders (collectively, “Shuman”). Pursuant to the Shuman LOC Agreement, Shuman provides us with a revolving line of credit (the “Shuman LOC”) with the following terms:

● Principal not to exceed $1,325;

● Secured with assignments of certain notes and mortgages;

● Cost of funds to us of 10%; and

● Due in July 2019 unless extended by Shuman for one or more additional 12-month periods.

The Shuman LOC was fully borrowed as of June 30, 2018. Interest expense was $33 and $67 for the quarter and six months ended June 30, 2018, respectively.

During April 2018, we entered into a Master Loan Modification Agreement (the “Swanson Modification Agreement”) with Paul Swanson which modified the Line of Credit Agreement between us and Mr. Swanson dated October 23, 2017. Pursuant to the Swanson Modification Agreement, Mr. Swanson provides us with a revolving line of credit (the “Swanson LOC”) with the following terms:

● Principal not to exceed $7,000;

● Secured with assignments of certain notes and mortgages;

● Cost of funds to us of 10%; and

● Due in January 2018 unless extended by Mr. Swanson for one or more additional 15-month periods.

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The Swanson LOC was fully borrowed as of June 30, 2018. Interest expense was $165 and $265 for the quarter and six months ended June 30, 2018, respectively.

Mortgage Payable

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

● Principal not to exceed $660;

● Interest rate at 5.07% per annum based on a year of 360 days; and

● Due in January 2033.

Summary

The purchase and sale agreements and lines of credit are summarized below:

	June 30, 2018				December 31, 2017
			Due From				Due From
	Book Value of		Shepherd’s		Book Value of		Shepherd’s
	Loans which		Finance to Loan		Loans which		Finance to Loan
	Served as Collateral		Purchaser or Lender		Served as Collateral		Purchaser or Lender
Loan Purchaser
Builder Finance, Inc.	$	8,538	$	4,843	$	7,483	$	4,089
S.K. Funding		10,108		6,625		9,128		4,134
Lender
Shuman		2,160		1,325		1,747		1,325
Paul Swanson		8,214		5,738		2,518		2,096
Total	$	29,020	$	18,531	$	20,876	$	11,644

			Typical Current Advance Rate			Does Buyer Portion
	Year Initiated		On New Loans			Have Priority?	Rate
Loan Purchaser
Builder Finance, Inc.		2014		70	%	Yes		The rate our customer pays us
S.K. Funding		2015		55	%	Varies		9–9.5	%
Lender
Shuman		2017		67	%	Yes		10	%
Paul Swanson		2017		67	%	Yes		10	%

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Unsecured Borrowings

Other Unsecured Debts

Our other unsecured debts are detailed below:

	Maturity	Interest			Principal Amount Outstanding as of
Loan	Date	Rate (1)			June 30, 2018		December 31, 2017
Unsecured Note with Seven Kings Holdings, Inc.	August 2018		7.5	%		500		500
Unsecured Line of Credit from Builder Finance, Inc.	January 2019		10.0	%		500		-
Unsecured Line of Credit from Paul Swanson	December 2018(2)		10.0	%		1,262		1,904
Subordinated Promissory Note	Demand(3)		7.5	%		1,125		-
Subordinated Promissory Note	December 2019		10.5	%		263		113
Subordinated Promissory Note	April 2020		10.0	%		100		100
Senior Subordinated Promissory Note	March 2022(4)		10.0	%		400		-
Senior Subordinated Promissory Note	March 2022(5)		1.0	%		728		-
Junior Subordinated Promissory Note	March 2022(5)		22.5	%		417		-
Senior Subordinated Promissory Note	October 2022(6)		1.0	%		279		279
Junior Subordinated Promissory Note	October 2022(6)		20.0	%		173		173
					$	5,747	$	3,069

⁽¹⁾ Interest rate per annum, based upon actual days outstanding and a 365/366 day year.

⁽²⁾ Due in December 2018 unless extended by Mr. Swanson for one or more additional 15-month periods.

⁽³⁾ Principal due six months after lender gives notice. This note may be prepaid without fee, premium, or penalty.

⁽⁴⁾ This note may be prepaid upon lender’s request at least 10 days prior to an interest payment and up to $20 of principal.

⁽⁵⁾ These notes were issued to the same holder and, when calculated together, yield a blended return of 11% per annum.

⁽⁶⁾ These notes were issued to the same holder and, when calculated together, yield a blended return of 10% per annum.

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

The effective interest rate on the Notes offered pursuant to the Notes Program at June 30, 2018 and December 31, 2017 was 9.39% and 9.21%, respectively, not including the amortization of deferred financing costs. There are limited rights of early redemption. The following table shows the roll forward of our Notes Program:

	Six Months Ended June 30, 2018			Year Ended December 31, 2017			Six Months Ended June 30, 2017
Gross Notes outstanding, beginning of period	$	14,121		$	11,221		$	11,221
Notes issued		3,350			8,375			8,105
Note repayments / redemptions		(2,197	)		(5,475	)		(5,087	)
Gross Notes outstanding, end of period	$	15,274		$	14,121		$	14,239
Less deferred financing costs, net		252			286			330
Notes outstanding, net	$	15,022		$	13,835		$	13,909

The following is a roll forward of deferred financing costs:

	Six Months			Year			Six Months
	Ended			Ended			Ended
	June 30, 2018			December 31, 2017			June 30, 2017
Deferred financing costs, beginning balance	$	1,102		$	1,014		$	1,014
Additions		61			88			40
Deferred financing costs, ending balance	$	1,163		$	1,102		$	1,054
Less accumulated amortization		(95	)		(816	)		(724	)
Deferred financing costs, net	$	911		$	286		$	330

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

	Six Months		Year		Six Months
	Ended		Ended		Ended
	June 30, 2018		December 31, 2017		June 30, 2017
Accumulated amortization, beginning balance	$	816	$	603	$	603
Additions		95		213		121
Accumulated amortization, ending balance	$	911	$	816	$	724

Redeemable Preferred Equity and Members’ Capital

We strive to maintain a reasonable (about 15%) balance between (1) redeemable preferred equity plus members’ capital and (2) total assets. The ratio of redeemable preferred equity plus members’ capital to assets was 10% as of June 30, 2018 and 13% as of December 31, 2017. We anticipate this ratio dropping until more preferred equity is added. We are currently exploring potential increases in preferred equity.

In January 2018, our Chief Financial Officer and Executive Vice President of Operations purchased 2% and 1% of our Class A common units; respectively, from our CEO. In March 2018, our Executive Vice President of Sales purchased 14.3% of our Class A common units from our CEO.

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Priority of Borrowings

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

	Priority Rank	June 30, 2018		December 31, 2017
Borrowing Source
Purchase and sale agreements	1	$	19,186	$	11,644
Secured line of credit from affiliates	2		1,877		-
Unsecured line of credit (senior)	3		500		-
Other unsecured borrowings (senior subordinated)	4		1,008		279
Unsecured Notes through our Notes Program, gross	5		15,274		14,121
Other unsecured borrowings (subordinated)	5		3,649		2,617
Other unsecured borrowings (junior subordinated)	6		590		173
Total		$	42,084	$	28,834

Liquidity and Capital Resources

Our primary liquidity management objective is to meet expected cash flow needs while continuing to service our business and customers. As of June 30, 2018, and December 31, 2017, we had 252 and 171, respectively, in combined loans outstanding, which totaled $44,803 and $32,375, respectively, in gross loan receivables outstanding. Unfunded commitments to extend credit, which have similar collateral, credit and market risk to our outstanding loans, were $21,676 and $19,312 as of June 30, 2018 and December 31, 2017, respectively. We anticipate a significant increase in our gross loans receivables over the 12 months subsequent to June 30, 2018 by directly increasing originations through new and existing customers.

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

Source of Liquidity	As of June 30, 2018		As of December 31, 2017
Secured debt	$	21,058	$	11,644
Unsecured debt		20,769		16,904
Equity		5,038		4,783

Secured debt, net of deferred financing costs increased $9,414 during the six months ended June 30, 2018, which consisted of an increase in loan purchase and sale agreements, balances on lines of credits with affiliates and mortgage payable of $6,887, $1,877 and $650, respectively. We anticipate increasing our secured debt by roughly half of the increase in loan asset balances over the 12 months subsequent to June 30, 2018 through our existing loan purchase and sale agreements.

The other half of the loan asset growth will come from a combination of increases in our unsecured debt and equity. Unsecured debt, net of deferred financing costs increased $3,865 during the six months ended June 30, 2018, which consisted of an increase in our Notes Program of $1,187 and an increase in the balances of unsecured lines of credit of $2,678. We anticipate an increase in our unsecured debt through increased sales in the Notes Program to cover most of the increase in loan assets not covered by increases in our secured debt during the 12 months subsequent to June 30, 2018.

Equity increased $255 during the six months ended June 30, 2018, which consisted of an increase in Series C cumulative preferred units (“Series C Units”), Series B cumulative preferred units, and Class A common equity of $68, $40 and $147, respectively. We anticipate an increase in our equity during the 12 months subsequent to June 30, 2017 through the issuance of additional Series C Units. During the year ended December 31, 2017, we increased the amount of Series C Units outstanding by $1,097. If we do are not able to increase our equity through the issuance of additional Series C Units, we will look to our Notes Program for the increase. If we anticipate not being able to fund our projected increases in loan balances through the means listed above, we may reduce new loan originations to reduce need for additional funds.

Cash provided by operations was $425 as of June 30, 2018 as compared to $742 for the same period of 2017. Our decrease in operating cash flow in 2018 compared to the same period of 2017 was due to a decrease in customer interest escrow of $408 offset by an increase in net loan origination fee deferred of $97.

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Contractual Obligations

The following table shows the maturity of our outstanding debt as of June 30, 2018:

Year Maturing	Total Amount Maturing		Public Offering		Other Unsecured		Secured Borrowings
2018	$	25,728	$	2,306	$	3,007	$	20,415
2019		7,556		6,499		1,043		14
2020		2,270		2,155		100		15
2021		3,788		3,773		-		15
2022 and thereafter		2,742		541		1,597		604
Total	$	42,084	$	15,274	$	5,747	$	21,063

The total amount maturing through year ended December 31, 2019 is $33,284, which consists of secured borrowings of $20,429 and unsecured borrowings of $12,855.

Secured borrowings maturing through year ended December 30, 2019 significantly consists of loan purchase and sale agreements with two loan purchasers (Builder Finance, Inc. and S. K. Funding) and two lenders (Stephen Shuman and Paul Swanson).

The purchasers under the loan purchase and sale agreements have an unconditional obligation to fund loans once agreed to purchase; however, Builder Finance, Inc. has put options that could require us to (a) buy back loans after 12 months and (b) buy back 10% of the portfolio commitment value in any 12 months.

Our lenders have lines of credit with the Company described as follows:

Stephen Shuman’s line of credit (“Shuman LOC”) is due July 2019 and unless terminated will automatically renew 60 days prior for an additional 12 months. If the Shuman LOC does not renew, $1,325 will be due in July 2019, which we would expect to fund through loan payoffs.

Paul Swanson’s line of credit (“Swanson LOC”) is due on December 31, 2018 and unless terminated will automatically renew 120 days prior for an additional 15 months. If the Swanson LOC does not renew, $4,000 will be due on December 31, 2018 and $3,000 will be due 120 days after, and which we would expect to fund through loan payoffs used as collateral for the line.

Unsecured borrowings due on December 31, 2018 consist of Notes issued pursuant to the Notes Program and other unsecured debt of $8,805 and $4,050, respectively. To the extent that Notes issued pursuant to the Notes Program are not renewed upon maturity, we will be required to fund the maturities, which we anticipate funding through the issuance of new Notes in our Notes Program. Our other unsecured debt has historically renewed. For more information on other unsecured borrowings, see Note 5 – Borrowings. If other unsecured borrowings are not renewed in the future, we anticipate funding such maturities through investments in our Notes Program.

To help manage our liquidity, we:

● do not offer demand deposits (for instance, a checking account). We manage the duration of our Notes through the interest rates we offer at any time;

● fund loan requests with varying sources of capital, not just from proceeds of our Notes Program; and

● match our interest rate to our borrower to our cost of funds.

The following table contains our sources of liquidity for the six months ended June 30, 2018 and 2017:

Source of Liquidity	Six Months Ended June 30, 2018		Six Months Ended June 30, 2017		Comment and Future Outlook
Secured debt	$	13,538	$	5,775	We increased our related party debt and added a mortgage on our office building. We intend to continue to increase funds through bank participation during 2018 as needed.
Unsecured debt		8,784		9,218	Our unsecured debt outside of our Notes Program increased during 2018. We plan to increase our unsecured borrowings as needed.
Principal payments		11,337		6,229	Our loan volume increased in 2018 resulting in an increase in principal payments. We anticipate continued growth in payoffs as our volume increases.
Interest income		2,708		1,631	We anticipate interest income increasing as our loan balances grow. Our concentration in large borrowers adds risk to this source of liquidity.
Funds from the sale of foreclosed assets		–		1,890	We anticipate selling more foreclosed assets in the future.

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The following table contains our uses of liquidity for the six months ended June 30, 2018 and 2017:

Use of Liquidity	Six Months Ended June 30, 2018		Six Months Ended June 30, 2017		Comment and Future Outlook
Unfunded and new loans	$	21,676	$	17,797	We have loan commitments which are unfunded and will be funded as the collateral of these loans are built. As we create new loans, a portion will be funded at origination and the remaining balance will fund over time.
Payments on secured debt		4,118		4,277	These will continue to grow as loan payoffs continue to rise.
Payments on unsecured debt		4,953		5,687	Consists mostly of borrowings from our Notes program. We anticipate these payments to increase in 2018.
Interest expense		1,891		1,162	We anticipate interest expense increasing as we incur additional debt.
Distributions to owners		276		175	Distributions are based on income.

Inflation, Interest Rates, and Housing Starts

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

Housing inflation generally has a positive impact on our operations. When we lend initially, we are lending a percentage of a home’s expected value, based on historical sales. If those estimates prove to be low (in an inflationary market), the percentage we loaned of the value actually decreases, reducing potential losses on defaulted loans. The opposite is true in a deflationary housing price market. It is our opinion that values are average in many of the housing markets in the U.S. today, and our lending against these values is safer than loans made by financial institutions in 2006 to 2008.

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

36

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

37

Source: U.S. Census Bureau

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

Off-Balance Sheet Arrangements

As of June 30, 2018, and December 31, 2017, we had no off-balance sheet transactions, nor do we currently have any such arrangements or obligations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

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

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

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

38

Internal Control over Financial Reporting

During 2018, we hired a Vice President of Administrative Operations and Product Development to further implement segregation of duties. In addition, we placed into service an internally developed proprietary software system to assist in the management of our Notes Program, which replaced an electronic spreadsheet system. The development of the proprietary software system was designed in part to enhance the overall system of internal controls over financial reporting through further automation of various business processes. Except for the above-mentioned items there has been no change in our internal controls over financial reporting during the quarter and six months ended June 30, 2018 that has materially affected or is reasonably likely to materially affect our internal controls over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 1A. RISK FACTORS

Not applicable.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a)	Reinvestments in Partial Series C Cumulative Preferred Units Investors in the Series C cumulative preferred units (“Series C Preferred Units”) may elect to reinvest their distributions in additional Series C Preferred Units (the “Series C Reinvestment Program”). Pursuant to the Series C Reinvestment Program, on January 31, 2018, we issued approximately 0.0474022 of a Series C Preferred Unit to Margaret Rauscher IRA LLC in exchange for distribution proceeds of approximately $4,740.22, and approximately 0.0601630 of a Series C Preferred Unit to an IRA owned by William Myrick in exchange for distribution proceeds of approximately $6,016.30. On February 28, 2018, we issued approximately 0.0478762 of a Series C Preferred Unit to Margaret Rauscher IRA LLC in exchange for distribution proceeds of approximately $4,787.62, and approximately 0.0607647 of a Series C Preferred Unit to an IRA owned by William Myrick in exchange for distribution proceeds of approximately $6,076.47. On March 31, 2018, we issued approximately 0.0483550 of a Series C Preferred Unit to Margaret Rauscher IRA LLC in exchange for distribution proceeds of approximately $4,835.50, and approximately 0.0613723 of a Series C Preferred Unit to an IRA owned by William Myrick in exchange for distribution proceeds of approximately $6,137.23. On April 30, 2018, we issued approximately 0.0488386 of a Series C Preferred Unit to Margaret Rauscher IRA LLC in exchange for distribution proceeds of approximately $4,883.86, and approximately 0.06198.60 of a Series C Preferred Unit to an IRA owned by William Myrick in exchange for distribution proceeds of approximately $6,198.60. On May 31, 2018, we issued approximately 0.0493269 of a Series C Preferred Unit to Margaret Rauscher IRA LLC in exchange for distribution proceeds of approximately $4,932.69, and approximately 0.0626059 of a Series C Preferred Unit to an IRA owned by William Myrick in exchange for distribution proceeds of approximately $6,260.59. On June 30, 2018, we issued approximately 0.0498202 of a Series C Preferred Unit to Margaret Rauscher IRA LLC in exchange for distribution proceeds of approximately $4,982.02, and approximately 0.0632320 of a Series C Preferred Unit to an IRA owned by William Myrick in exchange for distribution proceeds of approximately $6,323.20. The proceeds received from the sales of the partial Series C Preferred Units in those transactions were used for the funding of construction loans. The transactions in Series C Preferred Units described above were effected in private transactions exempt from the registration requirements of the Securities Act under Section 4(a)(2) of the Securities Act. The transactions described above did not involve any public offering, were made without general solicitation or advertising, and the buyer represented to us that it is an “accredited investor’’ within the meaning of Rule 501 of Regulation D promulgated under the Securities Act, with access to all relevant information necessary to evaluate the investment in the Series C Preferred Units.
(b)	We registered up to $70,000,000 in Fixed Rate Subordinated Notes in our public offering (SEC File No. 333-203707, effective September 29, 2015). As of June 30, 2018, we had issued $18,435,000 in Notes pursuant to that public offering. From September 29, 2015 through June 30, 2018, we incurred expenses of $246,000 in connection with the issuance and distribution of the Notes, which were paid to third parties. These expenses were not for underwriters or discounts, but were for advertising, printing, and professional services. Net offering proceeds as of June 30, 2018 were $18,189,000, 100% of which was used to increase loan balances.
(c)	None.

39

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

(a)	During the quarter ended June 30, 2018, there was no information required to be disclosed in a report on Form 8-K which was not disclosed in a report on Form 8-K.
(b)	During the quarter ended June 30, 2018, there were no material changes to the procedures by which members may recommend nominees to our board of managers.

ITEM 6. EXHIBITS

The exhibits required to be filed with this report are set forth on the Exhibit Index hereto and incorporated by reference herein.

EXHIBIT INDEX

The following exhibits are included in this report on Form 10-Q for the period ended June 30, 2018 (and are numbered in accordance with Item 601 of Regulation S-K).

Exhibit No.	Name of Exhibit
3.1	Certificate of Conversion, incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1, filed on May 11, 2012, Commission File No. 333-181360
3.2	Certificate of Formation, incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1, filed on May 11, 2012, Commission File No. 333-181360
3.3	Second Amended and Restated Operating Agreement, incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K, filed on November 13, 2017, Commission File No. 333-203707
4.1	Indenture Agreement (including Form of Note) dated September 29, 2015, incorporated by reference to Exhibit 4.1 to the Company’s Post-Effective Amendment No. 1, filed on September 29, 2015, Commission File No. 333-203707
10.1	Master Loan Modification Agreement to the Line of Credit Agreement between Shepherd’s Finance, LLC and Paul Swanson, dated as of April 11, 2018, incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K, filed on April 18, 2018, Commission File No. 333-203707
10.2	Unsecured Promissory Note from Shepherd’s Finance, LLC to Paul Swanson, dated as of October 23, 2017 and April 12, 2018, incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K, filed on April 18, 2018, Commission File No. 333-203707
10.3	Secured Promissory Note from Shepherd’s Finance, LLC to Paul Swanson, dated as of October 23, 2017 and April 13, 2018, incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K, filed on April 18, 2018, Commission File No. 333-203707
10.4	Agreement between Shepherd’s Finance, LLC and 1333 Vista Drive, LLC, dated April 27, 2018, incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K, filed on May 3, 2018, Commission File No. 333-203707
10.5	Deed in Lieu of Foreclosure Agreement between Shepherd’s Finance, LLC and 1333 Vista Drive, LLC, dated April 27, 2018, incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K, filed on May 3, 2018, Commission File No. 333-203707
10.6	Warranty Deed in Lieu of Foreclosure Agreement between Shepherd’s Finance, LLC and 1333 Vista Drive, LLC, dated April 27, 2018, incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K, filed on May 3, 2018, Commission File No. 333-203707
10.7*	First Amendment to Promissory Note between Shepherd’s Finance, LLC and Daniel M. Wallach and Joyce S. Wallach, dated June 14, 2018
10.8*	First Amendment to Promissory Note between Shepherd’s Finance, LLC and 2007 Daniel M. Wallach Legacy Trust, dated June 14, 2018
31.1*	Certification of Principal Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of Principal Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002
32.2*	Certification of Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002

101.INS**	XBRL Instance Document
101.SCH**	XBRL Schema Document
101.CAL**	XBRL Calculation Linkbase Document
101.DEF**	XBRL Definition Linkbase Document
101.LAB**	XBRL Labels Linkbase Document
101.PRE**	XBRL Presentation Linkbase Document

* Filed herewith.

** Pursuant to Regulation 406T of Regulation S-T, these Interactive Data Files are deemed not filed or part of a registration statement or prospectus for purpose of Section 11 or 12 of the Securities Act of 1933, as amended, or Section 18 of the Securities Exchange Act of 1934, as amended, and are otherwise not subject to liability.

40

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	SHEPHERD’S FINANCE, LLC (Registrant)
Dated: August 9, 2018	By:	/s/ Catherine Loftin
		Catherine Loftin
		Chief Financial Officer

41

EX-10.7

FIRST AMENDMENT TO Promissory NOTE

This FIRST AMENDMENT TO Promissory Note (this “First Amendment”) is made and entered into on June 14, 2018, by and among SHEPHERD’S FINANCE, LLC (“Borrower”), and DANIEL M. WALLACH AND JOYCE S. WALLACH, as tenants by the entirety (together, “Lender”).

W I T N E S S E T H:

WHEREAS, Borrower and Lender have entered into that certain Promissory Note dated as of December 30, 2011 (the “Promissory Note”), pursuant to which Lender advanced to Borrower a loan in the maximum principal amount of One Million Two Hundred Fifty Thousand and No/100 Dollars ($1,250,000.00) (the “Loan”), which is secured by that certain Commercial Pledge Agreement, dated as of December 30, 2011(the “Wallach Commercial Pledge Agreement” and, collectively with the Promissory Note, the “Loan Documents”) pursuant to which Lender is granted a first priority security interest in certain of Borrower’s personal property;

WHEREAS, the interest rate to the Borrower on the Promissory Note equals the cost of funds, and management of the Borrower has recommended that the interest rate to the Borrower on the Promissory Note be changed to equal the cost of funds plus two percent;

NOW, THEREFORE, for and in consideration of the above premises, Ten Dollars in hand paid and other good and valuable consideration, the receipt and sufficiency whereof are hereby acknowledged, Borrower and Lender hereby agree as follows:

1. Recitals. The foregoing recitals are confirmed by the parties as true and correct and are incorporated herein by reference. The recitals are a substantive, contractual part of this First Amendment.

2. Capitalized Terms. Capitalized terms used herein but not otherwise defined herein shall have the respective meanings ascribed thereto in the Loan Documents.

3. Modification to Interest Calculation Method. As of the date hereof, the paragraph that begins “INTEREST CALCULATION METHOD” is deleted in its entirety and simultaneously substituted in lieu thereof by the following:

INTEREST CALCULATION METHOD. The interest rate on this Note shall equal the “Lender’s Cost of Funds,” which shall mean a daily rate equal to the “Prime Rate” of interest published in The Wall Street Journal from time to time, plus three percent. If more than one “Prime Rate” is published in The Wall Street Journal for a day, the average of such “Prime Rates” shall be used, and such average shall be rounded up to the nearest 1/100th of one percent (0.01%).

4. Modification to Governing Law. As of the date hereof, the paragraph that begins “GOVERNING LAW” is deleted in its entirety and simultaneously substituted in lieu thereof by the following:

GOVERNING LAW. This Note will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of Florida without regard to its conflicts of law provisions. This Note has been accepted by each Lender in the State of Florida.

5. Modification to Choice of Venue. As of the date hereof, the paragraph that begins “COICE OF VENUE” is deleted in its entirety and simultaneously substituted in lieu thereof by the following:

COICE OF VENUE. If there is a lawsuit, Borrower agrees upon Lender’s request to submit to the jurisdiction of the courts of the State of Florida, in the county in which Lender’s following address is located: 13241 Bartram Park Blvd., Suite 2401, Jacksonville, Florida 32258.

6. Representations and Warranties. Borrower hereby represents and warrants as follows:

(a) after giving effect to this First Amendment each of the representations and warranties in the Wallach Commercial Pledge and in each of the other Loan Documents are true and correct in all material respects on and as of the date hereof as though made on and as of such date;

(b) no default or Event of Default has occurred and is continuing as of the date hereof;

(c) the execution, delivery and performance by the Borrower of this First Amendment has been duly authorized by all requisite company action on the part of the Borrower and will not violate any of its articles of organization, operating agreement, bylaws or other organizational documents;

(d) this First Amendment has been duly executed and delivered by Borrower, and this First Amendment constitutes the legal, valid and binding obligation of Borrower enforceable against it in accordance with its terms; and

(e) no action or proceeding, including, without limitation, a voluntary or involuntary petition for bankruptcy under any chapter of the Bankruptcy Code, has been instituted or threatened by or against Borrower under the Bankruptcy Code or any other federal or state insolvency laws.

7. Conditions to Effectiveness. This First Amendment shall become effective when the Lender shall have received, in form and substance satisfactory to the Lender:

(a) counterparts of this First Amendment executed by the Borrower and the Lender; and

(b) all reasonable fees and expenses payable or reimbursable by the Borrower as of the date hereof, including, without limitation, all costs, fees and expenses of the Lender in connection with the preparation, execution and delivery of this First Amendment and the other instruments and documents to be delivered pursuant hereto (including the reasonable fees and out-of-pocket expenses of counsel for the Lender with respect thereto).

8. No Other Agreements; No Novation. Except as expressly modified and amended hereby, the Promissory Note shall be and remain in full force and effect and unchanged and is hereby ratified and confirmed. The execution, delivery and effectiveness of this First Amendment shall not, except as expressly provided herein, operate as an amendment, waiver or modification of any right, power or remedy of the Lender under any of the Loan Documents, nor constitute an amendment, waiver or modification of any other provisions of the Loan Documents. Neither the execution and delivery of this First Amendment, nor the consummation of any transaction contemplated hereunder, is intended to constitute a novation of the Promissory Note or of any of the other Loan Documents or any obligations thereunder. This First Amendment shall constitute a Loan Document for all purposes.

9. Reaffirmation and Ratification. Borrower acknowledges and agrees that the security interests and liens granted to the Lender pursuant to the Loan Documents shall remain outstanding and in full force and effect in accordance with the Loan Documents, and shall continue to secure the Obligations, and that the security and other interests granted to the Lender thereby are hereby ratified, confirmed and continued by execution and delivery of this First Amendment. The Loan Documents shall remain extant and in full force and effect following the execution and delivery of this First Amendment and any other Loan Documents executed in connection therewith.

10. Waiver of Claims. To induce the Lender to enter into this First Amendment, Borrower warrants and represents to the Lender that the Loan is not subject to any credits, charges, claims, or rights of offset or deduction of any kind or character whatsoever; and Borrower releases and discharges the Lender and its respective affiliates, officers, directors, shareholders, employees, attorneys and agents from any and all claims, defenses and causes of action, whether known or unknown and whether now existing or hereafter arising that have at any time been owned, or that are hereafter owned, in tort or in contract by Borrower, that arise out of any one or more circumstances or events that occurred prior to the date of this First Amendment and that relate to the Loan, the Promissory Note, the Loan Documents or the transactions described therein.

11. Strict Compliance Notice. Lender hereby notifies the Borrower that Lender intends to rely upon the strict terms and conditions of the Promissory Note and the other Loan Documents, and the Lender expects that the Borrower will strictly comply with the terms and conditions thereof from and after the date hereof.

12. Governing Law. This First Amendment will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of Florida without regard to its conflicts of law provisions. This First Amendment has been accepted by each Lender in the State of Florida.

13. Choice of Venue. If there is a lawsuit, Lender and Borrower agree to submit to the jurisdiction of the courts of the State of Florida, in the county in which Lender’s following address is located: 13241 Bartram Park Blvd., Suite 2401, Jacksonville, Florida 32258.

14. Counterparts and Headings. This First Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same instrument. The headings of this First Amendment are for convenience of reference only, are not part of this First Amendment and are not to affect the construction of, or to be taken into consideration interpreting, this First Amendment.

[SIGNATURES BEGIN ON THE FOLLOWING PAGE]

IN WITNESS WHEREOF, Borrower and Lender have caused this First Amendment to be executed as of the day and year first above written.

BORROWER:
SHEPHERD’S FINANCE, LLC
By:	/s/ Daniel M. Wallach
Name:	Daniel M. Wallach
Title:	Chief Executive Officer

[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]

LENDER:
DANIEL M. WALLACH AND JOYCE S. WALLACH,
as tenants by the entirety
By:	/s/ Daniel M. Wallach
Name:	Daniel M. Wallach
By:	/s/ Joyce S. Wallach
Name:	Joyce S. Wallach

EX-10.8

FIRST AMENDMENT TO Promissory NOTE

This FIRST AMENDMENT TO Promissory Note (this “First Amendment”) is made and entered into on June 14, 2018, by and among SHEPHERD’S FINANCE, LLC (“Borrower”), and 2007 DANIEL M. WALLACH LEGACY TRUST (“Lender”).

W I T N E S S E T H:

WHEREAS, Borrower and Lender have entered into that certain Promissory Note dated as of December 30, 2011 (the “Promissory Note”), pursuant to which Lender advanced to Borrower a loan in the maximum principal amount of Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00) (the “Loan”), which is secured by that certain Commercial Pledge Agreement, dated as of December 30, 2011(the “Wallach Commercial Pledge Agreement” and, collectively with the Promissory Note, the “Loan Documents”) pursuant to which Lender is granted a first priority security interest in certain of Borrower’s personal property;

WHEREAS, the interest rate to the Borrower on the Promissory Note equals the cost of funds, and management of the Borrower has recommended that the interest rate to the Borrower on the Promissory Note be changed to equal the cost of funds plus two percent;

NOW, THEREFORE, for and in consideration of the above premises, Ten Dollars in hand paid and other good and valuable consideration, the receipt and sufficiency whereof are hereby acknowledged, Borrower and Lender hereby agree as follows:

1. Recitals. The foregoing recitals are confirmed by the parties as true and correct and are incorporated herein by reference. The recitals are a substantive, contractual part of this First Amendment.

2. Capitalized Terms. Capitalized terms used herein but not otherwise defined herein shall have the respective meanings ascribed thereto in the Loan Documents.

3. Modification to Interest Calculation Method. As of the date hereof, the paragraph that begins “INTEREST CALCULATION METHOD” is deleted in its entirety and simultaneously substituted in lieu thereof by the following:

INTEREST CALCULATION METHOD. The interest rate on this Note shall equal the “Lender’s Cost of Funds,” which shall mean a daily rate equal to the “Prime Rate” of interest published in The Wall Street Journal from time to time, plus three percent. If more than one “Prime Rate” is published in The Wall Street Journal for a day, the average of such “Prime Rates” shall be used, and such average shall be rounded up to the nearest 1/100th of one percent (0.01%).

4. Modification to Governing Law. As of the date hereof, the paragraph that begins “GOVERNING LAW” is deleted in its entirety and simultaneously substituted in lieu thereof by the following:

GOVERNING LAW. This Note will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of Florida without regard to its conflicts of law provisions. This Note has been accepted by each Lender in the State of Florida.

5. Modification to Choice of Venue. As of the date hereof, the paragraph that begins “COICE OF VENUE” is deleted in its entirety and simultaneously substituted in lieu thereof by the following:

COICE OF VENUE. If there is a lawsuit, Borrower agrees upon Lender’s request to submit to the jurisdiction of the courts of the State of Florida, in the county in which Lender’s following address is located: 13241 Bartram Park Blvd., Suite 2401, Jacksonville, Florida 32258.

6. Representations and Warranties. Borrower hereby represents and warrants as follows:

(a) after giving effect to this First Amendment each of the representations and warranties in the Wallach Commercial Pledge and in each of the other Loan Documents are true and correct in all material respects on and as of the date hereof as though made on and as of such date;

(b) no default or Event of Default has occurred and is continuing as of the date hereof;

(c) the execution, delivery and performance by the Borrower of this First Amendment has been duly authorized by all requisite company action on the part of the Borrower and will not violate any of its articles of organization, operating agreement, bylaws or other organizational documents;

(d) this First Amendment has been duly executed and delivered by Borrower, and this First Amendment constitutes the legal, valid and binding obligation of Borrower enforceable against it in accordance with its terms; and

(e) no action or proceeding, including, without limitation, a voluntary or involuntary petition for bankruptcy under any chapter of the Bankruptcy Code, has been instituted or threatened by or against Borrower under the Bankruptcy Code or any other federal or state insolvency laws.

7. Conditions to Effectiveness. This First Amendment shall become effective when the Lender shall have received, in form and substance satisfactory to the Lender:

(a) counterparts of this First Amendment executed by the Borrower and the Lender; and

(b) all reasonable fees and expenses payable or reimbursable by the Borrower as of the date hereof, including, without limitation, all costs, fees and expenses of the Lender in connection with the preparation, execution and delivery of this First Amendment and the other instruments and documents to be delivered pursuant hereto (including the reasonable fees and out-of-pocket expenses of counsel for the Lender with respect thereto).

8. No Other Agreements; No Novation. Except as expressly modified and amended hereby, the Promissory Note shall be and remain in full force and effect and unchanged and is hereby ratified and confirmed. The execution, delivery and effectiveness of this First Amendment shall not, except as expressly provided herein, operate as an amendment, waiver or modification of any right, power or remedy of the Lender under any of the Loan Documents, nor constitute an amendment, waiver or modification of any other provisions of the Loan Documents. Neither the execution and delivery of this First Amendment, nor the consummation of any transaction contemplated hereunder, is intended to constitute a novation of the Promissory Note or of any of the other Loan Documents or any obligations thereunder. This First Amendment shall constitute a Loan Document for all purposes.

9. Reaffirmation and Ratification. Borrower acknowledges and agrees that the security interests and liens granted to the Lender pursuant to the Loan Documents shall remain outstanding and in full force and effect in accordance with the Loan Documents, and shall continue to secure the Obligations, and that the security and other interests granted to the Lender thereby are hereby ratified, confirmed and continued by execution and delivery of this First Amendment. The Loan Documents shall remain extant and in full force and effect following the execution and delivery of this First Amendment and any other Loan Documents executed in connection therewith.

10. Waiver of Claims. To induce the Lender to enter into this First Amendment, Borrower warrants and represents to the Lender that the Loan is not subject to any credits, charges, claims, or rights of offset or deduction of any kind or character whatsoever; and Borrower releases and discharges the Lender and its respective affiliates, officers, directors, shareholders, employees, attorneys and agents from any and all claims, defenses and causes of action, whether known or unknown and whether now existing or hereafter arising that have at any time been owned, or that are hereafter owned, in tort or in contract by Borrower, that arise out of any one or more circumstances or events that occurred prior to the date of this First Amendment and that relate to the Loan, the Promissory Note, the Loan Documents or the transactions described therein.

11. Strict Compliance Notice. Lender hereby notifies the Borrower that Lender intends to rely upon the strict terms and conditions of the Promissory Note and the other Loan Documents, and the Lender expects that the Borrower will strictly comply with the terms and conditions thereof from and after the date hereof.

12. Governing Law. This First Amendment will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of Florida without regard to its conflicts of law provisions. This First Amendment has been accepted by the Lender in the State of Florida.

13. Choice of Venue. If there is a lawsuit, Lender and Borrower agree to submit to the jurisdiction of the courts of the State of Florida, in the county in which Lender’s following address is located: 13241 Bartram Park Blvd., Suite 2401, Jacksonville, Florida 32258.

14. Counterparts and Headings. This First Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same instrument. The headings of this First Amendment are for convenience of reference only, are not part of this First Amendment and are not to affect the construction of, or to be taken into consideration interpreting, this First Amendment.

[SIGNATURES BEGIN ON THE FOLLOWING PAGE]

IN WITNESS WHEREOF, Borrower and Lender have caused this First Amendment to be executed as of the day and year first above written.

BORROWER:
SHEPHERD’S FINANCE, LLC
By:	/s/ Daniel M. Wallach
Name:	Daniel M. Wallach
Title:	Chief Executive Officer

[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]

LENDER:
2007 DANIEL M. WALLACH LEGACY TRUST
By:	/s/ Daniel M. Wallach
Name:	Daniel M. Wallach
Title:	Trustee

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Daniel M. Wallach, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Shepherd’s Finance, LLC;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: August 9, 2018	By:	/s/ Daniel M. Wallach
		Daniel M. Wallach
		Chief Executive Officer and Manager
		(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Catherine Loftin, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Shepherd’s Finance, LLC;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: August 9, 2018	By:	/s/ Catherine Loftin
		Catherine Loftin
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Shepherd’s Finance, LLC (the “Company”), in connection with the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2018 (the “Report”) hereby certifies, to his knowledge, that:

(i)	the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and
(ii)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 9, 2018	By:	/s/ Daniel M. Wallach
		Daniel M. Wallach
		Chief Executive Officer and Manager
		(Principal Executive Officer)

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Shepherd’s Finance, LLC (the “Company”), in connection with the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2018 (the “Report”) hereby certifies, to her knowledge, that:

(i)	the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and
(ii)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 9, 2018	By:	/s/ Catherine Loftin
		Catherine Loftin
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2018	Jul. 23, 2018
Document And Entity Information
Entity Registrant Name	Shepherd's Finance, LLC
Entity Central Index Key	0001544190
Document Type	10-Q
Document Period End Date	Jun. 30, 2018
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		0
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2018

XML

Interim Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Assets
Cash and cash equivalents	$ 247	$ 3,478
Accrued interest receivable	653	720
Loans receivable, net	41,819	30,043
Foreclosed assets	5,636	1,036
Property, plant and equipment, net	1,045	1,020
Other assets	176	58
Total assets	49,576	36,355
Liabilities
Customer interest escrow	544	935
Accounts payable and accrued expenses	482	705
Accrued interest payable	1,654	1,353
Notes payable secured, net of deferred financing costs	21,058	11,644
Notes payable unsecured, net of deferred financing costs	20,769	16,904
Due to preferred equity member	31	31
Total liabilities	44,538	31,572
Commitments and Contingencies (Notes 3 and 9)
Series C preferred equity	1,165	1,097
Members' Capital
Series B preferred equity	1,280	1,240
Class A common equity	2,593	2,446
Members' capital	3,873	3,686
Total liabilities, redeemable preferred equity and members' capital	$ 49,576	$ 36,355

XML

Interim Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Interest Income
Interest and fee income on loans	$ 2,045,000	$ 1,356,000	$ 3,872,000	$ 2,530,000
Interest expense:
Interest related to secured borrowings	517,000	215,000	928,000	394,000
Interest related to unsecured borrowings	513,000	401,000	963,000	768,000
Interest expense	1,030,000	616,000	1,891,000	1,162,000
Net interest income	1,015,000	740,000	1,981,000	1,368,000
Less: Loan loss provision	19,000	15,000	59,000	26,000
Net interest income after loan loss provision	996,000	725,000	1,922,000	1,342,000
Non-Interest Income
Gain from sale of foreclosed assets				77,000
Total non-interest income				77,000
Income	996,000	725,000	1,922,000	1,419,000
Non-Interest Expense
Selling, general and administrative	691	450	1,308,000	898,000
Depreciation and amortization	21	6	38,000	12,000
Impairment loss on foreclosed assets	80	106	85,000	155,000
Total non-interest expense	792,000	562,000	1,431,000	1,065,000
Net Income	204	163	491,000	354,000
Earned distribution to preferred equity holders	67,000	57,000	130,000	88,000
Net income attributable to common equity holders	$ 137,000	$ 106,000	$ 361,000	$ 266,000

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Interim Condensed Consolidated Statements of Changes in Members' Capital (Unaudited)	6 Months Ended
	Jun. 30, 2018 USD ($)
Statement of Stockholders' Equity [Abstract]
Member's capital, beginning balance	$ 3,686,000
Net income	491,000
Contributions from members (preferred)	40,000
Earned distributions to preferred equity holders	(130,000)
Distributions to common equity holders	(214,000)
Members' capital, ending balance	$ 3,873,000

XML

Interim Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Cash flows from operations
Net income	$ 491,000	$ 354,000
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Amortization of deferred financing costs	95,000	121,000
Provision for loan losses	59,000	26,000
Net loan origination fees deferred (earned)	351,000	254,000
Change in deferred origination expense	(87,000)	(71,000)
Impairment of foreclosed assets	85,000	155,000
Depreciation and amortization	38,000	12,000
Gain from sale of foreclosed assets		(77,000)
Net change in operating assets and liabilities
Other assets	(118,000)	10,000
Accrued interest receivable	(176,000)	(74,000)
Customer interest escrow	(391,000)	17,000
Accounts payable and accrued expenses	78,000	39,000
Net cash provided by (used in) operating activities	425,000	742,000
Cash flows from investing activities
Loan originations and principal collections, net	(15,996,000)	(9,090,000)
Investment in foreclosed assets	(545,000)	(265,000)
Proceeds from sale of foreclosed assets		1,890,000
Property plant and equipment additions	(63,000)	(583,000)
Net cash provided by (used in) investing activities	(16,564,000)	(8,048,000)
Cash flows from financing activities
Contributions from redeemable preferred equity		1,004,000
Contributions from members (preferred)	40,000	10,000
Distributions to preferred equity holders	(62,000)	(58,000)
Distributions to common equity holders	(214,000)	(117,000)
Proceeds from secured note payable	13,538,000	5,775,000
Repayments of secured note payable	(4,118,000)	(4,277,000)
Proceeds from unsecured notes payable	8,784,000	9,218,000
Redemptions/repayments of unsecured notes payable	(4,953,000)	(5,687,000)
Deferred financing costs paid	(67,000)	(40,000)
Net cash provided by (used in) financing activities	12,948,000	5,828,000
Net increase (decrease) in cash and cash equivalents	(3,231,000)	(1,478,000)
Cash and cash equivalents
Beginning of period	3,478,000	1,566,000
End of period	247,000	88,000
Supplemental disclosure of cash flow information
Cash paid for interest	1,533,000	1,062,000
Non-cash investing and financing activities
Earned but not paid distribution of preferred equity holders	68,000	29,000
Foreclosure of assets	3,897,000
Accrued interest reduction due to foreclosure	$ 243,000

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Description of Business and Basis of Presentation

6 Months Ended

Jun. 30, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Description of Business and Basis of Presentation

1. Description of Business and Basis of Presentation

Description of Business

Shepherd’s Finance, LLC and subsidiary (the “Company”) was originally formed as a Pennsylvania limited liability company on May 10, 2007. The Company is a sole member of a consolidating subsidiary, 84 REPA, LLC. The Company operates pursuant to its Second Amended and Restated Operating Agreement by and among Daniel M. Wallach and the other members of the Company effective as of March 16, 2017.

As of June 30, 2018, the Company extends commercial loans to residential homebuilders (in 17 states) to:

● construct single family homes,

● develop undeveloped land into residential building lots, and

● purchase and improve for sale older homes.

Basis of Presentation

The accompanying (a) interim condensed consolidated balance sheet as of December 31, 2017, which has been derived from audited consolidated financial statements, and (b) unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. While certain information and disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), management believes that the disclosures herein are adequate to make the unaudited interim condensed consolidated information presented not misleading. In the opinion of management, the unaudited interim condensed consolidated financial statements reflect all adjustments necessary for a fair presentation of the consolidated financial position, results of operations, and cash flows for the periods presented. Such adjustments are of a normal, recurring nature. The consolidated results of operations for any interim period are not necessarily indicative of results expected for the fiscal year ending December 31, 2018. These unaudited interim condensed consolidated financial statements should be read in conjunction with the 2017 consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K as of and for the year ended December 31, 2017 (the “2017 Statements”). The accounting policies followed by the Company are set forth in Note 2 – Summary of Significant Accounting Policies in the 2017 Statements.

Accounting Standards Adopted in the Period

Accounting Standards Update (“ASU”) 2016-01, “Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (An Amendment of FASB ASC 825).” The Financial Accounting Standards Board (“FASB”) issued ASU 2016-01 in January 2016, and it was intended to enhance the reporting model for financial instruments to provide users of financial statements with improved decision-making information. The amendments of ASU 2016-01 include: (i) requiring equity investments, except those accounted for under the equity method of accounting or those that result in the consolidation of an investee, to be measured at fair value, with changes in fair value recognized in net income; (ii) requiring a qualitative assessment to identify impairment of equity investments without readily determinable fair values; and (iii) clarifying that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets.

ASU 2016-01 became effective for the Company on January 1, 2018. The adoption of ASU 2016-01 did not have a material impact on the Company’s consolidated financial statements.

ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).” Issued in May 2014, ASU 2014-09 added FASB Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers,” and superseded revenue recognition requirements in FASB ASC Topic 605, “Revenue Recognition,” and certain cost guidance in FASB ASC Topic 605-35, “Revenue Recognition – Construction-Type and Production-Type Contracts.” ASU 2014-09 requires an entity to recognize revenue when (or as) an entity transfers control of goods or services to a customer at the amount to which the entity expects to be entitled. Depending on whether certain criteria are met, revenue should be recognized either over time, in a manner that depicts the entity’s performance, or at a point in time, when control of the goods or services is transferred to the customer. ASU 2014-09 became effective for the Company on January 1, 2018. The adoption of ASU 2014-09 did not have a material impact on the Company’s consolidated financial statements.

Revenue

On January 1, 2018, the Company implemented ASU 2014-09, codified at ASC Topic 606. The Company adopted ASC Topic 606 using the modified retrospective transition method. As of December 31, 2017, the Company had no uncompleted customer contracts and, as a result, no cumulative transition adjustment was made during the first quarter of 2018. Results for reporting periods beginning January 1, 2018 are presented under ASC Topic 606, while prior period amounts continue to be reported under legacy U.S. GAAP.

The majority of the Company’s revenue is generated through interest earned on financial instruments, including loans, which falls outside the scope of ASC Topic 606. All of the Company’s revenue that is subject to ASC Topic 606 would be included in non-interest income; however, not all non-interest income is subject to ASC Topic 606. The Company had no contract liabilities or unsatisfied performance obligations with customers as of June 30, 2018.

Reclassifications

Certain prior year amounts have been reclassified for consistency with current period presentation.

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Fair Value

6 Months Ended

Jun. 30, 2018

Fair Value Disclosures [Abstract]

Fair Value

2. Fair Value

The Company had no financial instruments measured at fair value on a recurring basis as of June 30, 2018 and December 31, 2017.

The following tables present the balances of non-financial instruments measured at fair value on a non-recurring basis as of June 30, 2018 and December 31, 2017.

June 30, 2018

	Carrying		Estimated		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Amount		Fair Value		Level 1		Level 2		Level 3
Foreclosed assets	$	5,636	$	5,636	$	–	$	–	$	5,636

December 31, 2017

					Quoted Prices
					in Active		Significant
					Markets for		Other		Significant
					Identical		Observable		Unobservable
	Carrying		Estimated		Assets		Inputs		Inputs
	Amount		Fair Value		Level 1		Level 2		Level 3
Foreclosed assets	$	1,036	$	1,036	$	–	$	–	$	1,036

The Company had no impaired loans as of June 30, 2018 and December 31, 2017.

The table below is a summary of fair value estimates for financial instruments and the level of the fair value hierarchy within which the fair value measurements are categorized at the periods indicated:

June 30, 2018

					Quoted Prices
					in Active		Significant
					Markets for		Other		Significant
					Identical		Observable		Unobservable
	Carrying		Estimated		Assets		Inputs		Inputs
	Amount		Fair Value		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	247	$	247	$	247	$	–	$	–
Loans receivable, net		41,819		41,819		–		–		41,819
Accrued interest receivable		653		653		–		–		653
Financial Liabilities:
Customer interest escrow		544		544		–		–		544
Notes payable secured		21,058		21,058		–		–		21,058
Notes payable unsecured, net		20,769		20,769		–		–		20,769
Accrued interest payable		1,654		1,654		–		–		1,654

December 31, 2017

					Quoted Prices
					in Active		Significant
					Markets for		Other		Significant
					Identical		Observable		Unobservable
	Carrying		Estimated		Assets		Inputs		Inputs
	Amount		Fair Value		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	3,478	$	3,478	$	3,478	$	–	$	–
Loans receivable, net		30,043		30,043		–		–		30,043
Accrued interest receivable		720		720		–		–		720
Financial Liabilities:
Customer interest escrow		935		935		–		–		935
Notes payable secured		11,644		11,644		–		–		11,644
Notes payable unsecured, net		16,904		16,904		–		–		16,904
Accrued interest payable		1,353		1,353		–		–		1,353

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Financing Receivables

6 Months Ended

Jun. 30, 2018

Receivables [Abstract]

Financing Receivables

3. Financing Receivables

Financing receivables are comprised of the following as of June 30, 2018 and December 31, 2017:

	June 30, 2018			December 31, 2017
Loans receivable, gross	$	44,803		$	32,375
Less: Deferred loan fees		(1,197	)		(847	)
Less: Deposits		(1,827	)		(1,497	)
Plus: Deferred origination expense		196			109
Less: Allowance for loan losses		(156	)		(97	)
Loans receivable, net	$	41,819		$	30,043

Commercial Construction and Development Loans

Commercial Loans – Construction Loan Portfolio Summary

As of June 30, 2018, the Company has 68 borrowers, all of whom, including four development loan customers (the “Hoskins Group,” consisting of Benjamin Marcus Homes, LLC, Investor’s Mark Acquisitions, LLC, and Mark Hoskins, being the largest of the four), borrow money for the purpose of building new homes.

The following is a summary of the loan portfolio to builders for home construction loans as of June 30, 2018 and December 31, 2017:

Year	Number of States		Number of Borrowers		Number of Loans		Value of Collateral(1)		Commitment Amount		Gross Amount Outstanding		Loan to Value Ratio(2)			Loan Fee
2018		17		68		245	$	93,976	$	60,551	$	38,888		64	%(3)		5	%
2017		16		52		168		75,931		47,087		29,564		62	%(3)		5	%

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

Commercial Loans – Real Estate Development Loan Portfolio Summary

The following is a summary of our loan portfolio to builders for land development as of June 30, 2018 and December 31, 2017:

Year	Number of States		Number of Borrowers		Number of Loans(4)		Gross Value of Collateral(1)		Commitment Amount(3)		Gross Amount Outstanding		Loan to Value Ratio(2)			Loan Fee
2018		3		4		7	$	8,249	$	6,367	$	5,915		72	%	$	1,000
2017		1		1		3		4,997		4,600		2,811		56	%		1,000

(1)	The value is determined by the appraised value adjusted for remaining costs to be paid. A portion of this collateral is $1,280 and $1,240 as of June 30, 2018 and December 31, 2017, respectively of preferred equity in our Company. In the event of a foreclosure on the property securing these loans, the portion of our collateral that is preferred equity might be difficult to sell, which may impact our ability to recover the loan balance. In addition, a portion of the collateral value is estimated based on the selling prices anticipated for the homes.
(2)	The loan to value ratio is calculated by taking the outstanding amount and dividing by the appraised value calculated as described above.
(3)	The commitment amount does not include letters of credit and cash bonds.
(4)	As of December 31, 2017, our development loans consisted of borrowings which originated in December 2011 and to which we refer throughout this report as the “Pennsylvania Loans”. During the first six months of 2018, the Company originated one additional development loan to the Pennsylvania Loans.

Credit Quality Information

The following tables present credit-related information at the “class” level in accordance with FASB ASC 310-10-50, “Disclosures about the Credit Quality of Finance Receivables and the Allowance for Credit Losses.” See our Form 10-K for the year ended December 31, 2017, as filed with the SEC, for more information.

Gross finance receivables – By risk rating:

	June 30, 2018		December 31, 2017
Pass	$	39,327	$	25,656
Special mention		5,476		6,719
Total	$	44,803	$	32,375

Gross finance receivables – Method of impairment calculation:

	June 30, 2018		December 31, 2017
Performing loans evaluated individually	$	18,409	$	14,992
Performing loans evaluated collectively		26,394		17,383
Total	$	44,803	$	32,375

As of June 30, 2018 and December 31, 2017, there were no loans acquired with deteriorated credit quality.

Concentrations

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of loans receivable. Our concentration risks for individual borrowers are summarized in the table below:

	June 30, 2018				December 31, 2017
		Percent of				Percent of
	Borrower	Loan			Borrower	Loan
	City	Commitments			City	Commitments
Highest concentration risk	Pittsburgh, PA		23	%	Pittsburgh, PA		22	%
Second highest concentration risk	Cape Coral, FL		4	%	Sarasota, FL		7	%
Third highest concentration risk	Orlando, FL		4	%	Savannah, GA		5	%

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Foreclosed Assets

6 Months Ended

Jun. 30, 2018

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Foreclosed Assets

4. Foreclosed Assets

The following table is a roll forward of foreclosed assets:

	Six Months Ended June 30, 2018			Year Ended December 31, 2017			Six Months Ended June 30, 2017
Beginning balance	$	1,036		$	2,798		$	2,798
Additions from loans		4,140			-			-
Additions for construction/development		545			317			265
Sale proceeds		-			(1,890	)		(1,890	)
Gain on sale		-			77			77
Impairment loss on foreclosed assets		(85	)		(266	)		(155	)
Ending balance	$	5,636		$	1,036		$	1,095

During April 2018, we entered into a Deed in Lieu of Foreclosure Agreement with a certain borrower who defaulted on a loan by failing to make an interest payment that was due. The Company reclassified $4,140, consisting of $3,897 of principal from Loan receivable, net and $243 of interest from Accrued interest receivable, to Foreclosed assets on the balance sheet as of June 30, 2018.

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Borrowings

6 Months Ended

Jun. 30, 2018

Debt Disclosure [Abstract]

Borrowings

5. Borrowings

The following table displays our borrowings and a ranking of priority:

	Priority Rank		June 30, 2018		December 31, 2017
Borrowing Source
Purchase and sale agreements		1	$	19,186	$	11,644
Secured line of credit from affiliates		2		1,877		-
Unsecured line of credit (senior)		3		500		-
Other unsecured borrowings (senior subordinated)		4		1,008		279
Unsecured Notes through our public offering, gross		5		15,274		14,121
Other unsecured borrowings (subordinated)		5		3,649		2,617
Other unsecured borrowings (junior subordinated)		6		590		173
Total			$	42,084	$	28,834

The following table shows the maturity of outstanding borrowings as of June 30, 2018:

Year Maturing	Total Amount Maturing		Public Offering		Other Unsecured		Purchase and Sale Agreements and Other Secured Borrowings
2018	$	25,728	$	2,306	$	3,007	$	20,415
2019		7,556		6,499		1,043		14
2020		2,270		2,155		100		15
2021		3,788		3,773		-		15
2022 and thereafter		2,742		541		1,597		604
Total	$	42,084	$	15,274	$	5,747	$	21,063

Secured Borrowings

Purchase and Sale Agreements

In March 2018, we entered into the Seventh Amendment (the “Seventh Amendment”) to our Loan Purchase and Sale Agreement (the “S.K. Funding LPSA”) with S.K. Funding, LLC (“S.K. Funding”).

The purpose of the Seventh Amendment was to allow S.K. Funding to purchase a portion of the Pennsylvania Loans for a purchase price of $649.

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

● If the total principal amount exceeds $1,000, S.K. Funding must fund the amount between $1,000 and less than or equal to $3,500.

● If the total principal amount is less than $4,500 then the Company will also repay S.K. Funding’s principal as principal payments are received on the Pennsylvania Loans from the underlying borrowers in the amount by which the total principal amount is less than $4,500 until S.K. Funding’s principal has been repaid in full.

● The interest rate accruing to S.K. Funding under the Seventh Amendment is 10.5% calculated on a 365/366-day basis.

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

Lines of Credit

Amendments to the Lines of Credit with Mr. Wallach and His Affiliates

During June 2018, we entered into a First Amendment to the line of credit with our Chief Executive Officer and his wife (the “Wallach LOC”) which modified the interest rate to generally equal the prime rate plus 3%. The interest rate for the Wallach LOC was 6.8% and 4.4% as of June 30, 2018 and 2017, respectively. We borrowed $877 and $0 against the Wallach LOC as of June 30, 2018 and 2017, respectively. Interest was $6 and $10 for the quarter and six months ended June 30, 2018, respectively. As of June 30, 2018, there was $373 remaining availability on the Wallach LOC.

During June 2018, we entered into a First Amendment to the line of credit with the 2007 Daniel M. Wallach Legacy Trust, which our Chief Executive Officer’s trust (the “Wallach Trust LOC”) which modified the interest rate to generally equal the prime rate plus 3%. The interest rate for this borrowing was 6.8% and 4.4% as of June 30, 2018 and 2017, respectively. As of June 30, 2018, we borrowed $0 against the Wallach Trust LOC. As of June 30, 2018, there the was $250 remaining availability on the Wallach Trust LOC.

Line of Credit (Shuman)

During July 2017, we entered into a line of credit agreement (the “Shuman LOC Agreement”) with a group of lenders (collectively, “Shuman”). Pursuant to the Shuman LOC Agreement, Shuman provides us with a revolving line of credit (the “Shuman LOC”) with the following terms:

● Principal not to exceed $1,325;

● Secured with assignments of certain notes and mortgages;

● Cost of funds to us of 10%; and

● Due in July 2019 unless extended by Shuman for one or more additional 12-month periods.

The Shuman LOC was fully borrowed as of June 30, 2018. Interest expense was $33 and $67 for the quarter and six months ended June 30, 2018, respectively.

Modification to the Line of Credit with Paul Swanson 

During April 2018, we entered into a Master Loan Modification Agreement (the “Swanson Modification Agreement”) with Paul Swanson which modified the Line of Credit Agreement between us and Mr. Swanson dated October 23, 2017. Pursuant to the Swanson Modification Agreement, Mr. Swanson provides us with a revolving line of credit (the “Swanson LOC”) with the following terms:

● Principal not to exceed $7,000;

● Secured with assignments of certain notes and mortgages;

● Cost of funds to us of 10%; and

● Due in January 2019 unless extended by Mr. Swanson for one or more additional 15-month periods.

The Swanson LOC was fully borrowed as of June 30, 2018. Interest expense was $165 and $265 for the quarter and six months ended June 30, 2018, respectively.

New Line of Credit with William Myrick

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

● Principal not to exceed $1,000;

● Secured by a lien against all of our assets;

● Cost of funds to us generally equal to the prime rate plus 3%; and

● Due upon demand.

The Myrick LOC was fully borrowed as of June 30, 2018. Interest expense was $3 for both the quarter and six months ended June 30, 2018.

Mortgage Payable

During the first six months of 2018, we entered into a commercial mortgage on our office building with the following terms:

● Principal not to exceed $660;

● Interest rate at 5.07% per annum based on a year of 360 days; and

● Due in January 2033.

The principal amount of the Company’s commercial mortgage was $654 as of June 30, 2018. Interest expense was $7 and $18 for the quarter and six months ended June 30, 2018.

Summary

The purchase and sale agreements and lines of credit are summarized below:

	June 30, 2018				December 31, 2017
			Due From				Due From
	Book Value of		Shepherd’s		Book Value of		Shepherd’s
	Loans which		Finance to Loan		Loans which		Finance to Loan
	Served as Collateral		Purchaser or Lender		Served as Collateral		Purchaser or Lender
Loan Purchaser
Builder Finance, Inc.	$	8,538	$	4,843	$	7,483	$	4,089
S.K. Funding		10,108		6,625		9,128		4,134
Lender
Shuman		2,160		1,325		1,747		1,325
Paul Swanson		8,214		5,738		2,518		2,096
Total	$	29,020	$	18,531	$	20,876	$	11,644

Unsecured Borrowings

Other Unsecured Debts

Our other unsecured debts are detailed below:

	Maturity	Interest			Principal Amount Outstanding as of
Loan	Date	Rate (1)			June 30, 2018		December 31, 2017
Unsecured Note with Seven Kings Holdings, Inc.	August 2018		7.5	%		500		500
Unsecured Line of Credit from Builder Finance, Inc.	January 2019		10.0	%		500		-
Unsecured Line of Credit from Paul Swanson	December 2018(2)		10.0	%		1,262		1,904
Subordinated Promissory Note	Demand(3)		7.5	%		1,125		-
Subordinated Promissory Note	December 2019		10.5	%		263		113
Subordinated Promissory Note	April 2020		10.0	%		100		100
Senior Subordinated Promissory Note	March 2022(4)		10.0	%		400		-
Senior Subordinated Promissory Note	March 2022(5)		1.0	%		728		-
Junior Subordinated Promissory Note	March 2022(5)		22.5	%		417		-
Senior Subordinated Promissory Note	October 2022(6)		1.0	%		279		279
Junior Subordinated Promissory Note	October 2022(6)		20.0	%		173		173
					$	5,747	$	3,069

⁽¹⁾ Interest rate per annum, based upon actual days outstanding and a 365/366 day year.

⁽²⁾ Due in December 2018 unless extended by Mr. Swanson for one or more additional 15-month periods.

⁽³⁾ Principal due six months after lender gives notice. This note may be prepaid without fee, premium, or penalty.

⁽⁴⁾ This note may be prepaid upon lender’s request at least 10 days prior to an interest payment and up to $20 of principal.

⁽⁵⁾ These notes were issued to the same holder and, when calculated together, yield a blended return of 11% per annum.

⁽⁶⁾ These notes were issued to the same holder and, when calculated together, yield a blended return of 10% per annum.

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

The effective interest rate on the Notes (“Notes”) offered pursuant to the Notes Program at June 30, 2018 and December 31, 2017 was 9.39% and 9.21%, respectively, not including the amortization of deferred financing costs. There are limited rights of early redemption. The following table shows the roll forward of the Notes Program:

	Six Months Ended June 30, 2018			Year Ended December 31, 2017			Six Months Ended June 30, 2017
Gross Notes outstanding, beginning of period	$	14,121		$	11,221		$	11,221
Notes issued		3,350			8,375			8,105
Note repayments / redemptions		(2,197	)		(5,475	)		(5,087	)
Gross Notes outstanding, end of period	$	15,274		$	14,121		$	14,239
Less deferred financing costs, net		252			286			330
Notes outstanding, net	$	15,022		$	13,835		$	13,909

The following is a roll forward of deferred financing costs:

	Six Months			Year			Six Months
	Ended			Ended			Ended
	June 30, 2018			December 31, 2017			June 30, 2017
Deferred financing costs, beginning balance	$	1,102		$	1,014		$	1,014
Additions		61			88			40
Deferred financing costs, ending balance	$	1,163		$	1,102		$	1,054
Less accumulated amortization		(911	)		(816	)		(724	)
Deferred financing costs, net	$	252		$	286		$	330

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

	Six Months		Year		Six Months
	Ended		Ended		Ended
	June 30, 2018		December 31, 2017		June 30, 2017
Accumulated amortization, beginning balance	$	816	$	603	$	603
Additions		95		213		121
Accumulated amortization, ending balance	$	911	$	816	$	724

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Redeemable Preferred Equity

6 Months Ended

Jun. 30, 2018

Equity [Abstract]

Redeemable Preferred Equity

6. Redeemable Preferred Equity

The following is a roll forward of Series C cumulative preferred equity (“Series C Preferred Units”):

	Six Months Ended June 30, 2018		Year Ended December 31, 2017		Six Months Ended June 30, 2017
Beginning balance	$	1,097	$	–	$	–
Additions from new investment		–		1,004		1,004
Additions from reinvestment		68		93		29
Ending balance	$	1,165	$	1,097	$	1,033

The following table shows the earliest redemption options for investors in our Series C Preferred Units as of June 30, 2018:

Year of Available Redemption	Total Amount Redeemable
2023	$	1,165
Total	$	1,165

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Members' Capital

6 Months Ended

Jun. 30, 2018

Equity [Abstract]

Members' Capital

7. Members’ Capital

There are currently two classes of equity units outstanding that the Company classifies as Members’ Capital: Class A common units (“Class A Common Units”) and Series B cumulative preferred units (“Series B Preferred Units”). As of June 30, 2018, the Class A Common Units are held by nine members, all of whom have no personal liability. All Class A common members have voting rights in proportion to their capital account. There were 2,629 Class A Common Units outstanding at both June 30, 2018 and December 31, 2017.

In January 2018, our Chief Financial Officer and Executive Vice President of Operations purchased 2% and 1% of our outstanding Class A Common Units, respectively, from our CEO. In March 2018, our Executive Vice President of Sales purchased 14.3% of our outstanding Class A Common Units from our CEO.

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Related Party Transactions

6 Months Ended

Jun. 30, 2018

Related Party Transactions [Abstract]

Related Party Transactions

8. Related Party Transactions

As of June 30, 2018, each of the Company’s two independent managers own 1% of our Class A Common Units. As of June 30, 2018, our CFO, Executive Vice President of Operations, and Executive Vice President of Sales each own 2%, 2%, and 15.3% of our Class A Common Units, respectively.

As of June 30, 2018, the Company borrowed $877 against the Wallach LOC, which is a line of credit with our CEO and his wife. A more detailed description is included in Note 5 above. This borrowing is included in notes payable secured, net of deferred financing costs on the interim condensed consolidated balance sheet.

As of June 30, 2018, the Company borrowed $1,000 against the Myrick LOC, which is a line of credit with our Executive Vice President of Sales. A more detailed description is included in Note 5 above. This borrowing is included in notes payable secured, net of deferred financing costs on the interim condensed consolidated balance sheet.

In February 2018, the Company issued a Subordinated Promissory Note in the principal amount of $1,125 to a trust affiliated with Seven Kings Holdings, Inc. One of our independent managers, Kenneth R. Summers, is the trustee of that trust. This borrowing is included in notes payable unsecured, net of deferred financing costs on the interim condensed consolidated balance sheet.

In March 2018, the Company issued a Senior Subordinated Promissory Note in the principal amount of $400 to family members of our CEO. This borrowing is included in the notes payable unsecured, net of deferred financing costs on the interim condensed consolidated balance sheet.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2018

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

9. Commitments and Contingencies

Unfunded commitments to extend credit, which have similar collateral, credit risk, and market risk to our outstanding loans, were $21,676 and $19,312 at June 30, 2018 and December 31, 2017, respectively.

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Selected Quarterly Condensed Consolidated Financial Data (Unaudited)

6 Months Ended

Jun. 30, 2018

Quarterly Financial Information Disclosure [Abstract]

Selected Quarterly Condensed Consolidated Financial Data (Unaudited)

10. Selected Quarterly Condensed Consolidated Financial Data (Unaudited)

Summarized unaudited quarterly condensed consolidated financial data for the two quarters of 2018 and four quarters of 2017 are as follows:

	Quarter 2		Quarter 1		Quarter 4		Quarter 3		Quarter 2		Quarter 1
	2018		2018		2017		2017		2017		2017
Net Interest Income after Loan Loss Provision	$	996	$	926	$	802	$	917	$	725	$	617
Non-Interest Income		–		–		–		–		–		77
SG&A expense		691		617		643		537		456		454
Depreciation and Amortization		21		17		–		–		–		6
Impairment loss on foreclosed assets		80		5		64		47		106		49
Net Income	$	204	$	287	$	95	$	333	$	163	$	191

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Non-Interest Expense Detail

6 Months Ended

Jun. 30, 2018

Non-interest Expense Detail

Non-Interest Expense Detail

11. Non-Interest expense detail

The following table displays our selling, general and administrative (“SG&A”) expenses:

	For the Six Months Ended June 30,
	2018		2017
Selling, general and administrative expenses
Legal and accounting	$	223	$	125
Salaries and related expenses		833		583
Board related expenses		37		55
Advertising		35		25
Rent and utilities		20		14
Loan and foreclosed asset expenses		38		26
Travel		51		32
Other		71		38
Total SG&A	$	1,308	$	898

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Subsequent Events

6 Months Ended

Jun. 30, 2018

Subsequent Events [Abstract]

Subsequent Events

12. Subsequent Events

Management of the Company has evaluated subsequent events through August 8, 2018, the date these consolidated financial statements were issued.

On July 31, 2018, we redeemed all of our outstanding Series C Cumulative Preferred Units (the “Preferred Units”), which were held by two investors. On August 1, 2018, we sold 12 of our Preferred Units to Daniel M. Wallach, our Chief Executive Officer and Chairman of our board of managers, and his wife, Joyce S. Wallach, for the total price of $1,200.

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Fair Value (Tables)

6 Months Ended

Jun. 30, 2018

Fair Value Disclosures [Abstract]

Schedule of Non-financial Instruments Measured at Fair Value On Non-recurring Basis

The following tables present the balances of non-financial instruments measured at fair value on a non-recurring basis as of June 30, 2018 and December 31, 2017.

June 30, 2018

	Carrying		Estimated		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Amount		Fair Value		Level 1		Level 2		Level 3
Foreclosed assets	$	5,636	$	5,636	$	–	$	–	$	5,636

December 31, 2017

					Quoted Prices
					in Active		Significant
					Markets for		Other		Significant
					Identical		Observable		Unobservable
	Carrying		Estimated		Assets		Inputs		Inputs
	Amount		Fair Value		Level 1		Level 2		Level 3
Foreclosed assets	$	1,036	$	1,036	$	–	$	–	$	1,036

Schedule of Fair Value Measurements, Recurring and Nonrecurring

The table below is a summary of fair value estimates for financial instruments and the level of the fair value hierarchy within which the fair value measurements are categorized at the periods indicated:

June 30, 2018

					Quoted Prices
					in Active		Significant
					Markets for		Other		Significant
					Identical		Observable		Unobservable
	Carrying		Estimated		Assets		Inputs		Inputs
	Amount		Fair Value		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	247	$	247	$	247	$	–	$	–
Loans receivable, net		41,819		41,819		–		–		41,819
Accrued interest receivable		653		653		–		–		653
Financial Liabilities:
Customer interest escrow		544		544		–		–		544
Notes payable secured		21,058		21,058		–		–		21,058
Notes payable unsecured, net		20,769		20,769		–		–		20,769
Accrued interest payable		1,654		1,654		–		–		1,654

December 31, 2017

					Quoted Prices
					in Active		Significant
					Markets for		Other		Significant
					Identical		Observable		Unobservable
	Carrying		Estimated		Assets		Inputs		Inputs
	Amount		Fair Value		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	3,478	$	3,478	$	3,478	$	–	$	–
Loans receivable, net		30,043		30,043		–		–		30,043
Accrued interest receivable		720		720		–		–		720
Financial Liabilities:
Customer interest escrow		935		935		–		–		935
Notes payable secured		11,644		11,644		–		–		11,644
Notes payable unsecured, net		16,904		16,904		–		–		16,904
Accrued interest payable		1,353		1,353		–		–		1,353

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Financing Receivables (Tables)

6 Months Ended

Jun. 30, 2018

Receivables [Abstract]

Schedule of Financing Receivables

Financing receivables are comprised of the following as of June 30, 2018 and December 31, 2017:

	June 30, 2018			December 31, 2017
Loans receivable, gross	$	44,803		$	32,375
Less: Deferred loan fees		(1,197	)		(847	)
Less: Deposits		(1,827	)		(1,497	)
Plus: Deferred origination expense		196			109
Less: Allowance for loan losses		(156	)		(97	)
Loans receivable, net	$	41,819		$	30,043

Commercial Loans - Construction Loan Portfolio Summary

The following is a summary of the loan portfolio to builders for home construction loans as of June 30, 2018 and December 31, 2017:

Year	Number of States		Number of Borrowers		Number of Loans		Value of Collateral(1)		Commitment Amount		Gross Amount Outstanding		Loan to Value Ratio(2)			Loan Fee
2018		17		68		245	$	93,976	$	60,551	$	38,888		64	%(3)		5	%
2017		16		52		168		75,931		47,087		29,564		62	%(3)		5	%

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

Commercial Loans - Real Estate Development Loan Portfolio Summary

The following is a summary of our loan portfolio to builders for land development as of June 30, 2018 and December 31, 2017:

Year	Number of States		Number of Borrowers		Number of Loans(4)		Gross Value of Collateral(1)		Commitment Amount(3)		Gross Amount Outstanding		Loan to Value Ratio(2)			Loan Fee
2018		3		4		7	$	8,249	$	6,367	$	5,915		72	%	$	1,000
2017		1		1		3		4,997		4,600		2,811		56	%		1,000

(1)	The value is determined by the appraised value adjusted for remaining costs to be paid. A portion of this collateral is $1,280 and $1,240 as of June 30, 2018 and December 31, 2017, respectively of preferred equity in our Company. In the event of a foreclosure on the property securing these loans, the portion of our collateral that is preferred equity might be difficult to sell, which may impact our ability to recover the loan balance. In addition, a portion of the collateral value is estimated based on the selling prices anticipated for the homes.
(2)	The loan to value ratio is calculated by taking the outstanding amount and dividing by the appraised value calculated as described above.
(3)	The commitment amount does not include letters of credit and cash bonds.
(4)	As of December 31, 2017, our development loans consisted of borrowings which originated in December 2011 and to which we refer throughout this report as the “Pennsylvania Loans”. During the first six months of 2018, the Company originated one additional development loan to the Pennsylvania Loans.

Summary of Finance Receivables by Classification

Gross finance receivables – By risk rating:

	June 30, 2018		December 31, 2017
Pass	$	39,327	$	25,656
Special mention		5,476		6,719
Total	$	44,803	$	32,375

Schedule of Impairment Calculation Method

Gross finance receivables – Method of impairment calculation:

	June 30, 2018		December 31, 2017
Performing loans evaluated individually	$	18,409	$	14,992
Performing loans evaluated collectively		26,394		17,383
Total	$	44,803	$	32,375

Schedule of Concentration Risk for Individual Borrowers

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of loans receivable. Our concentration risks for individual borrowers are summarized in the table below:

	June 30, 2018				December 31, 2017
		Percent of				Percent of
	Borrower	Loan			Borrower	Loan
	City	Commitments			City	Commitments
Highest concentration risk	Pittsburgh, PA		23	%	Pittsburgh, PA		22	%
Second highest concentration risk	Cape Coral, FL		4	%	Sarasota, FL		7	%
Third highest concentration risk	Orlando, FL		4	%	Savannah, GA		5	%

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Foreclosed Assets (Tables)

6 Months Ended

Jun. 30, 2018

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Schedule of Roll Forward of Foreclosed Assets

The following table is a roll forward of foreclosed assets:

	Six Months Ended June 30, 2018			Year Ended December 31, 2017			Six Months Ended June 30, 2017
Beginning balance	$	1,036		$	2,798		$	2,798
Additions from loans		4,140			-			-
Additions for construction/development		545			317			265
Sale proceeds		-			(1,890	)		(1,890	)
Gain on sale		-			77			77
Impairment loss on foreclosed assets		(85	)		(266	)		(155	)
Ending balance	$	5,636		$	1,036		$	1,095

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Borrowings (Tables)

6 Months Ended

Jun. 30, 2018

Debt Disclosure [Abstract]

Schedule of Borrowings

The following table displays our borrowings and a ranking of priority:

	Priority Rank		June 30, 2018		December 31, 2017
Borrowing Source
Purchase and sale agreements		1	$	19,186	$	11,644
Secured line of credit from affiliates		2		1,877		-
Unsecured line of credit (senior)		3		500		-
Other unsecured borrowings (senior subordinated)		4		1,008		279
Unsecured Notes through our public offering, gross		5		15,274		14,121
Other unsecured borrowings (subordinated)		5		3,649		2,617
Other unsecured borrowings (junior subordinated)		6		590		173
Total			$	42,084	$	28,834

Schedule of Maturities of Long-term Debt

The following table shows the maturity of outstanding borrowings as of June 30, 2018:

Year Maturing	Total Amount Maturing		Public Offering		Other Unsecured		Purchase and Sale Agreements and Other Secured Borrowings
2018	$	25,728	$	2,306	$	3,007	$	20,415
2019		7,556		6,499		1,043		14
2020		2,270		2,155		100		15
2021		3,788		3,773		-		15
2022 and thereafter		2,742		541		1,597		604
Total	$	42,084	$	15,274	$	5,747	$	21,063

Schedule of Secured Borrowings

The purchase and sale agreements and lines of credit are summarized below:

	June 30, 2018				December 31, 2017
			Due From				Due From
	Book Value of		Shepherd’s		Book Value of		Shepherd’s
	Loans which		Finance to Loan		Loans which		Finance to Loan
	Served as Collateral		Purchaser or Lender		Served as Collateral		Purchaser or Lender
Loan Purchaser
Builder Finance, Inc.	$	8,538	$	4,843	$	7,483	$	4,089
S.K. Funding		10,108		6,625		9,128		4,134
Lender
Shuman		2,160		1,325		1,747		1,325
Paul Swanson		8,214		5,738		2,518		2,096
Total	$	29,020	$	18,531	$	20,876	$	11,644

Schedule of Other Unsecured Loans

Our other unsecured debts are detailed below:

	Maturity	Interest			Principal Amount Outstanding as of
Loan	Date	Rate (1)			June 30, 2018		December 31, 2017
Unsecured Note with Seven Kings Holdings, Inc.	August 2018		7.5	%		500		500
Unsecured Line of Credit from Builder Finance, Inc.	January 2019		10.0	%		500		-
Unsecured Line of Credit from Paul Swanson	December 2018(2)		10.0	%		1,262		1,904
Subordinated Promissory Note	Demand(3)		7.5	%		1,125		-
Subordinated Promissory Note	December 2019		10.5	%		263		113
Subordinated Promissory Note	April 2020		10.0	%		100		100
Senior Subordinated Promissory Note	March 2022(4)		10.0	%		400		-
Senior Subordinated Promissory Note	March 2022(5)		1.0	%		728		-
Junior Subordinated Promissory Note	March 2022(5)		22.5	%		417		-
Senior Subordinated Promissory Note	October 2022(6)		1.0	%		279		279
Junior Subordinated Promissory Note	October 2022(6)		20.0	%		173		173
					$	5,747	$	3,069

⁽¹⁾ Interest rate per annum, based upon actual days outstanding and a 365/366 day year.

⁽²⁾ Due in December 2018 unless extended by Mr. Swanson for one or more additional 15-month periods.

⁽³⁾ Principal due six months after lender gives notice. This note may be prepaid without fee, premium, or penalty.

⁽⁴⁾ This note may be prepaid upon lender’s request at least 10 days prior to an interest payment and up to $20 of principal.

⁽⁵⁾ These notes were issued to the same holder and, when calculated together, yield a blended return of 11% per annum.

⁽⁶⁾ These notes were issued to the same holder and, when calculated together, yield a blended return of 10% per annum.

Schedule of Roll Forward of Notes Outstanding

The following table shows the roll forward of the Notes Program:

	Six Months Ended June 30, 2018			Year Ended December 31, 2017			Six Months Ended June 30, 2017
Gross Notes outstanding, beginning of period	$	14,121		$	11,221		$	11,221
Notes issued		3,350			8,375			8,105
Note repayments / redemptions		(2,197	)		(5,475	)		(5,087	)
Gross Notes outstanding, end of period	$	15,274		$	14,121		$	14,239
Less deferred financing costs, net		252			286			330
Notes outstanding, net	$	15,022		$	13,835		$	13,909

Schedule of Roll Forward of Deferred Financing Costs

The following is a roll forward of deferred financing costs:

	Six Months			Year			Six Months
	Ended			Ended			Ended
	June 30, 2018			December 31, 2017			June 30, 2017
Deferred financing costs, beginning balance	$	1,102		$	1,014		$	1,014
Additions		61			88			40
Deferred financing costs, ending balance	$	1,163		$	1,102		$	1,054
Less accumulated amortization		(911	)		(816	)		(724	)
Deferred financing costs, net	$	252		$	286		$	330

Schedule of Roll Forward of Accumulated Amortization of Deferred Financing Costs

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

	Six Months		Year		Six Months
	Ended		Ended		Ended
	June 30, 2018		December 31, 2017		June 30, 2017
Accumulated amortization, beginning balance	$	816	$	603	$	603
Additions		95		213		121
Accumulated amortization, ending balance	$	911	$	816	$	724

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Redeemable Preferred Equity (Tables)

6 Months Ended

Jun. 30, 2018

Equity [Abstract]

Schedule of Roll Forward of Series C Cumulative Preferred Units

The following is a roll forward of Series C cumulative preferred equity (“Series C Preferred Units”):

	Six Months Ended June 30, 2018		Year Ended December 31, 2017		Six Months Ended June 30, 2017
Beginning balance	$	1,097	$	–	$	–
Additions from new investment		–		1,004		1,004
Additions from reinvestment		68		93		29
Ending balance	$	1,165	$	1,097	$	1,033

Schedule of Redemption Option for Investors

The following table shows the earliest redemption options for investors in our Series C Preferred Units as of June 30, 2018:

Year of Available Redemption	Total Amount Redeemable
2023	$	1,165
Total	$	1,165

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Selected Quarterly Condensed Consolidated Financial Data (Unaudited) (Tables)

6 Months Ended

Jun. 30, 2018

Quarterly Financial Information Disclosure [Abstract]

Summarized Unaudited Quarterly Condensed Consolidated Financial Data

Summarized unaudited quarterly condensed consolidated financial data for the two quarters of 2018 and four quarters of 2017 are as follows:

	Quarter 2		Quarter 1		Quarter 4		Quarter 3		Quarter 2		Quarter 1
	2018		2018		2017		2017		2017		2017
Net Interest Income after Loan Loss Provision	$	996	$	926	$	802	$	917	$	725	$	617
Non-Interest Income		–		–		–		–		–		77
SG&A expense		691		617		643		537		456		454
Depreciation and Amortization		21		17		–		–		–		6
Impairment loss on foreclosed assets		80		5		64		47		106		49
Net Income	$	204	$	287	$	95	$	333	$	163	$	191

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Non-Interest Expense Detail (Tables)

6 Months Ended

Jun. 30, 2018

Non-interest Expense Detail

Schedule of Selling General and Administrative Expenses

The following table displays our selling, general and administrative (“SG&A”) expenses:

	For the Six Months Ended June 30,
	2018		2017
Selling, general and administrative expenses
Legal and accounting	$	223	$	125
Salaries and related expenses		833		583
Board related expenses		37		55
Advertising		35		25
Rent and utilities		20		14
Loan and foreclosed asset expenses		38		26
Travel		51		32
Other		71		38
Total SG&A	$	1,308	$	898

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Fair Value - Schedule of Non-financial Instruments Measured at Fair Value on Non-recurring Basis (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017	Jun. 30, 2017	Dec. 31, 2016
Foreclosed assets	$ 5,636	$ 1,036	$ 1,095	$ 2,798
Estimate Fair Value [Member]
Foreclosed assets	5,636	1,036
Fair Value, Inputs, Level 1 [Member]
Foreclosed assets
Fair Value, Inputs, Level 2 [Member]
Foreclosed assets
Fair Value, Inputs, Level 3 [Member]
Foreclosed assets	5,636	1,036
Carrying Amount [Member]
Foreclosed assets	$ 5,636	$ 1,036

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Fair Value - Schedule of Fair Value Measurements, Recurring and Nonrecurring (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017	Jun. 30, 2017	Dec. 31, 2016
Financial Assets, Cash and cash equivalents	$ 247	$ 3,478	$ 88	$ 1,566
Financial Assets, Loans receivable, net	41,819	30,043
Financial Assets, Accrued interest receivable	653	720
Financial Liabilities, Customer interest escrow	544	935
Financial Liabilities, Notes payable secured	18,531	11,644
Financial Liabilities, Notes payable unsecured, net	20,769	16,904
Estimate Fair Value [Member]
Financial Assets, Cash and cash equivalents	247	3,478
Financial Assets, Loans receivable, net	41,819	30,043
Financial Assets, Accrued interest receivable	653	720
Financial Liabilities, Customer interest escrow	544	935
Financial Liabilities, Notes payable secured	21,058	11,644
Financial Liabilities, Notes payable unsecured, net	20,769	16,904
Financial Liabilities, Accrued interest payable	1,654	1,353
Fair Value, Inputs, Level 1 [Member]
Financial Assets, Cash and cash equivalents	247	3,478
Financial Assets, Loans receivable, net
Financial Assets, Accrued interest receivable
Financial Liabilities, Customer interest escrow
Financial Liabilities, Notes payable secured
Financial Liabilities, Notes payable unsecured, net
Financial Liabilities, Accrued interest payable
Fair Value, Inputs, Level 2 [Member]
Financial Assets, Cash and cash equivalents
Financial Assets, Loans receivable, net
Financial Assets, Accrued interest receivable
Financial Liabilities, Customer interest escrow
Financial Liabilities, Notes payable secured
Financial Liabilities, Notes payable unsecured, net
Financial Liabilities, Accrued interest payable
Fair Value, Inputs, Level 3 [Member]
Financial Assets, Cash and cash equivalents
Financial Assets, Loans receivable, net	41,819	30,043
Financial Assets, Accrued interest receivable	653	720
Financial Liabilities, Customer interest escrow	544	935
Financial Liabilities, Notes payable secured	21,058	11,644
Financial Liabilities, Notes payable unsecured, net	20,769	16,904
Financial Liabilities, Accrued interest payable	1,654	1,353
Carrying Amount [Member]
Financial Assets, Cash and cash equivalents	247	3,478
Financial Assets, Loans receivable, net	41,819	30,043
Financial Assets, Accrued interest receivable	653	720
Financial Liabilities, Customer interest escrow	544	935
Financial Liabilities, Notes payable secured	21,058	11,644
Financial Liabilities, Notes payable unsecured, net	20,769	16,904
Financial Liabilities, Accrued interest payable	$ 1,654	$ 1,353

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Financing Receivables - Schedule of Financing Receivables (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Receivables [Abstract]
Loans receivable, gross	$ 44,803	$ 32,375
Less: Deferred loan fees	(1,197)	(847)
Less: Deposits	(1,827)	(1,497)
Plus: Deferred origination expense	196	109
Less: Allowance for loan losses	(156)	(97)
Loans receivable, net	$ 41,819	$ 30,043

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Financing Receivables - Commercial Loans - Construction Loan Portfolio Summary (Details) $ in Thousands		6 Months Ended	12 Months Ended
		Jun. 30, 2018 USD ($) Loan Integer	Dec. 31, 2017 USD ($) Loan Integer
Summary Of Loan Portfolio To Builders For Home Construction [Line Items]
Gross Amount Outstanding		$ 44,803	$ 32,375
Home Construction Loans [Member]
Summary Of Loan Portfolio To Builders For Home Construction [Line Items]
Number of States | Integer		17	16
Number of Borrowers | Integer		68	52
Number of Loans | Loan		245	168
Value of Collateral	[1]	$ 93,976	$ 75,931
Commitment Amount		60,551	47,087
Gross Amount Outstanding		$ 38,888	$ 29,564
Loan to Value Ratio	[2],[3]	64.00%	62.00%
Loan Fee		5.00%	5.00%

[1] The value is determined by the appraised value.

[2] Represents the weighted average loan to value ratio of the loans.

[3] The loan to value ratio is calculated by taking the commitment amount and dividing by the appraised value.

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Financing Receivables - Commercial Loans - Real Estate Development Loan Portfolio Summary (Details) $ in Thousands		6 Months Ended	12 Months Ended
		Jun. 30, 2018 USD ($) Loan Integer	Dec. 31, 2017 USD ($) Loan Integer
Real Estate Development Loan Portfolio [Line Items]
Gross Amount Outstanding		$ 44,803	$ 32,375
Real Estate Development [Member]
Real Estate Development Loan Portfolio [Line Items]
Number of States | Integer		3	1
Number of Borrowers | Integer		4	1
Number of Loans | Loan	[1]	7	3
Gross Value of Collateral	[2]	$ 8,249	$ 4,997
Commitment Amount	[3]	6,367	4,600
Gross Amount Outstanding		$ 5,915	$ 2,811
Loan to Value Ratio	[4]	72.00%	56.00%
Loan Fee		$ 1,000	$ 1,000

[1] As of December 31, 2017, our development loans consisted of borrowings which originated in December 2011 and to which we refer throughout this report as the "Pennsylvania Loans". During the first six months of 2018, the Company originated one additional development loan to the Pennsylvania Loans.

[2] The value is determined by the appraised value adjusted for remaining costs to be paid. A portion of this collateral is $1,280 and $1,240 as of June 30, 2018 and December 31, 2017, respectively of preferred equity in our Company. In the event of a foreclosure on the property securing these loans, the portion of our collateral that is preferred equity might be difficult to sell, which may impact our ability to recover the loan balance. In addition, a portion of the collateral value is estimated based on the selling prices anticipated for the homes.

[3] The commitment amount does not include letters of credit and cash bonds.

[4] The loan to value ratio is calculated by taking the outstanding amount and dividing by the appraised value calculated as described above.

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Financing Receivables - Commercial Loans - Real Estate Development Loan Portfolio Summary (Details) (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Receivables [Abstract]
Collateral of preferred equity	$ 1,280	$ 1,240

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Financing Receivables - Summary of Finance Receivables by Classification (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Loans receivable, gross	$ 44,803	$ 32,375
Financing Receivable [Member]
Loans receivable, gross	44,803	32,375
Pass [Member] | Financing Receivable [Member]
Loans receivable, gross	39,327	25,656
Special Mention [Member] | Financing Receivable [Member]
Loans receivable, gross	$ 5,476	$ 6,719

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Financing Receivables - Schedule of Impairment Calculation Method (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable, gross	$ 44,803	$ 32,375
Financing Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable, gross	44,803	32,375
Performing Loans Evaluated Individually [Member] | Financing Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable, gross	18,409	14,992
Performing Loans Evaluated Collectively [Member] | Financing Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable, gross	$ 26,394	$ 17,383

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Financing Receivables - Schedule of Concentration Risk for Individual Borrowers (Details)	6 Months Ended	12 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
Highest Concentration Risk [Member]
Borrower City	Pittsburgh, PA	Pittsburgh, PA
Percent of Loan Commitments	23.00%	22.00%
Second Highest Concentration Risk [Member]
Borrower City	Cape Coral, FL	Sarasota, FL
Percent of Loan Commitments	4.00%	7.00%
Third Highest Concentration Risk [Member]
Borrower City	Orlando, FL	Savannah, GA
Percent of Loan Commitments	4.00%	5.00%

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Foreclosed Assets (Details Narrative) - USD ($) $ in Thousands	1 Months Ended	6 Months Ended		12 Months Ended
	Apr. 30, 2018	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Proceeds from loan		$ 4,140
Foreclosure of assets		3,897
Accrued interest reduction due to foreclosure		$ 243
Foreclosure Agreement [Member]
Proceeds from loan	$ 4,140
Foreclosure of assets	3,897
Accrued interest reduction due to foreclosure	$ 243

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Foreclosed Assets - Schedule of Roll Forward of Foreclosed Assets (Details) - USD ($)	3 Months Ended						6 Months Ended		12 Months Ended
	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Beginning balance		$ 1,036,000		$ 1,095,000		$ 2,798,000	$ 1,036,000	$ 2,798,000	$ 2,798,000
Additions from loans							4,140,000
Additions for construction/development							545,000	265,000	317,000
Sale proceeds								(1,890,000)	(1,890,000)
Gain on sale								77,000	77,000
Impairment loss on foreclosed assets	(80)	$ (5)	$ (64)	$ (47)	(106)	$ (49)	(85,000)	(155,000)	(266,000)
Ending balance	$ 5,636,000		$ 1,036,000		$ 1,095,000		$ 5,636,000	$ 1,095,000	$ 1,036,000

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Borrowings (Details Narrative) - USD ($) $ in Thousands	1 Months Ended			3 Months Ended		6 Months Ended
	Mar. 31, 2018	Jul. 31, 2017	Apr. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Apr. 30, 2018	Dec. 31, 2017
Debt instrument interest rate stated percentage				3.00%		3.00%
Debt description						The interest rate for this borrowing was 6.8% and 4.4% as of June 30, 2018 and 2017.
Interest				$ 6		$ 10
Principal amount of mortgage				18,531		18,531			$ 11,644
Interest expense				$ 1,030	$ 616	$ 1,891	$ 1,162
Public Offering [Member]
Debt instrument interest rate stated percentage				9.39%		9.39%
Notes Program [Member]
Debt instrument interest rate stated percentage									9.21%
Shuman LOC [Member]
Interest				$ 33		$ 67
Chief Executive Officer [Member]
Debt description						During June 2018, we entered into a First Amendment to the line of credit with our Chief Executive Officer and his wife (the "Wallach LOC") which modified the interest rate to generally equal the prime rate plus 3%. The interest rate for the Wallach LOC was 6.8% and 4.4% as of June 30, 2018 and 2017.
Chief Executive Officer [Member] | Prime Rate [Member]
Debt instrument interest rate stated percentage				3.00%		3.00%
Wallach LOC [Member]
Borrowings under line of credit				$ 877	$ 0	$ 877	$ 0
Remaining line of credit				373		373
Wallach Trust LOC [Member]
Borrowings under line of credit				0		0
Remaining line of credit				250		250
Shuman [Member]
Principal amount of mortgage				1,325		1,325			$ 1,325
Paul Swanson [Member]
Principal amount of mortgage				5,738		5,738			$ 2,096
Loan Purchase and Sale Agreement [Member] | Seventh Amendment [Member] | S.K. Funding, LLC [Member]
Purchase price of loan	$ 649
Description of loan funding obligation	The timing of the Company's principal and interest payments to S.K. Funding under the Seventh Amendment, and S.K. Funding's obligation to fund the Pennsylvania Loans, vary depending on the total principal amount of the Pennsylvania Loans outstanding at any time, as follows: If the total principal amount exceeds $1,000, S.K. Funding must fund the amount between $1,000 and less than or equal to $3,500. If the total principal amount is less than $4,500 then the Company will also repay S.K. Funding's principal as principal payments are received on the Pennsylvania Loans from the underlying borrowers in the amount by which the total principal amount is less than $4,500 until S.K. Funding's principal has been repaid in full. The interest rate accruing to S.K. Funding under the Seventh Amendment is 10.5% calculated on a 365/366-day basis.
Debt term	24 months
Shuman Line of Credit Agreement [Member] | Shuman [Member]
Line of credit maximum borrowing capacity		$ 1,325
Cost of funds percentage		10.00%
Line of credit maturity date		Jul. 31, 2019
Line of credit termination description		Due in July 2019 unless extended by Shuman for one or more additional 12-month periods.
Swanson Modification Agreement [Member] | Paul Swanson [Member]
Line of credit maximum borrowing capacity								$ 7,000
Cost of funds percentage			10.00%
Line of credit maturity date			Jan. 31, 2019
Line of credit termination description			Due in January 2019 unless extended by Mr. Swanson for one or more additional 15-month periods.
Swanson Line of Credit Agreement [Member]
Interest				165		265
Swanson Line of Credit Agreement [Member] | Paul Swanson [Member]
Line of credit maximum borrowing capacity				660		$ 660
Cost of funds percentage						5.07%
Line of credit termination description						Due in January 2033
Principal amount of mortgage				654		$ 654
Interest expense				7		18
Myrick LOC Agreement [Member]
Interest				3		3
Line of credit maximum borrowing capacity				$ 1,000		$ 1,000
Cost of funds percentage						3.00%

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Borrowings - Schedule of Borrowings (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Debt Disclosure [Abstract]
Purchase and sale agreements	$ 19,186	$ 11,644
Secured line of credit from affiliates	1,877
Unsecured line of credit (senior)	500
Other unsecured borrowings (senior subordinated)	1,008	279
Unsecured Notes through our public offering, gross	15,274	14,121
Other unsecured borrowings (subordinated)	3,649	2,617
Other unsecured borrowings (junior subordinated)	590	173
Total	$ 42,084	$ 28,834

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Borrowings - Schedule of Maturities of Long-term Debt (Details) $ in Thousands	Jun. 30, 2018 USD ($)
Total Amount Maturing [Member]
2018	$ 25,728
2019	7,556
2020	2,270
2021	3,788
2022 and thereafter	2,742
Total	42,084
Public Offering [Member]
2018	2,306
2019	6,499
2020	2,155
2021	3,773
2022 and thereafter	541
Total	15,274
Other Unsecured [Member]
2018	3,007
2019	1,043
2020	100
2021
2022 and thereafter	1,597
Total	5,747
Purchase and Sale Agreements and Other Secured Borrowings [Member]
2018	20,415
2019	14
2020	15
2021	15
2022 and thereafter	604
Total	$ 21,063

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Borrowings - Schedule of Secured Borrowings (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Book Value of Loans which Served as Collateral	$ 29,020	$ 20,876
Due From Shepherd's Finance to Loan Purchaser or Lender	18,531	11,644
Builder Finance, Inc. [Member]
Book Value of Loans which Served as Collateral	8,538	7,483
Due From Shepherd's Finance to Loan Purchaser or Lender	4,843	4,089
S.K. Funding [Member]
Book Value of Loans which Served as Collateral	10,108	9,128
Due From Shepherd's Finance to Loan Purchaser or Lender	6,625	4,134
Shuman [Member]
Book Value of Loans which Served as Collateral	2,160	1,747
Due From Shepherd's Finance to Loan Purchaser or Lender	1,325	1,325
Paul Swanson [Member]
Book Value of Loans which Served as Collateral	8,214	2,518
Due From Shepherd's Finance to Loan Purchaser or Lender	$ 5,738	$ 2,096

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Borrowings - Schedule of Other Unsecured Loans (Details) - USD ($) $ in Thousands		6 Months Ended
		Jun. 30, 2018	Dec. 31, 2017
Unsecured Note with Seven Kings Holdings, Inc. [Member]
Maturity Date		August 2018
Interest Rate	[1]	7.50%
Other Unsecured Loans		$ 500	$ 500
Unsecured Line of Credit from Builder Finance, Inc. [Member]
Maturity Date		January 2019
Interest Rate	[1]	10.00%
Other Unsecured Loans		$ 500
Unsecured Line of Credit from Paul Swanson [Member]
Maturity Date	[2]	December 2018
Interest Rate	[1]	10.00%
Other Unsecured Loans		$ 1,262	1,904
Subordinated Promissory Note [Member]
Maturity Date	[3]	Demand
Interest Rate	[1]	7.50%
Other Unsecured Loans		$ 1,125
Subordinated Promissory Note One [Member]
Maturity Date		December 2019
Interest Rate	[1]	10.50%
Other Unsecured Loans		$ 263	113
Subordinated Promissory Note Two [Member]
Maturity Date		April 2020
Interest Rate	[1]	10.00%
Other Unsecured Loans		$ 100	100
Senior Subordinated Promissory Note [Member]
Maturity Date	[4]	March 2022
Interest Rate	[1]	10.00%
Other Unsecured Loans		$ 400
Senior Subordinated Promissory Note One [Member]
Maturity Date	[5]	March 2022
Interest Rate	[1]	1.00%
Other Unsecured Loans		$ 728
Junior Subordinated Promissory Note [Member]
Maturity Date	[5]	March 2022
Interest Rate	[1]	22.50%
Other Unsecured Loans		$ 417
Senior Subordinated Promissory Note Two [Member]
Maturity Date	[6]	October 2022
Interest Rate	[1]	1.00%
Other Unsecured Loans		$ 279	279
Junior Subordinated Promissory Note One [Member]
Maturity Date	[6]	October 2022
Interest Rate	[1]	20.00%
Other Unsecured Loans		$ 173	173
Other Unsecured Debt [Member]
Other Unsecured Loans		$ 5,747	$ 3,069

[1] Interest rate per annum, based upon actual days outstanding and a 365/366 day year.

[2] Due in December 2018 unless extended by Mr. Swanson for one or more additional 15-month periods.

[3] Principal due six months after lender gives notice. This note may be prepaid without fee, premium, or penalty.

[4] This note may be prepaid upon lender's request at least 10 days prior to an interest payment and up to $20 of principal.

[5] These notes were issued to the same holder and, when calculated together, yield a blended return of 11% per annum.

[6] These notes were issued to the same holder and, when calculated together, yield a blended return of 10% per annum.

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Borrowings - Schedule of Other Unsecured Loans (Details) (Parenthetical) $ in Thousands	6 Months Ended
	Jun. 30, 2018 USD ($)
Note 1 [Member]
Debt yield return percentage	11.00%
Note 2 [Member]
Debt yield return percentage	10.00%
Senior Subordinated Promissory Note [Member] | Maximum [Member]
Debt, principal amount	$ 20

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Borrowings - Schedule of Roll Forward of Notes Outstanding (Details) - USD ($) $ in Thousands	6 Months Ended		12 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Debt Disclosure [Abstract]
Gross Notes outstanding, beginning of period	$ 14,121	$ 11,221	$ 11,221
Notes issued	3,350	8,105	8,375
Note repayments / redemptions	(2,197)	(5,087)	(5,475)
Gross Notes outstanding, end of period	15,274	14,239	14,121
Less deferred financing costs, net	252	330	286
Notes outstanding, net	$ 15,022	$ 13,909	$ 13,835

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Borrowings - Schedule of Roll Forward of Deferred Financing Costs (Details) - USD ($) $ in Thousands	6 Months Ended		12 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017	Dec. 31, 2016
Debt Disclosure [Abstract]
Deferred financing costs, beginning balance	$ 1,102	$ 1,014	$ 1,014
Additions	61	40	88
Deferred financing costs, ending balance	1,163	1,054	1,102
Less accumulated amortization	(911)	(724)	(816)	$ (603)
Deferred financing costs, net	$ 252	$ 330	$ 286

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Borrowings - Schedule of Roll Forward of Accumulated Amortization of Deferred Financing Costs (Details) - USD ($) $ in Thousands	6 Months Ended		12 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Debt Disclosure [Abstract]
Accumulated amortization, beginning balance	$ 816	$ 603	$ 603
Additions	95	121	213
Accumulated amortization, ending balance	$ 911	$ 724	$ 816

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Redeemable Preferred Equity - Schedule of Roll Forward of Redeemable Preferred Equity (Details) - USD ($) $ in Thousands	6 Months Ended		12 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Equity [Abstract]
Series C Cumulative Preferred Equity, beginning balance	$ 1,097
Additions from new investment		1,004	1,004
Additions from reinvestment	68	29	93
Series C Cumulative Preferred Equity, ending balance	$ 1,165	$ 1,033	$ 1,097

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Redeemable Preferred Equity - Schedule of Redemption Option for Investors (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018	Dec. 31, 2017	Jun. 30, 2017	Dec. 31, 2016
Equity [Abstract]
Year of Available Redemption	2023
Total Amount Redeemable	$ 1,165	$ 1,097	$ 1,033

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Members' Capital (Details Narrative) - shares	Jun. 30, 2018	Mar. 31, 2018	Jan. 31, 2018	Dec. 31, 2017
Chief Financial Officer [Member]
Equity ownership, percentage			2.00%
Executive Vice President of Operations [Member]
Equity ownership, percentage			1.00%
Executive Vice President of Sales [Member]
Equity ownership, percentage		14.30%
Class A Common Units [Member]
Common stock, units outstanding	2,629			2,629
Class A Common Units [Member] | Chief Financial Officer [Member]
Equity ownership, percentage	2.00%
Class A Common Units [Member] | Executive Vice President of Operations [Member]
Equity ownership, percentage	2.00%
Class A Common Units [Member] | Executive Vice President of Sales [Member]
Equity ownership, percentage	15.30%

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Related Party Transactions (Details Narrative) - USD ($) $ in Thousands	Jun. 30, 2018	Mar. 31, 2018	Feb. 28, 2018	Jan. 31, 2018
Chief Executive Officer and Wife [Member]
Line of credit	$ 877
Executive Vice President of Sales [Member]
Line of credit	$ 1,000
Trust Affiliated with Seven Kings Holdings, Inc [Member] | Subordinated Promissory Note [Member]
Debt instrument, face amount			$ 1,125
Chief Executive Officer [Member] | Senior Subordinated Promissory Note [Member]
Debt instrument, face amount		$ 400
Chief Financial Officer [Member]
Percentage of ownership interest				2.00%
Executive Vice President of Operations [Member]
Percentage of ownership interest				1.00%
Executive Vice President of Sales [Member]
Percentage of ownership interest		14.30%
Class A Common Units [Member] | Independent Manager 1 [Member]
Percentage of ownership interest	1.00%
Class A Common Units [Member] | Independent Manager 2 [Member]
Percentage of ownership interest	1.00%
Class A Common Units [Member] | Chief Financial Officer [Member]
Percentage of ownership interest	2.00%
Class A Common Units [Member] | Executive Vice President of Operations [Member]
Percentage of ownership interest	2.00%
Class A Common Units [Member] | Executive Vice President of Sales [Member]
Percentage of ownership interest	15.30%

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Commitments and Contingencies (Details Narrative) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Commitments and Contingencies Disclosure [Abstract]
Letter of credit, amount outstanding	$ 21,676	$ 19,312

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Selected Quarterly Condensed Consolidated Financial Data (Unaudited) - Summarized Unaudited Quarterly Condensed Consolidated Financial Data (Details) - USD ($)	3 Months Ended						6 Months Ended		12 Months Ended
	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Quarterly Financial Information Disclosure [Abstract]
Net Interest Income after Loan Loss Provision	$ 996	$ 926	$ 802	$ 917	$ 725	$ 617
Non-Interest Income						77		$ 77,000
SG&A expense	691	617	643	537	450	454	1,308,000	898,000
Depreciation and Amortization	21	17			6	6	38,000	12,000
Impairment loss on foreclosed assets	80	5	64	47	106	49	85,000	155,000	$ 266,000
Net Income	$ 204	$ 287	$ 95	$ 333	$ 163	$ 191	$ 491,000	$ 354,000

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Non-Interest Expense Detail - Schedule of Selling General and Administrative Expenses (Details) - USD ($)	3 Months Ended						6 Months Ended
	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Jun. 30, 2018	Jun. 30, 2017
Non-interest Expense Detail
Legal and accounting							$ 223,000	$ 125,000
Salaries and related expenses							833,000	583,000
Board related expenses							37,000	55,000
Advertising							35,000	25,000
Rent and utilities							20,000	14,000
Loan and foreclosed asset expenses							38,000	26,000
Travel							51,000	32,000
Other							71,000	38,000
Total SG&A	$ 691	$ 617	$ 643	$ 537	$ 450	$ 454	$ 1,308,000	$ 898,000

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Subsequent Events (Details Narrative) - Subsequent Event [Member] - Daniel M Wallach [Member]	Aug. 01, 2018 USD ($)
Sale of stock, description	we sold 12 of our Preferred Units to Daniel M. Wallach
Sale of transaction, amount	$ 1,200