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 September 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 September 30, 2018 (Unaudited) and December 31, 2017	4
Interim Condensed Consolidated Statements of Operations (Unaudited) for the Three Months and Nine Months Ended September 30, 2018 and 2017	5
Interim Condensed Consolidated Statement of Changes in Members’ Capital (Unaudited) for the Nine Months Ended September 30, 2018	6
Interim Condensed Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 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	21
Item 3. Quantitative and Qualitative Disclosure About Market Risk	40
Item 4. Controls and Procedures	40
PART II. OTHER INFORMATION	40
Item 1. Legal Proceedings	40
Item 1A. Risk Factors	40
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 3. Defaults upon Senior Securities	42
Item 4. Mine Safety Disclosures	42
Item 5. Other Information	42
Item 6. Exhibits	43

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)	September 30, 2018		December 31, 2017
	(Unaudited)
Assets
Cash and cash equivalents	$	3,345	$	3,478
Accrued interest receivable		620		720
Loans receivable, net		42,541		30,043
Foreclosed assets		6,323		1,036
Property, plant and equipment, net		1,023		1,020
Other assets		274		58
Total assets	$	54,126	$	36,355
Liabilities, Redeemable Preferred Equity and Members’ Capital
Liabilities
Customer interest escrow	$	877	$	935
Accounts payable and accrued expenses		863		705
Accrued interest payable		1,867		1,353
Notes payable secured, net of deferred financing costs		20,338		11,644
Notes payable unsecured, net of deferred financing costs		24,847		16,904
Due to preferred equity member		32		31
Total liabilities		48,824		31,572
Commitments and Contingencies (Notes 3 and 9)
Redeemable Preferred Equity
Series C preferred equity		1,426		1,097
Members’ Capital
Series B preferred equity		1,320		1,240
Class A common equity		2,556		2,446
Members’ capital		3,876		3,686
Total liabilities, redeemable preferred equity and members’ capital	$	54,126	$	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 Nine Months ended September 30, 2018 and 2017

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands of dollars)	2018		2017		2018		2017
Interest Income
Interest and fee income on loans	$	2,045	$	1,673	$	5,917	$	4,203
Interest expense:
Interest related to secured borrowings		552		342		1,480		718
Interest related to unsecured borrowings		587		424		1,550		1,192
Interest expense		1,139		748		3,030		1,910
Net interest income		906		925		2,887		2,293
Less: Loan loss provision		2		8		61		34
Net interest income after loan loss provision		904		917		2,826		2,259
Non-Interest Income
Gain from sale of foreclosed assets		-		-		-		77
Gain from foreclosure of assets		20		-		20		-
Total non-interest expense/income		20		-		20		77
Income		924		917		2,846		2,336
Non-Interest Expense
Selling, general and administrative		680		525		1,988		1,423
Depreciation and amortization		23		12		61		24
Loss from sale of foreclosed assets		3		-		3		-
Loss from foreclosure of assets		47		-		47		-
Impairment loss on foreclosed assets		4		47		89		202
Total non-interest expense		757		584		2,188		1,649
Net Income	$	167		333	$	658	$	687
Earned distribution to preferred equity holders		69		61		199		149
Net income attributable to common equity holders	$	98		272	$	459	$	538

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 Nine Months Ended September 30, 2018

(in thousands of dollars)	Nine Months Ended September 30, 2018
Members’ capital, beginning balance	$	3,686
Net income		658
Contributions from members (preferred)		80
Earned distributions to preferred equity holders		(199	)
Distributions to common equity holders		(349	)
Members’ capital, ending balance	$	3,876

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 Nine Months Ended September 30, 2018 and 2017

	Nine Months Ended September 30,
(in thousands of dollars)	2018			2017
Cash flows from operations
Net income	$	658		$	687
Adjustments to reconcile net income to net cash provided by operating activities
Amortization of deferred financing costs		142			165
Provision for loan losses		61			34
Net loan origination fees deferred		375			120
Change in deferred origination expense		(31	)		(26	)
Impairment of foreclosed assets		89			202
Depreciation and amortization		61			24
Gain on foreclosed assets		(20	)		-
Loss on foreclosed assets		47			-
Gain from sale of foreclosed assets		-			(77	)
Loss from sale of foreclosed assets		3			-
Net change in operating assets and liabilities
Other assets		(216	)		(67	)
Accrued interest receivable		(143	)		(155	)
Customer interest escrow		(58	)		39
Accounts payable and accrued expenses		672			217
Net cash provided by operating activities		1,640			1,163
Cash flows from investing activities
Loan originations and principal collections, net		(18,072	)		(9,663	)
Proceeds from sale of loans		198			-
Investment in foreclosed assets		(1,039	)		(296	)
Proceeds from sale of foreclosed assets		370			1,890
Property plant and equipment additions		(64	)		(698	)
Net cash used in investing activities		(18,607	)		(8,767	)
Cash flows from financing activities
Contributions from redeemable preferred equity		1,400			1,004
Contributions from members (preferred)		80			70
Distributions to redeemable preferred equity		(1,176	)		-
Distributions to preferred equity holders		(93	)		(88	)
Distributions to common equity holders		(349	)		(189	)
Proceeds from secured note payable		19,181			11,760
Repayments of secured note payable		(9,905	)		(6,914	)
Proceeds from unsecured notes payable		12,149			9,412
Redemptions/repayments of unsecured notes payable		(4,258	)		(6,481	)
Deferred financing costs paid		(195	)		(65	)
Net cash provided by financing activities		16,834			8,509
Net increase (decrease) in cash and cash equivalents		(133	)		905
Cash and cash equivalents
Beginning of period		3,478			1,566
End of period	$	3,345		$	2,471
Supplemental disclosure of cash flow information
Cash paid for interest	$	2,466		$	1,616
Non-cash investing and financing activities
Earned but not paid distribution of preferred equity holders	$	105		$	29
Foreclosure of assets	$	4,494		$	-
Accrued interest reduction due to foreclosure	$	243		$	-
Secured line of credit reduction due to construction loan purchase	$	477			-

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 the 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 September 30, 2018, the Company extends commercial loans to residential homebuilders (in 16 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, 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 accounting policies followed by the Company are set forth in Note 2 – Summary of Significant Accounting Policies in the 2017 financial 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.

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 September 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 September 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 September 30, 2018 and December 31, 2017.

September 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	$	6,323	$	6,323	$	-	$	-	$	6,323
Impaired Loans		1,000		997		-		-		997

9

December 31, 2017

					Quoted Prices
					in Active Markets for		Significant 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 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:

September 30, 2018

					Quoted Prices
					in Active
					Markets for		Significant  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	$	3,345	$	3,345	$	3,345	$	–	$	–
Loans receivable, net		42,541		42,541		–		–		42,541
Accrued interest receivable		620		620		–		–		620
Financial Liabilities:
Customer interest escrow		877		877		–		–		877
Notes payable secured, net		20,338		20,338		–		–		20,338
Notes payable unsecured, net		24,847		24,847		–		–		24,847
Accrued interest payable		1,867		1,867		–		–		1,867

December 31, 2017

					Quoted
					Prices
					in Active Markets for		Significant 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 September 30, 2018 and December 31, 2017:

	September 30, 2018			December 31, 2017
Loans receivable, gross	$	45,214		$	32,375
Less: Deferred loan fees		(1,222	)		(847	)
Less: Deposits		(1,434	)		(1,497	)
Plus: Deferred origination expense		141			109
Less: Allowance for loan losses		(158	)		(97	)
Loans receivable, net	$	42,541		$	30,043

Commercial Construction and Development Loans

Commercial Loans – Construction Loan Portfolio Summary

As of September 30, 2018, the Company’s portfolio consisted of 232 commercial construction and seven development loans with 68 borrowers within 16 states.

The following is a summary of the loan portfolio to builders for home construction loans as of September 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		16		68		232	$	91,989	$	60,943	$	40,179		66	%(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 September 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		3		7	$	7,046	$	6,434	$	5,035		71	%	$	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 $1,320 and $1,240 as of September 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”.

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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:

	September 30, 2018		December 31, 2017
Pass	$	40,103	$	25,656
Special mention		4,111		6,719
Classified – accruing		-		-
Classified – nonaccrual		1,000		-
Total	$	45,214	$	32,375

Gross finance receivables – Method of impairment calculation:

	September 30, 2018		December 31, 2017
Performing loans evaluated individually	$	17,193	$	14,992
Performing loans evaluated collectively		27,021		17,383
Non-performing loans with a specific reserve		-		-
Non-performing loans without a specific reserve		1,000		-
Total	$	45,214	$	32,375

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

Impaired Loans

The following is a summary of our impaired nonaccrual commercial construction loans as of September 30, 2018 and December 31, 2017.

	September 30, 2018			December 31, 2017
Unpaid principal balance (contractual obligation from customer)	$	1,000		$	-
Charge-offs and payments applied		-			-
Gross value before related allowance		1,000			-
Related allowance		(3	)		-
Value after allowance	$	997		$	-

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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:

	September 30, 2018				December 31, 2017
		Percent of				Percent of
	Borrower	Loan			Borrower	Loan
	City	Commitments			City	Commitments
Highest concentration risk	Pittsburgh, PA		25	%	Pittsburgh, PA		22	%
Second highest concentration risk	Orlando, FL		10	%	Sarasota, FL		7	%
Third highest concentration risk	Cape Coral, FL		3	%	Savannah, GA		5	%

4. Foreclosed Assets

The following table is a roll forward of foreclosed assets:

	Nine Months Ended September 30, 2018			Year Ended December 31, 2017			Nine Months Ended September 30, 2017
Beginning balance	$	1,036		$	2,798		$	2,798
Additions from loans		4,737			-			-
Additions for construction/development		1,039			317			296
Sale proceeds		(370	)		(1,890	)		(1,890	)
Gain on sale		-			77			77
Loss on sale		(3	)		-			-
Gain on foreclosure		20			-			-
Loss on foreclosure		(47	)		-			-
Impairment loss on foreclosed assets		(89	)		(266	)		(202	)
Ending balance	$	6,323		$	1,036		$	1,079

During the nine months ended September 30, 2018 we recorded four deed in lieu of foreclosures. Three of the four were with a certain borrower with a completed home and two lots. The fourth was with a borrower who defaulted on a loan by failing to make interest payments.

During the first nine of months of 2018, we reclassified $4,737 to foreclosed assets, $4,494 of principal from loans receivable, net; and $243 from accrued interest receivable. We sold one of our foreclosed assets with sales proceeds of $370 and a loss on the sale of $3.

During the quarter ended September 30, 2018, we reclassified $597 to foreclosed assets and recognized a gain on foreclosure of $20 on the two lots and a loss on foreclosure of $47 on the completed home.

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5. Borrowings

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

	Priority Rank		September 30, 2018		December 31, 2017
Borrowing Source
Borrowings secured by loans		1	$	16,931	$	11,644
Other secured borrowings		2		3,511		-
Unsecured line of credit (senior)		3		500		-
Other unsecured borrowings (senior subordinated)		4		1,008		279
Unsecured Notes through our public offering, gross		5		17,975		14,121
Other unsecured borrowings (subordinated)		5		5,008		2,617
Other unsecured borrowings (junior subordinated)		6		590		173
Total			$	45,523	$	28,834

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

Year Maturing	Total Amount Maturing		Public Offering		Other Unsecured		Secured Borrowings
2018	$	18,254	$	1,259	$	60	$	16,935
2019		12,888		7,386		2,628		2,874
2020		6,723		3,436		3,272		15
2021		3,789		3,773		-		16
2022 and thereafter		3,869		2,121		1,146		602
Total	$	45,523	$	17,975	$	7,106	$	20,442

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 nine 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.

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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 on the Wallach LOC to generally equal the prime rate plus 3%. The interest rate for the Wallach LOC was 8.0% and 4.4% as of September 30, 2018 and 2017, respectively. As of September 30, 2018, and 2017, we borrowed $0 against the Wallach LOC. Interest was $10 and $20 for the quarter and nine months ended September 30, 2018, respectively. As of September 30, 2018, $1,250 remained available 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 is our CEO’s trust (the “Wallach Trust LOC”) which modified the interest rate on the Wallach Trust LOC to generally equal the prime rate plus 3%. The interest rate for this borrowing was 8.0% and 4.4% as of September 30, 2018 and 2017, respectively. As of September 30, 2018, and 2017, we borrowed $0 against the Wallach Trust LOC. As of September 30, 2018, $250 remained available 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 September 30, 2018. Interest expense was $33 and $100 for the quarter and nine months ended September 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 9%; and

● Automatic renewal in September 2018 and extended for 15 months.

The Swanson LOC was fully borrowed as of September 30, 2018. Interest expense was $180 and $445 for the quarter and nine months ended September 30, 2018, respectively.

Line of Credit (Myrick)

During June 2018, we entered into a line of credit agreement (the “Myrick LOC Agreement”) with our Executive Vice President (“EVP”) 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 of prime rate plus 3%; and

● Due upon demand.

As of September 30, 2018, $1,000 remained available on the Myrick LOC. Interest expense was $14 and $17 for the quarter and nine months ended September 30, 2018, respectively.

15

London Financial

During September 2018, we entered into a Master Loan Agreement (“London Loan”) with London Financial Company, LLC (“London Financial”) with the following terms:

● Principal of $3,250;

● Secured by collateral of land and improvements by a certain foreclosed asset;

● Cost of funds to us of 12%; and

● Due in September 2019.

As of September 30, 2018, $2,860 was borrowed against the London Loan with an additional $390 that remained available upon completion of additional work performed of the foreclosed asset. Interest expense was $3 for the quarter and nine months ended September 30, 2018.

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.

The principal amount of the Company’s commercial mortgage was $651 as of September 30, 2018. Interest expense was $9 and $27 for the quarter and nine months ended September 30, 2018, respectively.

Summary

Borrowings secured by loan assets are summarized below:

	September 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.	$	7,467	$	4,510	$	7,483	$	4,089
S.K. Funding		9,366		6,716		9,128		4,134
Lender
Shuman		1,575		1,325		1,747		1,325
Paul Swanson		5,965		4,380		2,518		2,096
Total	$	24,373	$	16,931	$	20,876	$	11,644

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Unsecured Borrowings

Other Unsecured Debts*

Our other unsecured debts are detailed below:

					Principal Amount Outstanding as of
Loan	Maturity Date	Interest Rate (1)			September 30, 2018		December 31, 2017
Unsecured Note with Seven Kings Holdings, Inc.	February 2019 (2)		9.5	%	$	500	$	500
Unsecured Line of Credit from Builder Finance, Inc.	January 2019		10.0	%		500		-
Unsecured Line of Credit from Paul Swanson	April 2020(3)		9.0	%		2,621		1,904
Subordinated Promissory Note	September 2019(4)		9.5	%		1,125		-
Subordinated Promissory Note	December 2019		10.5	%		113		113
Subordinated Promissory Note	April 2020		10.0	%		100		100
Subordinated Promissory Note	October 2019		10.0	%		150		-
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 2020(6)		1.0	%		279		279
Junior Subordinated Promissory Note	October 2020(6)		20.0	%		173		173
					$	7,106	$	3,069

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

⁽²⁾ Due six months after lender gives notice.

⁽³⁾ Automatically renewed in September 2018 and extended for 15 months.

⁽⁴⁾ Due on the earlier of six months after lender gives notice or September 2019.

⁽⁴⁾ Lender may require us to repay $20 of principal and all unpaid interest with 10 days’ notice.

⁽⁵⁾ These notes were issued to the same holder and, when calculated together, yield a blended 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 September 30, 2018 and December 31, 2017 was 9.83% 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:

	Nine Months Ended September 30, 2018			Year Ended December 31, 2017			Nine Months Ended September 30, 2017
Gross Notes outstanding, beginning of period	$	14,121		$	11,221		$	11,221
Notes issued		6,357			8,375			8,299
Note repayments / redemptions		(2,503	)		(5,475	)		(5,381	)
Gross Notes outstanding, end of period	$	17,975		$	14,121		$	14,139
Less deferred financing costs, net		233			286			311
Notes outstanding, net	$	17,742		$	13,835		$	13,828

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The following is a roll forward of deferred financing costs:

	Nine Months			Year			Nine Months
	Ended			Ended			Ended
	September 30, 2018			December 31, 2017			September 30, 2017
Deferred financing costs, beginning balance	$	1,102		$	1,014		$	1,014
Additions		89			88			65
Deferred financing costs, ending balance	$	1,191		$	1,102		$	1,079
Less accumulated amortization		(958	)		(816	)		(768	)
Deferred financing costs, net	$	233		$	286		$	311

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

	Nine Months		Year		Nine Months
	Ended		Ended		Ended
	September 30, 2018		December 31, 2017		September 30, 2017
Accumulated amortization, beginning balance	$	816	$	603	$	603
Additions		142		213		165
Accumulated amortization, ending balance	$	958	$	816	$	768

6. Redeemable Preferred Equity

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

	Nine Months Ended September 30, 2018			Year Ended December 31, 2017		Nine Months Ended September 30, 2017
Beginning balance	$	1,097		$	–	$	–
Additions from new investment		1,400			1,004		1,004
Redemptions		(1,176	)		-		-
Additions from reinvestment		105			93		61
Ending balance	$	1,426		$	1,097	$	1,065

On July 31, 2018, we redeemed all of our outstanding Series C Preferred Units, which were held by two investors. On August 1, 2018, we sold 12 of our Preferred Units to Daniel M. Wallach, our CEO and Chairman of our board of managers, and his wife, Joyce S. Wallach, for the total price of $1,200. In addition, on August 30, 2018, we sold two of our Series C Preferred Units to two investors, for the total price of $200,000.

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

Year of Available Redemption	Total Amount Redeemable
2024	$	1,426
Total	$	1,426

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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 September 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 September 30, 2018 and December 31, 2017.

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

The Series B Preferred Units were issued to the Hoskins Group through a reduction in a loan issued by the Hoskins Group to the Company. In December 2015, the Hoskins Group agreed to purchase 0.1 Series B Preferred Units for $10 at each closing of a lot to a third party in the Hamlet’s and Tuscany subdivision. As of September 30, 2018, the Hoskins Group owns a total of 13.2 Series B Preferred Units, which were issued for a total of $1,320.

8. Related Party Transactions

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

As of September 30, 2018, the Company had $1,250, $250 and $1,000 available to borrow against the Wallach LOC, Wallach Trust LOC and Myrick LOC, respectively. A more detailed description is included in Note 5 above. These borrowings are 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.

On August 1, 2018, we sold 12 of our Preferred Units to Daniel M. Wallach, our CEO and Chairman of our board of managers, and his wife, Joyce S. Wallach, for the total price of $1,200.

In September 2018, we sold three loans to our CEO at their gross loans receivable balance of $281, and as such, no gain or loss was recognized on the sale. Cash received was $104 and the remaining purchase price was funded through a $177 reduction in the principal balance of the line of credit extended by the CEO to the Company. The Company continues to service these loans. As of September 30, 2018, we had $16 in builder deposits related to these loans, and the principal balance being serviced was $281.

Also, in September 2018, we sold two loans to our EVP of Sales at their gross loans receivable balance of $394, and as such, no gain or loss was recognized on the sale. Cash received was $94 and the remaining purchase price was funded through a $300 reduction in the principal balance of the line of credit extended by the EVP of Sales to the Company. The Company continues to service these loans. As of September 30, 2018, we had $6 in builder deposits related to these loans, and the principal balance being serviced was $394.

9. Commitments and Contingencies

Unfunded commitments to extend credit, which have similar collateral, credit risk, and market risk to our outstanding loans, were $22,163 and $19,312 at September 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 three quarters of 2018 and four quarters of 2017 are as follows:

	Quarter 3		Quarter 2		Quarter 1		Quarter 4		Quarter 3		Quarter 2		Quarter 1
	2018		2018		2018		2017		2017		2017		2017
Net Interest Income after Loan Loss Provision	$	904	$	996	$	926	$	802	$	917	$	725	$	617
Non-Interest Income		20		-		-		–		–		–		77
SG&A expense		680		691		617		643		537		456		454
Depreciation and Amortization		23		21		17		–		–		–		6
Loss from sale of foreclosed assets		3		-		-		-		-		-		-
Non-Interest Expense		47		-		-		-		-		-		-
Impairment loss on foreclosed assets		4		80		5		64		47		106		49
Net Income	$	167	$	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 Nine Months Ended September 30,
	2018		2017
Selling, general and administrative expenses
Legal and accounting	$	277	$	164
Salaries and related expenses		1,306		976
Board related expenses		54		82
Advertising		58		42
Rent and utilities		38		22
Loan and foreclosed asset expenses		80		30
Travel		73		45
Other		102		62
Total SG&A	$	1,988	$	1,423

12. Subsequent Events

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

On October 31, 2018, we sold four of our Series C Preferred Units to an investor for the total price of $400.

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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.

Overview

Net income for the third quarter and first nine months of 2018 decreased by $166 and $29 when compared to the same periods of 2017, respectively. The decrease in net income was mainly due to a loss of interest income of $138 and $280 for the third quarter and first nine months of 2018; respectively, related to an increase in our foreclosed assets. In addition, our selling, general and administrative (“SG&A”) expenses increased $80 and $330 for the third quarter and first nine months of 2018, respectively.

For the nine months ended September 30, 2018, we did not receive default rate interest on non-performing loans. For the quarter and nine months ended September 30, 2017 interest income included $104 of default rate interest on certain loans.

Management made the decision to add additional employees to support the growth of the Company, which primarily includes our Chief Financial Officer, Executive Vice President of Sales, and Vice President of Administration, and resulted in an increase in our payroll expenses. As of September 30, 2018, we had a total of 20 employees compared to seven as of September 30, 2017.

We had $45,215 and $30,043 in loan assets as of September 30, 2018 and December 31, 2017, respectively. In addition, we had 232 construction loans in 16 states with 68 borrowers and seven development loans in three states with three borrowers.

Cash provided by operations increased $477 for the nine months ended September 30, 2018 as compared to the same period of 2017. Our increase in operating cash flow was due primarily to higher loan originations.

Originations increased by $6,802 or 114% to $14,572 for the quarter ended September 30, 2018 and by $18,675 or 62% to $48,772 for the nine months ended September 30, 2018 compared to the same periods of 2017.

Critical Accounting Estimates

To assist in evaluating our interim condensed 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.

	September 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%**	$	(1,671	)

* 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 $37,770.

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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).

	September 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%	$	(2,213	)

* 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 $6,323.

Consolidated Results of Operations

Key financial and operating data for the three and nine months ended September 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 interim condensed consolidated financial statements, including the related notes and the other information contained in this document.

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
Interest Income
Interest and fee income on loans	$	2,045	$	1,673	$	5,917	$	4,203
Interest expense:
Interest related to secured borrowings		552		342		1,480		718
Interest related to unsecured borrowings		587		424		1,550		1,192
Interest expense		1,139		748		3,030		1,910
Net interest income		906		925		2,887		2,293
Less: Loan loss provision		2		8		61		34
Net interest income after loan loss provision		904		917		2,826		2,259
Non-Interest Income
Gain from sale of foreclosed assets		-		-		-		77
Gain from foreclosure of assets		20		-		20		-
Total non-interest expense/income		20		-		20		77
Income		924		917		2,846		2,336
Non-Interest Expense
Selling, general and administrative		680		525		1,988		1,423
Depreciation and amortization		23		12		61		24
Loss from sale of foreclosed assets		3		-		3		-
Loss from foreclosure of assets		47		-		47		-
Impairment loss on foreclosed assets		4		47		89		202
Total non-interest expense		757		584		2,188		1,649
Net Income	$	167		333	$	658	$	687
Earned distribution to preferred equity holders		69		61		199		149
Net income attributable to common equity holders	$	98		272	$	459	$	538

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Interest Spread

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

	Three Months Ended								Nine Months Ended
	September 30,								September 30,
	2018				2017				2018				2017
Interest Income				*				*				*				*
Interest income on loans	$	1,400	13	%	$	1,198	15	%	$	4,108	14	%	$	2,829	14	%
Fee income on loans		645	6	%		475	6	%		1,809	6	%		1,374	6	%
Interest and fee income on loans		2,045	19	%		1,673	21	%		5,917	20	%		4,203	20	%
Interest expense unsecured		540	5	%		380	5	%		1,408	5	%		1,027	5	%
Interest expense secured		552	5	%		324	4	%		1,480	5	%		718	3	%
Amortization offering costs		47	-	%		44	-	%		142	-	%		165	1	%
Interest expense		1,139	10	%		748	9	%		3,030	10	%		1,910	9	%
Net interest income (spread)		906	9	%		925	12	%		2,887	10	%		2,293	11	%
Weighted average outstanding loan asset balance	$	43,732			$	31,742			$	40,566			$	27,161

*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%. Loans originated after June 30, 2018 are 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 quarter and nine months ended September 30, 2018, the difference between interest income and interest expense was 3% and 4%, respectively. For the quarter and nine months ended September 30, 2017, the difference between interest income and interest expense was 6% and 5%, respectively. The decrease of 3% for the quarter ended September 30, 2018 compared to 2017 was due primarily to 1) higher default rate interest charged and collected on certain of our loans in 2017 vs. 2018 (1%), 2) $104 of the associated interest income of these defaulted loans was recognized in the third quarter of 2017 instead of the second quarter of 2017, which increased the spread in the third quarter of 2017 compared to the same quarter in 2018 by 1%, and 3) an increase in foreclosed assets in the third quarter of 2018 as compared to the same quarter in 2018 (also 1%). The 1% decrease for the nine month period is due to both the increase in foreclosed assets and the lack of collected default interest on nonperforming loans.

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We currently anticipate that the difference between our interest income and interest expense will continue to be 3% for the remainder of 2018. With the increase in our pricing which started with loans created in the third quarter, we anticipate our standard margin to be 3% on all future construction loans and 7% on all development loans which yields a blended margin of approximately 3.4%. This will be decreased currently by about 1% by having an abnormal amount of foreclosed assets while we only have seven foreclosed assets compared to 237 loans, the balance is $6,323 compared to $42,541 of loans due to one large foreclosed asset in Sarasota for $3,897) and by loans not paying interest (typically impacting the number by 0.3%) and increased (typically by 0.5%) by loans which have higher interest rates due to age and other factors and by 0.8% due to lending a portion of our equity. These factors should yield us a spread in the low 3%’s until the Sarasota property is sold, and then in the low 4%’s thereafter, assuming no other significant changes to our business. Currently we are finishing construction of the Sarasota property and anticipate listing it for sale in the fourth quarter of 2018.

● Fee income. Our construction loans have a 5% fee on the amount that 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. For both the quarter and nine months ended September 30, 2018 our fee income remained consistent compared to the same periods of 2017.

We currently anticipate that fee income will continue at the same 6% rate for the remainder of 2018.

● 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 September 30, 2018 and quarter and nine months ended September 30, 2017. One loan was not paying interest in the nine months ended September 30, 2018.

Foreclosed assets do not provide a monthly interest return. During the nine months ended September 30, 2018, we recorded $4,494 from Loan receivables, net to Foreclosed assets on the balance sheet as of September 30, 2018, which resulted in a negative impact on our interest spread.

The amount of nonperforming assets is expected to rise over the next several months, due to expected development costs related to foreclosed assets, anticipated foreclosure of assets, and idle cash increases related to anticipated large borrowing inflows. The nonperforming asset balance will drop significantly with the sale of the Sarasota property.

SG&A Expenses

The following table displays our SG&A expenses:

	Three Months				Nine Months
	Ended September 30,				Ended September 30,
	2018		2017		2018		2017
Selling, general and administrative expenses
Legal and accounting	$	54	$	39	$	277	$	164
Salaries and related expenses		473		393		1,306		976
Board related expenses		17		27		54		82
Advertising		23		17		58		42
Rent and utilities		18		8		38		22
Loan and foreclosed asset expenses		42		4		80		30
Travel		22		13		73		45
Other		31		24		102		62
Total SG&A	$	680	$	525	$	1,988	$	1,423

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Our SG&A expense increased $155 and $565 for the quarter and nine months ended September 30, 2018 due significantly to the following:

● 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 13 new employees, which was partially offset by a reduction in our CEO’s salary; and

● Loan and foreclosed asset expenses increased due to an increase in additional loan title and search fees of related to higher originations and an increase in foreclosed asset expenses related to work performed to complete certain of our foreclosed assets.

Impairment Loss on Foreclosed Assets

We owned seven foreclosed assets as of September 30, 2018, compared to four foreclosed assets as of December 31, 2017. Three of the foreclosed assets are lots under construction, two are completed homes, and two are land 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.

We had three impaired loans as of September 30, 2018 and none as of December 31, 2017. During the third quarter of 2018, we reclassified $27 from interest income to accrued interest receivable on the interim condensed consolidated balance sheet related to the impaired loans.

Loan Loss Provision

Our loan loss provision decreased by $6 and increased by $27 for the quarter and nine months ended September 30, 2018, respectively, compared to the same periods of 2017. The decrease for the quarter ended September 30, 2018 was primarily due to a reduction in loan balances. The increase in the nine months ended September 30, 2018 was primarily due to increases in loan balances and qualitative reserve percentage as a result of the change in housing values.

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 September 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
Colorado		3		7		3,878		2,684		2,096		69	%		5	%
Florida		18		73		24,789		17,463		10,349		70	%		5	%
Georgia		7		9		6,955		4,781		3,830		69	%		5	%
Idaho		1		2		605		424		53		70	%		5	%
Indiana		2		7		2,124		1,486		699		70	%		5	%
Michigan		4		28		6,303		4,205		2,501		67	%		5	%
New Jersey		5		16		5,295		3,645		2,741		69	%		5	%
New York		1		3		915		641		555		70	%		5	%
North Carolina		5		12		4,196		2,872		1,429		68	%		5	%
North Dakota		1		1		375		263		227		70	%		5	%
Ohio		1		2		1,620		1,000		902		62	%		5	%
Pennsylvania		3		32		23,055		13,184		9,740		57	%		5	%
South Carolina		12		29		8,319		5,823		3,648		70	%		5	%
Tennessee		1		2		750		525		310		70	%		5	%
Utah		1		1		485		319		107		66	%		5	%
Virginia		3		8		2,325		1,628		992		70	%		5	%
Total		68		232	$	91,989	$	60,943	$	40,179		66	%(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.

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Commercial Loans – Real Estate Development Loan Portfolio Summary

The following is a summary of our loan portfolio to builders for land development as of September 30, 2018 and December 31, 2017. A significant portion of our development loans consist of three development loans to a borrower in Pittsburgh, Pennsylvania (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		3		7	$	7,046	$	6,434		$	5,035		71	%	$	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 $1,320 as of September 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.

Combined Loan Portfolio Summary

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

	September 30, 2018			December 31, 2017
Loans receivable, gross	$	45,214		$	32,375
Less: Deferred loan fees		(1,222	)		(847	)
Less: Deposits		(1,434	)		(1,497	)
Plus: Deferred origination expense		141			109
Less: Allowance for loan losses		(158	)		(97	)
Loans receivable, net	$	42,541		$	30,043

The following is a roll forward of combined loans:

	Nine Months Ended September 30, 2018			Year Ended December 31, 2017			Nine Months Ended September 30, 2017
Beginning balance	$	30,043		$	20,091		$	20,091
Additions		30,606			33,451			24,099
Payoffs/sales		(22,260	)		(22,645	)		(13,810	)
Moved to foreclosed assets		4,494			-			–
Change in deferred origination expense		31			55			26
Change in builder deposit		64			(636	)		(626	)
Change in loan loss provision		(61	)		(44	)		(34	)
New loan fees		(2,194	)		(2,127	)		(1,494	)
Earned loan fees		1,818			1,898			1,374
Ending balance	$	42,541		$	30,043		$	29,626

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Finance Receivables – By risk rating:

	September 30, 2018		December 31, 2017
Pass	$	40,103	$	25,656
Special mention		4,111		6,719
Classified - accruing		-		-
Classified – nonaccrual		1,000		-
Total	$	45,214	$	32,375

Finance Receivables – Method of impairment calculation:

	September 30, 2018		December 31, 2017
Performing loans evaluated individually	$	17,193	$	14,992
Performing loans evaluated collectively		27,021		17,383
Non-performing loans with a non-specific reserve		-		-
Non-performing loans without a specific reserve		1,000		-
Total	$	45,214	$	32,375

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

Impaired Loans

The following is a summary of our impaired nonaccrual commercial construction loans as of September 30, 2018 and December 31, 2017. All loans listed have a related allowance for loan losses:

	September 30, 2018		December 31, 2017
Unpaid principal balance (contractual obligation from customer)	$	1,000	$	-
Charge-offs and payments applied		-		-
Gross value before related allowance		1,000		-
Related allowance		3		-
Value after allowance	$	997	$	-

Below is an aging schedule of gross loans receivable as of September 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)		237		44,482		98	%
60–89 days		-				-	%
90–179 days		2		732		2	%
180–269 days		-		-		-	%
Subtotal		239		45,214		100	%
Interest only accounts (Accounts on which interest, deferment, extension and/or default charges were received in the last 60 days)		-		-		-	%
Partial Payment accounts (Accounts on which the total received in the last 60 days was less than 50% of the original contractual monthly payment. “Total received” to include interest on simple interest accounts, as well as late charges on deferment charges on pre-computed accounts.)		-		-		-	%
Total		239		45,214		100	%

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Below is an aging schedule of gross loans receivable as of September 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.		237		44,482		98	%
60–89 days		-		-		-	%
90–179 days		2		732		2	%
180–269 days		-		-		-	%
Subtotal		239		45,214		100	%
Interest only accounts (Accounts on which interest, deferment, extension and/or default charges were received in the last 60 days)		-		-		-	%
Partial Payment accounts (Accounts on which the total received in the last 60 days was less than 50% of the original contractual monthly payment. “Total received” to include interest on simple interest accounts, as well as late charges on deferment charges on pre-computed accounts.)		-		-		-	%
Total		239		45,214		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		–		–		–	%
180–269 days		–		–		–	%
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)		–	$	–		–	%
Partial Payment accounts (Accounts on which the total received in the last 60 days was less than 50% of the original contractual monthly payment. “Total received” to include interest on simple interest accounts, as well as late charges on deferment charges on pre-computed accounts.)		–	$	–		–	%
Total		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		–		–		–	%
180–269 days		–		–		–	%
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)		–	$	–		–	%
Partial Payment accounts (Accounts on which the total received in the last 60 days was less than 50% of the original contractual monthly payment. “Total received” to include interest on simple interest accounts, as well as late charges on deferment charges on pre-computed accounts.)		–	$	–		–	%
Total		171	$	32,375		100	%

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Foreclosed Assets

Below is a roll forward of foreclosed assets:

	Nine Months Ended September 30, 2018			Year Ended December 31, 2017			Nine Months Ended September 30, 2017
Beginning balance	$	1,036		$	2,798		$	2,798
Additions from loans		4,737			-			-
Additions for construction/development		1,039			317			296
Sale proceeds		(370	)		(1,890	)		(1,890	)
Gain on sale		-			77			77
Loss on sale		(3	)		-			-
Gain on foreclosure		20			-			-
Loss on foreclosure		(47	)		-			-
Impairment loss on foreclosed assets		(89	)		(266	)		(202	)
Ending balance	$	6,323		$	1,036		$	1,079

During the nine months ended September 30, 2018, we recorded four deeds in lieu of foreclosure. Three of the four were with a certain borrower with a completed home and two lots. The fourth was with a borrower who defaulted on a loan by failing to make interest payments. In addition, we sold one of our foreclosed assets with sales proceeds of $370 and a loss on the sale of $3. During the quarter ended September 30, 2018, we recognized a gain on foreclosure of $20 on the two lots and a loss on foreclosure of $47 on the completed home.

During the first nine of months of 2018 we reclassified $4,737 to Foreclosed assets, $4,494 of which was principal from Loans receivable; net, and $243 of which was from Accrued interest receivable.

Customer Interest Escrow

Below is a roll forward of interest escrow:

	Nine Months Ended September 30, 2018			Year Ended December 31, 2017			Nine Months Ended September 30, 2017
Beginning balance	$	935		$	812		$	812
Preferred equity dividends		93			115			86
Additions from Pennsylvania Loans		331			480			345
Additions from other loans		781			1,163			962
Interest, fees, principal or repaid to borrower		(1,263	)		(1,635	)		(1,354	)
Ending balance	$	877		$	935		$	851

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 on the Wallach LOC to generally equal the prime rate plus 3%. The interest rate for the Wallach LOC was 8.0% and 4.4% as of September 30, 2018 and 2017, respectively. As of September 30, 2018, and 2017, we had borrowed $0 against the Wallach LOC. Interest was $10 and $20 for the quarter and nine months ended September 30, 2018, respectively. As of September 30, 2018, there was $1,250 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 is our CEO’s trust (the “Wallach Trust LOC”) which modified the interest rate on the Wallach Trust LOC to generally equal the prime rate plus 3%. The interest rate for this borrowing was 8.0% and 4.4% as of September 30, 2018 and 2017, respectively. As of September 30, 2018, and 2017, we borrowed $0 against the Wallach Trust LOC. As of September 30, 2018, there was $250 remaining availability on the Wallach Trust LOC.

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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 of prime rate plus 3%; and

● Due upon demand.

As of September 30, 2018, we had borrowed $0 against the Myrick LOC and there was $1,000 remaining in availability. Interest expense was $14 and $17 for the quarter and nine months ended September 30, 2018, respectively.

Secured Borrowings

Borrowings Secured by Loan Assets

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 nine 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 September 30, 2018. Interest expense was $33 and $100 for the quarter and nine months ended September 30, 2018, respectively.

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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

● Automatic renewal in September 2018 and extended for 15 months.

The Swanson LOC was fully borrowed as of September 30, 2018. Interest expense was $180 and $445 for the quarter and nine months ended September 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.

The principal amount of our commercial mortgage was $651 as of September 30, 2018. Interest expense was $9 and $27 for the quarter and nine months ended September 30, 2018, respectively.

London Loan

During September 2018, we entered into a Master Loan Agreement (“London Loan”) with London Financial Company, LLC (“London Financial”) with the following terms:

● Principal of $3,250;

● Secured by collateral of land and improvements by a certain foreclosed asset;

● Cost of funds to us of 12%; and

● Due in September 2019.

As of September 30, 2018, $2,860 was borrowed against the London Loan with an additional $390 that remained available upon completion of additional work performed of the foreclosed asset. Interest expense was $3 for the quarter and nine months ended September 30, 2018, respectively.

Summary

The borrowings secured by loan assets are summarized below:

	September 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.	$	7,467		4,510	$	7,483	$	4,089
S.K. Funding		9,366		6,716		9,128		4,134
Lender
Shuman		1,575		1,325		1,747		1,325
Paul Swanson		5,965		4,380		2,518		2,096
Total	$	24,373		16,931	$	20,876	$	11,644

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			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	%

Unsecured Borrowings

Other Unsecured Debts

Our other unsecured debts are detailed below:

						Principal Amount Outstanding as of
Loan	Maturity Date		Interest Rate (1)			September 30, 2018		December 31, 2017
Unsecured Note with Seven Kings Holdings, Inc.		February 2019 (2)		9.5	%		500		500
Unsecured Line of Credit from Builder Finance, Inc.		January 2019		10.0	%		500		-
Unsecured Line of Credit from Paul Swanson		April 2020(3)		9.0	%		2,621		1,904
Subordinated Promissory Note		September 2019(4)		9.5	%		1,125		-
Subordinated Promissory Note		December 2019		10.5	%		113		113
Subordinated Promissory Note		April 2020		10.0	%		100		100
Subordinated Promissory Note		October 2019		10.0	%		150		-
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 2020(6)		1.0	%		279		279
Junior Subordinated Promissory Note		October 2020(6)		20.0	%		173		173
						$	7,106	$	3,069

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

⁽²⁾ Due six months after lender gives notice.

⁽³⁾ Automatically renewed in September 2018 and extended for 15 months.

⁽⁴⁾ Due on the earlier of six months after lender gives notice or September 2019.

⁽⁴⁾ Lender may require us to repay $20 of principal and all unpaid interest with 10 days’ notice.

⁽⁵⁾ These notes were issued to the same holder and, when calculated together, yield a blended 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 September 30, 2018 and December 31, 2017 was 9.83% 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:

	Nine Months Ended September 30, 2018			Year Ended December 31, 2017			Nine Months Ended September 30, 2017
Gross Notes outstanding, beginning of period	$	14,121		$	11,221		$	11,221
Notes issued		6,357			8,375			8,105
Note repayments / redemptions		(2,503	)		(5,475	)		(5,087	)
Gross Notes outstanding, end of period	$	17,975		$	14,121		$	14,239
Less deferred financing costs, net		233			286			330
Notes outstanding, net	$	17,742		$	13,835		$	13,909

The following is a roll forward of deferred financing costs:

	Nine Months			Year			Nine Months
	Ended			Ended			Ended
	September 30, 2018			December 31, 2017			September 30, 2017
Deferred financing costs, beginning balance	$	1,102		$	1,014		$	1,014
Additions		89			88			40
Deferred financing costs, ending balance	$	1,191		$	1,102		$	1,054
Less accumulated amortization		(958	)		(816	)		(724	)
Deferred financing costs, net	$	233		$	286		$	330

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

	Nine Months		Year		Nine Months
	Ended		Ended		Ended
	September 30, 2018		December 31, 2017		September 30, 2017
Accumulated amortization, beginning balance	$	816	$	603	$	603
Additions		142		213		121
Accumulated amortization, ending balance	$	958	$	816	$	724

Redeemable Preferred Equity and Members’ Capital

On July 31, 2018, we redeemed all of our outstanding Series C cumulative preferred units (“Series C Preferred Units”), which were held by two investors. On August 1, 2018, we sold 12 of our Series C Preferred Units to Daniel M. Wallach, our CEO and Chairman of our board of managers, and his wife, Joyce S. Wallach, for the total price of $1,200. In addition, on August 30, 2018, we sold two Series C Preferred Units to two investors for the total price of $200.

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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 September 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.

Priority of Borrowings

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

	Priority Rank		September 30, 2018		December 31, 2017
Borrowing Source
Borrowings secured by loan assets		1	$	16,931	$	11,644
Other secured borrowings		2		3,511		-
Unsecured line of credit (senior)		3		500		-
Other unsecured borrowings (senior subordinated)		4		1,008		279
Unsecured Notes through our Notes Program, gross		5		17,975		14,121
Other unsecured borrowings (subordinated)		5		5,008		2,617
Other unsecured borrowings (junior subordinated)		6		590		173
Total			$	45,523	$	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 September 30, 2018, and December 31, 2017, we had 239 and 171, respectively, in combined loans outstanding, which totaled $45,214 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 $22,163 and $19,312 as of September 30, 2018 and December 31, 2017, respectively. We anticipate a significant increase in our gross loan receivables over the 12 months subsequent to September 30, 2018 by directly increasing originations to 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 ofSeptember 30, 2018		As of December 31, 2017
Secured debt	$	20,338	$	11,644
Unsecured debt		24,847		16,904
Equity		5,302		4,783

 Secured debt, net of deferred financing costs increased $8,694 during the nine months ended September 30, 2018, which consisted of an increase in borrowings secured by loans and foreclosed assets and a mortgage payable of $8,043 and $651, respectively. We anticipate increasing our secured debt by roughly half of the increase in loan asset balances over the 12 months subsequent to September 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 $7,943 during the nine months ended September 30, 2018, which consisted of an increase in our Notes Program of $3,854 and an increase in the balances of unsecured lines of credit of $4,037. 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 September 30, 2018.

Equity increased $519 during the nine months ended September 30, 2018, which consisted of an increase in Series C cumulative preferred units (“Series C Preferred Units”), Series B cumulative preferred units, and Class A common equity of $329, $80, and $110, respectively. We anticipate an increase in our equity during the 12 months subsequent to September 30, 2018 through the issuance of additional Series C Preferred Units. During the year ended December 31, 2017, we increased the amount of Series C Preferred Units outstanding by $1,097. If we are not able to increase our equity through the issuance of additional Series C Preferred Units, we will then attempt to raise additional funds through the Notes Program. If we anticipate the ability to not fund our projected increases in loan balances as discussed above, we may reduce new loan originations to reduce need for additional funds.

Cash provided by operations was $1,640 as of September 30, 2018 as compared to $1,163 for the same period of 2017. Our increase in operating cash flow was primarily due to higher loan originations.

36

Contractual Obligations

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

Year Maturing	Total Amount Maturing		Public Offering		Other Unsecured		Secured Borrowings
2018	$	18,254	$	1,259	$	60	$	16,935
2019		12,888		7,386		2,628		2,874
2020		6,723		3,436		3,272		15
2021		3,789		3,773		-		16
2022 and thereafter		3,869		2,121		1,146		602
Total	$	45,523	$	17,975	$	7,106	$	20,442

The total amount maturing through year ending December 31, 2019 is $31,142, which consists of secured borrowings of $19,809 and unsecured borrowings of $11,333.

Secured borrowings maturing through year ending December 31, 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). Our secured borrowings are mostly showing as due by 2019 because the related collateral is demand loans. The following lists our secured facilities with maturity and renewal dates:

● Swanson – $4,380 due April 2020;

● Shuman – $1,325 due July 2019;

● S. K. Funding – $3,500 of the total due July 2019;

● 1st Financial Bank USA – $4,510 no expiration date; and

● London Financial – $2,860 due September 2019.

37

Unsecured borrowings due on December 31, 2019 consist of Notes issued pursuant to the Notes Program and other unsecured debt of $8,645 and $2,688, 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. Historically, approximately 75% of our Note holders renew their investment. 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.

Summary

We have the funding available to address the loans we have today, including our unfunded commitments. We anticipate growing our assets through the net sources and uses (12-month liquidity) listed above as well as future capital increases from debt, redeemable preferred equity and regular equity. Although our secured debt is all listed as currently due because of the underlying collateral being demand notes, the vast majority of our secured debt is either contractually set to automatically renew unless notice is given or, in the case of purchase and sale agreements, has no end date as to when the purchasers will not purchase new loans (although they are never required to purchase additional loans).

Inflation, Interest Rates, and Housing Starts

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

38

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.

Source: U.S. Census Bureau

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

39

Off-Balance Sheet Arrangements

As of September 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.

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 nine months ended September 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.

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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. On July 31, 2018, we issued approximately 0.0503184 of a Series C Preferred Unit to Margaret Rauscher IRA LLC in exchange for distribution proceeds of approximately $5,031.84 and approximately 0.0638643 of a Series C Preferred Unit to an IRA owned by William Myrick in exchange for distribution proceeds of approximately $6,386.43. On August 31, 2018, we issued approximately 0.0508216 of a Series C Preferred Unit to Margaret Rauscher IRA LLC in exchange for distribution proceeds of approximately $5,082.16, and approximately 0.0645029 of a Series C Preferred Unit to an IRA owned by William Myrick in exchange for distribution proceeds of approximately $6,450.29. On September 30, 2018, we issued approximately 0.0513298 of a Series C Preferred Unit to Margaret Rauscher IRA LLC in exchange for distribution proceeds of approximately $5,132.98, and approximately 0.06514.79 of a Series C Preferred Unit to an IRA owned by William Myrick in exchange for distribution proceeds of approximately $6,514.79. 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.

41

	Issuance of Series C Preferred Units to Daniel M. Wallach and Joyce S. Wallach On August 1, 2018, we sold 12 Series C 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 $1,200,000. The proceeds received from the sale of the Series C Preferred Units in this transaction were used for the funding of construction loans. This transaction was a private transaction exempt from the registration requirements of the Securities Act under Section 4(a)(2) of the Securities Act. This transaction did not involve any public offering, was made without general solicitation or advertising, and the buyers represented to the us that they were each an “accredited investor” as defined under the Securities Act, with access to all relevant information necessary to evaluate the investment in the Series C Preferred Units. Other Issuance of Series C Preferred Units On August 30, 2018, we sold two Series C Preferred Units to two investors for the total price of $200,000. The proceeds received from the sale of the Series C Preferred Units in this transaction were used for the funding of construction loans This transaction was a private transaction exempt from the registration requirements of the Securities Act under Section 4(a)(2) of the Securities Act. This transaction did not involve any public offering, was made without general solicitation or advertising, and the buyers represented to the us that they were each an “accredited investor” as defined 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 September 30, 2018, we had issued $20,672,000 in Notes pursuant to that public offering. From September 29, 2015 through September 30, 2018, we incurred expenses of $275,000 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 September 30, 2018 were $20,397,000, 100% of which was used to increase loan balances.
(c)	None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

(a)	During the quarter ended September 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 September 30, 2018, there were no material changes to the procedures by which members may recommend nominees to our board of managers.

42

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 September 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
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.

43

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: November 8, 2018	By:	/s/ Catherine Loftin
		Catherine Loftin
		Chief Financial Officer

44

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: November 8, 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: November 8, 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 September 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: November 8, 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 September 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: November 8, 2018	By:	/s/ Catherine Loftin
		Catherine Loftin
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2018	Nov. 05, 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	Sep. 30, 2018
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Small Business Flag	true
Entity Emerging Growth Company	true
Entity Ex Transition Period	false
Entity Common Stock, Shares Outstanding		0
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2018

XML

Interim Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Assets
Cash and cash equivalents	$ 3,345	$ 3,478
Accrued interest receivable	620	720
Loans receivable, net	42,541	30,043
Foreclosed assets	6,323	1,036
Property, plant and equipment, net	1,023	1,020
Other assets	274	58
Total assets	54,126	36,355
Liabilities
Customer interest escrow	877	935
Accounts payable and accrued expenses	863	705
Accrued interest payable	1,867	1,353
Notes payable secured, net of deferred financing costs	20,338	11,644
Notes payable unsecured, net of deferred financing costs	24,847	16,904
Due to preferred equity member	32	31
Total liabilities	48,824	31,572
Commitments and Contingencies (Notes 3 and 9)
Series C preferred equity	1,426	1,097
Members' Capital
Series B preferred equity	1,320	1,240
Class A common equity	2,556	2,446
Members' capital	3,876	3,686
Total liabilities, redeemable preferred equity and members' capital	$ 54,126	$ 36,355

XML

Interim Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Interest Income
Interest and fee income on loans	$ 2,045	$ 1,673	$ 5,917	$ 4,203
Interest expense:
Interest related to secured borrowings	552	342	1,480	718
Interest related to unsecured borrowings	587	424	1,550	1,192
Interest expense	1,139	748	3,030	1,910
Net interest income	906	925	2,887	2,293
Less: Loan loss provision	2	8	61	34
Net interest income after loan loss provision	904	917	2,826	2,259
Non-Interest Income
Gain from sale of foreclosed assets				77
Gain from foreclosure of assets	20		20
Total non-interest expense/income	20		20	77
Income	924	917	2,846	2,336
Non-Interest Expense
Selling, general and administrative	680	525	1,983	1,423
Depreciation and amortization	23	12	61	24
Loss from sale of foreclosed assets	3		3
Loss from foreclosure of assets	47		47
Impairment loss on foreclosed assets	4	47	89	202
Total non-interest expense	757	584	2,188	1,649
Net Income	167	333	658	687
Earned distribution to preferred equity holders	69	61	199	149
Net income attributable to common equity holders	$ 98	$ 272	$ 459	$ 538

XML

Interim Condensed Consolidated Statements of Changes in Members' Capital (Unaudited) $ in Thousands	9 Months Ended
	Sep. 30, 2018 USD ($)
Statement of Stockholders' Equity [Abstract]
Members' capital, beginning balance	$ 3,686
Net income	658
Contributions from members (preferred)	80
Earned distributions to preferred equity holders	(199)
Distributions to common equity holders	(349)
Members' capital, ending balance	$ 3,876

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Interim Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Cash flows from operations
Net income	$ 658	$ 687
Adjustments to reconcile net income to net cash provided by operating activities
Amortization of deferred financing costs	142	165
Provision for loan losses	61	34
Net loan origination fees deferred	375	120
Change in deferred origination expense	(31)	(26)
Impairment of foreclosed assets	89	202
Depreciation and amortization	61	24
Gain on foreclosed assets	(20)
Loss on foreclosed assets	47
Gain from sale of foreclosed assets		(77)
Loss from sale of foreclosed assets	3
Net change in operating assets and liabilities
Other assets	(216)	(67)
Accrued interest receivable	(143)	(155)
Customer interest escrow	(58)	39
Accounts payable and accrued expenses	672	217
Net cash provided by operating activities	1,640	1,163
Cash flows from investing activities
Loan originations and principal collections, net	(18,072)	(9,663)
Proceeds from sale of loans	198
Investment in foreclosed assets	(1,039)	(296)
Proceeds from sale of foreclosed assets	370	1,890
Property plant and equipment additions	(64)	(698)
Net cash used in investing activities	(18,607)	(8,767)
Cash flows from financing activities
Contributions from redeemable preferred equity	1,400	1,004
Contributions from members (preferred)	80	70
Distributions to redeemable preferred equity	(1,176)
Distributions to preferred equity holders	(93)	(88)
Distributions to common equity holders	(349)	(189)
Proceeds from secured note payable	19,181	11,760
Repayments of secured note payable	(9,905)	(6,914)
Proceeds from unsecured notes payable	12,149	9,412
Redemptions/repayments of unsecured notes payable	(4,258)	(6,481)
Deferred financing costs paid	(195)	(65)
Net cash provided by financing activities	16,834	8,509
Net increase (decrease) in cash and cash equivalents	(133)	905
Cash and cash equivalents
Beginning of period	3,478	1,566
End of period	3,345	2,471
Supplemental disclosure of cash flow information
Cash paid for interest	2,466	1,616
Non-cash investing and financing activities
Earned but not paid distribution of preferred equity holders	105	29
Foreclosure of assets	4,494
Accrued interest reduction due to foreclosure	243
Secured line of credit reduction due to construction loan purchase	$ 477

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Description of Business and Basis of Presentation

9 Months Ended

Sep. 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 the 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 September 30, 2018, the Company extends commercial loans to residential homebuilders (in 16 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, 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 accounting policies followed by the Company are set forth in Note 2 – Summary of Significant Accounting Policies in the 2017 financial 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.

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 September 30, 2018.

Reclassifications

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

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Fair Value

9 Months Ended

Sep. 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 September 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 September 30, 2018 and December 31, 2017.

September 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	$	6,323	$	6,323	$	-	$	-	$	6,323
Impaired Loans		1,000		997		-		-		997

December 31, 2017

					Quoted Prices
					in Active Markets for		Significant 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 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:

September 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	$	3,345	$	3,345	$	3,345	$	–	$	–
Loans receivable, net		42,541		42,541		–		–		42,541
Accrued interest receivable		620		620		–		–		620
Financial Liabilities:
Customer interest escrow		877		877		–		–		877
Notes payable secured, net		20,338		20,338		–		–		20,338
Notes payable unsecured, net		24,847		24,847		–		–		24,847
Accrued interest payable		1,867		1,867		–		–		1,867

December 31, 2017

					Quoted
					Prices
					in Active Markets for		Significant 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

9 Months Ended

Sep. 30, 2018

Receivables [Abstract]

Financing Receivables

3. Financing Receivables

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

	September 30, 2018			December 31, 2017
Loans receivable, gross	$	45,214		$	32,375
Less: Deferred loan fees		(1,222	)		(847	)
Less: Deposits		(1,434	)		(1,497	)
Plus: Deferred origination expense		141			109
Less: Allowance for loan losses		(158	)		(97	)
Loans receivable, net	$	42,541		$	30,043

Commercial Construction and Development Loans

Commercial Loans – Construction Loan Portfolio Summary

As of September 30, 2018, the Company’s portfolio consisted of 232 commercial construction and seven development loans with 68 borrowers within 16 states.

The following is a summary of the loan portfolio to builders for home construction loans as of September 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		16		68		232	$	91,989	$	60,943	$	40,179		66	%(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 September 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		3		7	$	7,046	$	6,434	$	5,035		71	%	$	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 $1,320 and $1,240 as of September 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”.

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:

	September 30, 2018		December 31, 2017
Pass	$	40,103	$	25,656
Special mention		4,111		6,719
Classified – accruing		-		-
Classified – nonaccrual		1,000		-
Total	$	45,214	$	32,375

Gross finance receivables – Method of impairment calculation:

	September 30, 2018		December 31, 2017
Performing loans evaluated individually	$	17,193	$	14,992
Performing loans evaluated collectively		27,021		17,383
Non-performing loans with a specific reserve		-		-
Non-performing loans without a specific reserve		1,000		-
Total	$	45,214	$	32,375

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

Impaired Loans

The following is a summary of our impaired nonaccrual commercial construction loans as of September 30, 2018 and December 31, 2017.

	September 30, 2018			December 31, 2017
Unpaid principal balance (contractual obligation from customer)	$	1,000		$	-
Charge-offs and payments applied		-			-
Gross value before related allowance		1,000			-
Related allowance		(3	)		-
Value after allowance	$	997		$	-

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:

	September 30, 2018				December 31, 2017
		Percent of				Percent of
	Borrower	Loan			Borrower	Loan
	City	Commitments			City	Commitments
Highest concentration risk	Pittsburgh, PA		25	%	Pittsburgh, PA		22	%
Second highest concentration risk	Orlando, FL		10	%	Sarasota, FL		7	%
Third highest concentration risk	Cape Coral, FL		3	%	Savannah, GA		5	%

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Foreclosed Assets

9 Months Ended

Sep. 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:

	Nine Months Ended September 30, 2018			Year Ended December 31, 2017			Nine Months Ended September 30, 2017
Beginning balance	$	1,036		$	2,798		$	2,798
Additions from loans		4,737			-			-
Additions for construction/development		1,039			317			296
Sale proceeds		(370	)		(1,890	)		(1,890	)
Gain on sale		-			77			77
Loss on sale		(3	)		-			-
Gain on foreclosure		20			-			-
Loss on foreclosure		(47	)		-			-
Impairment loss on foreclosed assets		(89	)		(266	)		(202	)
Ending balance	$	6,323		$	1,036		$	1,079

During the nine months ended September 30, 2018 we recorded four deed in lieu of foreclosures. Three of the four were with a certain borrower with a completed home and two lots. The fourth was with a borrower who defaulted on a loan by failing to make interest payments.

During the first nine of months of 2018, we reclassified $4,737 to foreclosed assets, $4,494 of principal from loans receivable, net; and $243 from accrued interest receivable. We sold one of our foreclosed assets with sales proceeds of $370 and a loss on the sale of $3.

During the quarter ended September 30, 2018, we reclassified $597 to foreclosed assets and recognized a gain on foreclosure of $20 on the two lots and a loss on foreclosure of $47 on the completed home.

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Borrowings

9 Months Ended

Sep. 30, 2018

Debt Disclosure [Abstract]

Borrowings

5. Borrowings

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

	Priority Rank		September 30, 2018		December 31, 2017
Borrowing Source
Borrowings secured by loans		1	$	16,931	$	11,644
Other secured borrowings		2		3,511		-
Unsecured line of credit (senior)		3		500		-
Other unsecured borrowings (senior subordinated)		4		1,008		279
Unsecured Notes through our public offering, gross		5		17,975		14,121
Other unsecured borrowings (subordinated)		5		5,008		2,617
Other unsecured borrowings (junior subordinated)		6		590		173
Total			$	45,523	$	28,834

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

Year Maturing	Total Amount Maturing		Public Offering		Other Unsecured		Secured Borrowings
2018	$	18,254	$	1,259	$	60	$	16,935
2019		12,888		7,386		2,628		2,874
2020		6,723		3,436		3,272		15
2021		3,789		3,773		-		16
2022 and thereafter		3,869		2,121		1,146		602
Total	$	45,523	$	17,975	$	7,106	$	20,442

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 nine 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 on the Wallach LOC to generally equal the prime rate plus 3%. The interest rate for the Wallach LOC was 8.0% and 4.4% as of September 30, 2018 and 2017, respectively. As of September 30, 2018, and 2017, we borrowed $0 against the Wallach LOC. Interest was $10 and $20 for the quarter and nine months ended September 30, 2018, respectively. As of September 30, 2018, $1,250 remained available 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 is our CEO’s trust (the “Wallach Trust LOC”) which modified the interest rate on the Wallach Trust LOC to generally equal the prime rate plus 3%. The interest rate for this borrowing was 8.0% and 4.4% as of September 30, 2018 and 2017, respectively. As of September 30, 2018, and 2017, we borrowed $0 against the Wallach Trust LOC. As of September 30, 2018, $250 remained available 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 September 30, 2018. Interest expense was $33 and $100 for the quarter and nine months ended September 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 9%; and

● Automatic renewal in September 2018 and extended for 15 months.

The Swanson LOC was fully borrowed as of September 30, 2018. Interest expense was $180 and $445 for the quarter and nine months ended September 30, 2018, respectively.

Line of Credit (Myrick)

During June 2018, we entered into a line of credit agreement (the “Myrick LOC Agreement”) with our Executive Vice President (“EVP”) 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 of prime rate plus 3%; and

● Due upon demand.

As of September 30, 2018, $1,000 remained available on the Myrick LOC. Interest expense was $14 and $17 for the quarter and nine months ended September 30, 2018, respectively.

London Financial

During September 2018, we entered into a Master Loan Agreement (“London Loan”) with London Financial Company, LLC (“London Financial”) with the following terms:

● Principal of $3,250;

● Secured by collateral of land and improvements by a certain foreclosed asset;

● Cost of funds to us of 12%; and

● Due in September 2019.

As of September 30, 2018, $2,860 was borrowed against the London Loan with an additional $390 that remained available upon completion of additional work performed of the foreclosed asset. Interest expense was $3 for the quarter and nine months ended September 30, 2018.

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.

The principal amount of the Company’s commercial mortgage was $651 as of September 30, 2018. Interest expense was $9 and $27 for the quarter and nine months ended September 30, 2018, respectively.

Summary

Borrowings secured by loan assets are summarized below:

	September 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.	$	7,467	$	4,510	$	7,483	$	4,089
S.K. Funding		9,366		6,716		9,128		4,134
Lender
Shuman		1,575		1,325		1,747		1,325
Paul Swanson		5,965		4,380		2,518		2,096
Total	$	24,373	$	16,931	$	20,876	$	11,644

Unsecured Borrowings

Other Unsecured Debts*

Our other unsecured debts are detailed below:

					Principal Amount Outstanding as of
Loan	Maturity Date	Interest Rate (1)			September 30, 2018		December 31, 2017
Unsecured Note with Seven Kings Holdings, Inc.	February 2019 (2)		9.5	%	$	500	$	500
Unsecured Line of Credit from Builder Finance, Inc.	January 2019		10.0	%		500		-
Unsecured Line of Credit from Paul Swanson	April 2020(3)		9.0	%		2,621		1,904
Subordinated Promissory Note	September 2019(4)		9.5	%		1,125		-
Subordinated Promissory Note	December 2019		10.5	%		113		113
Subordinated Promissory Note	April 2020		10.0	%		100		100
Subordinated Promissory Note	October 2019		10.0	%		150		-
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 2020(6)		1.0	%		279		279
Junior Subordinated Promissory Note	October 2020(6)		20.0	%		173		173
					$	7,106	$	3,069

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

⁽²⁾ Due six months after lender gives notice.

⁽³⁾ Automatically renewed in September 2018 and extended for 15 months.

⁽⁴⁾ Due on the earlier of six months after lender gives notice or September 2019.

⁽⁴⁾ Lender may require us to repay $20 of principal and all unpaid interest with 10 days’ notice.

⁽⁵⁾ These notes were issued to the same holder and, when calculated together, yield a blended 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 September 30, 2018 and December 31, 2017 was 9.83% 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:

	Nine Months Ended September 30, 2018			Year Ended December 31, 2017			Nine Months Ended September 30, 2017
Gross Notes outstanding, beginning of period	$	14,121		$	11,221		$	11,221
Notes issued		6,357			8,375			8,299
Note repayments / redemptions		(2,503	)		(5,475	)		(5,381	)
Gross Notes outstanding, end of period	$	17,975		$	14,121		$	14,139
Less deferred financing costs, net		233			286			311
Notes outstanding, net	$	17,742		$	13,835		$	13,828

The following is a roll forward of deferred financing costs:

	Nine Months			Year			Nine Months
	Ended			Ended			Ended
	September 30, 2018			December 31, 2017			September 30, 2017
Deferred financing costs, beginning balance	$	1,102		$	1,014		$	1,014
Additions		89			88			65
Deferred financing costs, ending balance	$	1,191		$	1,102		$	1,079
Less accumulated amortization		(958	)		(816	)		(768	)
Deferred financing costs, net	$	233		$	286		$	311

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

	Nine Months		Year		Nine Months
	Ended		Ended		Ended
	September 30, 2018		December 31, 2017		September 30, 2017
Accumulated amortization, beginning balance	$	816	$	603	$	603
Additions		142		213		165
Accumulated amortization, ending balance	$	958	$	816	$	768

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Redeemable Preferred Equity

9 Months Ended

Sep. 30, 2018

Equity [Abstract]

Redeemable Preferred Equity

6. Redeemable Preferred Equity

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

	Nine Months Ended September 30, 2018			Year Ended December 31, 2017		Nine Months Ended September 30, 2017
Beginning balance	$	1,097		$	–	$	–
Additions from new investment		1,400			1,004		1,004
Redemptions		(1,176	)		-		-
Additions from reinvestment		105			93		61
Ending balance	$	1,426		$	1,097	$	1,065

On July 31, 2018, we redeemed all of our outstanding Series C Preferred Units, which were held by two investors. On August 1, 2018, we sold 12 of our Preferred Units to Daniel M. Wallach, our CEO and Chairman of our board of managers, and his wife, Joyce S. Wallach, for the total price of $1,200. In addition, on August 30, 2018, we sold two of our Series C Preferred Units to two investors, for the total price of $200,000.

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

Year of Available Redemption	Total Amount Redeemable
2024	$	1,426
Total	$	1,426

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Members' Capital

9 Months Ended

Sep. 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 September 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 September 30, 2018 and December 31, 2017.

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

The Series B Preferred Units were issued to the Hoskins Group through a reduction in a loan issued by the Hoskins Group to the Company. In December 2015, the Hoskins Group agreed to purchase 0.1 Series B Preferred Units for $10 at each closing of a lot to a third party in the Hamlet’s and Tuscany subdivision. As of September 30, 2018, the Hoskins Group owns a total of 13.2 Series B Preferred Units, which were issued for a total of $1,320.

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Related Party Transactions

9 Months Ended

Sep. 30, 2018

Related Party Transactions [Abstract]

Related Party Transactions

8. Related Party Transactions

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

As of September 30, 2018, the Company had $1,250, $250 and $1,000 available to borrow against the Wallach LOC, Wallach Trust LOC and Myrick LOC, respectively. A more detailed description is included in Note 5 above. These borrowings are 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.

On August 1, 2018, we sold 12 of our Preferred Units to Daniel M. Wallach, our CEO and Chairman of our board of managers, and his wife, Joyce S. Wallach, for the total price of $1,200.

In September 2018, we sold three loans to our CEO at their gross loans receivable balance of $281, and as such, no gain or loss was recognized on the sale. Cash received was $104 and the remaining purchase price was funded through a $177 reduction in the principal balance of the line of credit extended by the CEO to the Company. The Company continues to service these loans. As of September 30, 2018, we had $16 in builder deposits related to these loans, and the principal balance being serviced was $281.

Also, in September 2018, we sold two loans to our EVP of Sales at their gross loans receivable balance of $394, and as such, no gain or loss was recognized on the sale. Cash received was $94 and the remaining purchase price was funded through a $300 reduction in the principal balance of the line of credit extended by the EVP of Sales to the Company. The Company continues to service these loans. As of September 30, 2018, we had $6 in builder deposits related to these loans, and the principal balance being serviced was $394.

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Commitments and Contingencies

9 Months Ended

Sep. 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 $22,163 and $19,312 at September 30, 2018 and December 31, 2017, respectively.

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Selected Quarterly Condensed Consolidated Financial Data (Unaudited)

9 Months Ended

Sep. 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 three quarters of 2018 and four quarters of 2017 are as follows:

	Quarter 3		Quarter 2		Quarter 1		Quarter 4		Quarter 3		Quarter 2		Quarter 1
	2018		2018		2018		2017		2017		2017		2017
Net Interest Income after Loan Loss Provision	$	904	$	996	$	926	$	802	$	917	$	725	$	617
Non-Interest Income		20		-		-		–		–		–		77
SG&A expense		680		691		617		643		537		456		454
Depreciation and Amortization		23		21		17		–		–		–		6
Loss from sale of foreclosed assets		3		-		-		-		-		-		-
Non-Interest Expense		47		-		-		-		-		-		-
Impairment loss on foreclosed assets		4		80		5		64		47		106		49
Net Income	$	167	$	204	$	287	$	95	$	333	$	163	$	191

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Non-Interest Expense Detail

9 Months Ended

Sep. 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 Nine Months Ended September 30,
	2018		2017
Selling, general and administrative expenses
Legal and accounting	$	277	$	164
Salaries and related expenses		1,306		976
Board related expenses		54		82
Advertising		58		42
Rent and utilities		38		22
Loan and foreclosed asset expenses		80		30
Travel		73		45
Other		102		62
Total SG&A	$	1,988	$	1,423

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Subsequent Events

9 Months Ended

Sep. 30, 2018

Subsequent Events [Abstract]

Subsequent Events

12. Subsequent Events

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

On October 31, 2018, we sold four of our Series C Preferred Units to an investor for the total price of $400. 

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Fair Value (Tables)

9 Months Ended

Sep. 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 September 30, 2018 and December 31, 2017.

September 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	$	6,323	$	6,323	$	-	$	-	$	6,323
Impaired Loans		1,000		997		-		-		997

December 31, 2017

					Quoted Prices
					in Active Markets for		Significant 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:

September 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	$	3,345	$	3,345	$	3,345	$	–	$	–
Loans receivable, net		42,541		42,541		–		–		42,541
Accrued interest receivable		620		620		–		–		620
Financial Liabilities:
Customer interest escrow		877		877		–		–		877
Notes payable secured, net		20,338		20,338		–		–		20,338
Notes payable unsecured, net		24,847		24,847		–		–		24,847
Accrued interest payable		1,867		1,867		–		–		1,867

December 31, 2017

					Quoted
					Prices
					in Active Markets for		Significant 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)

9 Months Ended

Sep. 30, 2018

Receivables [Abstract]

Schedule of Financing Receivables

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

	September 30, 2018			December 31, 2017
Loans receivable, gross	$	45,214		$	32,375
Less: Deferred loan fees		(1,222	)		(847	)
Less: Deposits		(1,434	)		(1,497	)
Plus: Deferred origination expense		141			109
Less: Allowance for loan losses		(158	)		(97	)
Loans receivable, net	$	42,541		$	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 September 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		16		68		232	$	91,989	$	60,943	$	40,179		66	%(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 September 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		3		7	$	7,046	$	6,434	$	5,035		71	%	$	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 $1,320 and $1,240 as of September 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”.

Summary of Finance Receivables by Classification

Gross finance receivables – By risk rating:

	September 30, 2018		December 31, 2017
Pass	$	40,103	$	25,656
Special mention		4,111		6,719
Classified – accruing		-		-
Classified – nonaccrual		1,000		-
Total	$	45,214	$	32,375

Schedule of Impairment Calculation Method

Gross finance receivables – Method of impairment calculation:

	September 30, 2018		December 31, 2017
Performing loans evaluated individually	$	17,193	$	14,992
Performing loans evaluated collectively		27,021		17,383
Non-performing loans with a specific reserve		-		-
Non-performing loans without a specific reserve		1,000		-
Total	$	45,214	$	32,375

Schedule of Impaired Loans

The following is a summary of our impaired nonaccrual commercial construction loans as of September 30, 2018 and December 31, 2017.

	September 30, 2018			December 31, 2017
Unpaid principal balance (contractual obligation from customer)	$	1,000		$	-
Charge-offs and payments applied		-			-
Gross value before related allowance		1,000			-
Related allowance		(3	)		-
Value after allowance	$	997		$	-

Schedule of Concentration Risk for Individual Borrowers

Our concentration risks for individual borrowers are summarized in the table below:

	September 30, 2018				December 31, 2017
		Percent of				Percent of
	Borrower	Loan			Borrower	Loan
	City	Commitments			City	Commitments
Highest concentration risk	Pittsburgh, PA		25	%	Pittsburgh, PA		22	%
Second highest concentration risk	Orlando, FL		10	%	Sarasota, FL		7	%
Third highest concentration risk	Cape Coral, FL		3	%	Savannah, GA		5	%

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Foreclosed Assets (Tables)

9 Months Ended

Sep. 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:

	Nine Months Ended September 30, 2018			Year Ended December 31, 2017			Nine Months Ended September 30, 2017
Beginning balance	$	1,036		$	2,798		$	2,798
Additions from loans		4,737			-			-
Additions for construction/development		1,039			317			296
Sale proceeds		(370	)		(1,890	)		(1,890	)
Gain on sale		-			77			77
Loss on sale		(3	)		-			-
Gain on foreclosure		20			-			-
Loss on foreclosure		(47	)		-			-
Impairment loss on foreclosed assets		(89	)		(266	)		(202	)
Ending balance	$	6,323		$	1,036		$	1,079

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Borrowings (Tables)

9 Months Ended

Sep. 30, 2018

Debt Disclosure [Abstract]

Schedule of Borrowings

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

	Priority Rank		September 30, 2018		December 31, 2017
Borrowing Source
Borrowings secured by loans		1	$	16,931	$	11,644
Other secured borrowings		2		3,511		-
Unsecured line of credit (senior)		3		500		-
Other unsecured borrowings (senior subordinated)		4		1,008		279
Unsecured Notes through our public offering, gross		5		17,975		14,121
Other unsecured borrowings (subordinated)		5		5,008		2,617
Other unsecured borrowings (junior subordinated)		6		590		173
Total			$	45,523	$	28,834

Schedule of Maturities of Long-term Debt

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

Year Maturing	Total Amount Maturing		Public Offering		Other Unsecured		Secured Borrowings
2018	$	18,254	$	1,259	$	60	$	16,935
2019		12,888		7,386		2,628		2,874
2020		6,723		3,436		3,272		15
2021		3,789		3,773		-		16
2022 and thereafter		3,869		2,121		1,146		602
Total	$	45,523	$	17,975	$	7,106	$	20,442

Schedule of Secured Borrowings

Borrowings secured by loan assets are summarized below:

	September 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.	$	7,467	$	4,510	$	7,483	$	4,089
S.K. Funding		9,366		6,716		9,128		4,134
Lender
Shuman		1,575		1,325		1,747		1,325
Paul Swanson		5,965		4,380		2,518		2,096
Total	$	24,373	$	16,931	$	20,876	$	11,644

Schedule of Other Unsecured Loans

Our other unsecured debts are detailed below:

					Principal Amount Outstanding as of
Loan	Maturity Date	Interest Rate (1)			September 30, 2018		December 31, 2017
Unsecured Note with Seven Kings Holdings, Inc.	February 2019 (2)		9.5	%	$	500	$	500
Unsecured Line of Credit from Builder Finance, Inc.	January 2019		10.0	%		500		-
Unsecured Line of Credit from Paul Swanson	April 2020(3)		9.0	%		2,621		1,904
Subordinated Promissory Note	September 2019(4)		9.5	%		1,125		-
Subordinated Promissory Note	December 2019		10.5	%		113		113
Subordinated Promissory Note	April 2020		10.0	%		100		100
Subordinated Promissory Note	October 2019		10.0	%		150		-
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 2020(6)		1.0	%		279		279
Junior Subordinated Promissory Note	October 2020(6)		20.0	%		173		173
					$	7,106	$	3,069

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

⁽²⁾ Due six months after lender gives notice.

⁽³⁾ Automatically renewed in September 2018 and extended for 15 months.

⁽⁴⁾ Due on the earlier of six months after lender gives notice or September 2019.

⁽⁴⁾ Lender may require us to repay $20 of principal and all unpaid interest with 10 days’ notice.

⁽⁵⁾ These notes were issued to the same holder and, when calculated together, yield a blended 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:

	Nine Months Ended September 30, 2018			Year Ended December 31, 2017			Nine Months Ended September 30, 2017
Gross Notes outstanding, beginning of period	$	14,121		$	11,221		$	11,221
Notes issued		6,357			8,375			8,299
Note repayments / redemptions		(2,503	)		(5,475	)		(5,381	)
Gross Notes outstanding, end of period	$	17,975		$	14,121		$	14,139
Less deferred financing costs, net		233			286			311
Notes outstanding, net	$	17,742		$	13,835		$	13,828

Schedule of Roll Forward of Deferred Financing Costs

The following is a roll forward of deferred financing costs:

	Nine Months			Year			Nine Months
	Ended			Ended			Ended
	September 30, 2018			December 31, 2017			September 30, 2017
Deferred financing costs, beginning balance	$	1,102		$	1,014		$	1,014
Additions		89			88			65
Deferred financing costs, ending balance	$	1,191		$	1,102		$	1,079
Less accumulated amortization		(958	)		(816	)		(768	)
Deferred financing costs, net	$	233		$	286		$	311

Schedule of Roll Forward of Accumulated Amortization of Deferred Financing Costs

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

	Nine Months		Year		Nine Months
	Ended		Ended		Ended
	September 30, 2018		December 31, 2017		September 30, 2017
Accumulated amortization, beginning balance	$	816	$	603	$	603
Additions		142		213		165
Accumulated amortization, ending balance	$	958	$	816	$	768

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Redeemable Preferred Equity (Tables)

9 Months Ended

Sep. 30, 2018

Equity [Abstract]

Schedule of Roll Forward of Series C Cumulative Preferred Units

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

	Nine Months Ended September 30, 2018			Year Ended December 31, 2017		Nine Months Ended September 30, 2017
Beginning balance	$	1,097		$	–	$	–
Additions from new investment		1,400			1,004		1,004
Redemptions		(1,176	)		-		-
Additions from reinvestment		105			93		61
Ending balance	$	1,426		$	1,097	$	1,065

Schedule of Redemption Option for Investors

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

Year of Available Redemption	Total Amount Redeemable
2024	$	1,426
Total	$	1,426

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

9 Months Ended

Sep. 30, 2018

Quarterly Financial Information Disclosure [Abstract]

Summarized Unaudited Quarterly Condensed Consolidated Financial Data

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

	Quarter 3		Quarter 2		Quarter 1		Quarter 4		Quarter 3		Quarter 2		Quarter 1
	2018		2018		2018		2017		2017		2017		2017
Net Interest Income after Loan Loss Provision	$	904	$	996	$	926	$	802	$	917	$	725	$	617
Non-Interest Income		20		-		-		–		–		–		77
SG&A expense		680		691		617		643		537		456		454
Depreciation and Amortization		23		21		17		–		–		–		6
Loss from sale of foreclosed assets		3		-		-		-		-		-		-
Non-Interest Expense		47		-		-		-		-		-		-
Impairment loss on foreclosed assets		4		80		5		64		47		106		49
Net Income	$	167	$	204	$	287	$	95	$	333	$	163	$	191

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Non-Interest Expense Detail (Tables)

9 Months Ended

Sep. 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 Nine Months Ended September 30,
	2018		2017
Selling, general and administrative expenses
Legal and accounting	$	277	$	164
Salaries and related expenses		1,306		976
Board related expenses		54		82
Advertising		58		42
Rent and utilities		38		22
Loan and foreclosed asset expenses		80		30
Travel		73		45
Other		102		62
Total SG&A	$	1,988	$	1,423

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Fair Value - Schedule of Non-financial Instruments Measured at Fair Value on Non-recurring Basis (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017	Sep. 30, 2017	Dec. 31, 2016
Foreclosed assets	$ 6,323	$ 1,036	$ 1,079	$ 2,798
Estimate Fair Value [Member]
Foreclosed assets	6,323	1,036
Impaired Loans	997
Fair Value, Inputs, Level 1 [Member]
Foreclosed assets
Impaired Loans
Fair Value, Inputs, Level 2 [Member]
Foreclosed assets
Impaired Loans
Fair Value, Inputs, Level 3 [Member]
Foreclosed assets	6,323	1,036
Impaired Loans	997
Carrying Amount [Member]
Foreclosed assets	6,323	$ 1,036
Impaired Loans	$ 1,000

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Fair Value - Schedule of Fair Value Measurements, Recurring and Nonrecurring (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017	Sep. 30, 2017	Dec. 31, 2016
Financial Assets, Cash and cash equivalents	$ 3,345	$ 3,478	$ 2,471	$ 1,566
Financial Assets, Loans receivable, net	42,541	30,043
Financial Assets, Accrued interest receivable	620	720
Financial Liabilities, Customer interest escrow	877	935
Financial Liabilities, Notes payable secured, net	16,931	11,644
Financial Liabilities, Notes payable unsecured, net	24,847	16,904
Estimate Fair Value [Member]
Financial Assets, Cash and cash equivalents	3,345	3,478
Financial Assets, Loans receivable, net	42,541	30,043
Financial Assets, Accrued interest receivable	620	720
Financial Liabilities, Customer interest escrow	877	935
Financial Liabilities, Notes payable secured, net	20,338	11,644
Financial Liabilities, Notes payable unsecured, net	24,847	16,904
Financial Liabilities, Accrued interest payable	1,867	1,353
Fair Value, Inputs, Level 1 [Member]
Financial Assets, Cash and cash equivalents	3,345	3,478
Financial Assets, Loans receivable, net
Financial Assets, Accrued interest receivable
Financial Liabilities, Customer interest escrow
Financial Liabilities, Notes payable secured, net
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, net
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	42,541	30,043
Financial Assets, Accrued interest receivable	620	720
Financial Liabilities, Customer interest escrow	877	935
Financial Liabilities, Notes payable secured, net	20,338	11,644
Financial Liabilities, Notes payable unsecured, net	24,847	16,904
Financial Liabilities, Accrued interest payable	1,867	1,353
Carrying Amount [Member]
Financial Assets, Cash and cash equivalents	3,345	3,478
Financial Assets, Loans receivable, net	42,541	30,043
Financial Assets, Accrued interest receivable	620	720
Financial Liabilities, Customer interest escrow	877	935
Financial Liabilities, Notes payable secured, net	20,338	11,644
Financial Liabilities, Notes payable unsecured, net	24,847	16,904
Financial Liabilities, Accrued interest payable	$ 1,867	$ 1,353

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Financing Receivables - Schedule of Financing Receivables (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Receivables [Abstract]
Loans receivable, gross	$ 45,214	$ 32,375
Less: Deferred loan fees	(1,222)	(847)
Less: Deposits	(1,434)	(1,497)
Plus: Deferred origination expense	141	109
Less: Allowance for loan losses	(158)	(97)
Loans receivable, net	$ 42,541	$ 30,043

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Financing Receivables - Commercial Loans - Construction Loan Portfolio Summary (Details) $ in Thousands		9 Months Ended	12 Months Ended
		Sep. 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		$ 45,214	$ 32,375
Home Construction Loans [Member]
Summary Of Loan Portfolio To Builders For Home Construction [Line Items]
Number of States | Integer		16	16
Number of Borrowers | Integer		68	52
Number of Loans | Loan		232	168
Value of Collateral	[1]	$ 91,989	$ 75,931
Commitment Amount		60,943	47,087
Gross Amount Outstanding		$ 40,179	$ 29,564
Loan to Value Ratio	[2],[3]	66.00%	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		9 Months Ended	12 Months Ended
		Sep. 30, 2018 USD ($) Loan Integer	Dec. 31, 2017 USD ($) Loan Integer
Real Estate Development Loan Portfolio [Line Items]
Gross Amount Outstanding		$ 45,214	$ 32,375
Real Estate Development [Member]
Real Estate Development Loan Portfolio [Line Items]
Number of States | Integer		3	1
Number of Borrowers | Integer		3	1
Number of Loans | Loan	[1]	7	3
Gross Value of Collateral	[2]	$ 7,046	$ 4,997
Commitment Amount	[3]	6,434	4,600
Gross Amount Outstanding		$ 5,035	$ 2,811
Loan to Value Ratio	[4]	71.00%	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".

[2] The value is determined by the appraised value adjusted for remaining costs to be paid. A portion of this collateral is $1,320 and $1,240 as of September 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	Sep. 30, 2018	Dec. 31, 2017
Receivables [Abstract]
Collateral of preferred equity	$ 1,320	$ 1,240

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Financing Receivables - Summary of Finance Receivables by Classification (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Loans receivable, gross	$ 45,214	$ 32,375
Financing Receivable [Member]
Loans receivable, gross	45,214	32,375
Pass [Member] | Financing Receivable [Member]
Loans receivable, gross	40,103	25,656
Special Mention [Member] | Financing Receivable [Member]
Loans receivable, gross	4,111	6,719
Classified - Accruing [Member] | Financing Receivable [Member]
Loans receivable, gross
Classified - Nonaccrual [Member] | Financing Receivable [Member]
Loans receivable, gross	$ 1,000

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Financing Receivables - Schedule of Impairment Calculation Method (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable, gross	$ 45,214	$ 32,375
Financing Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable, gross	45,214	32,375
Performing Loans Evaluated Individually [Member] | Financing Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable, gross	17,193	14,992
Performing Loans Evaluated Collectively [Member] | Financing Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable, gross	27,021	17,383
Non-Performing Loans With A Specific Reserve [Member] | Financing Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable, gross
Non-Performing Loans Without A Specific Reserve [Member] | Financing Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans receivable, gross	$ 1,000

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Financing Receivables - Schedule of Impaired Loans (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Receivables [Abstract]
Unpaid principal balance (contractual obligation from customer)	$ 1,000
Charge-offs and payments applied
Gross value before related allowance	1,000
Related allowance	(3)
Value after allowance	$ 997

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Financing Receivables - Schedule of Concentration Risk for Individual Borrowers (Details)	9 Months Ended	12 Months Ended
	Sep. 30, 2018	Dec. 31, 2017
Highest Concentration Risk [Member]
Borrower City	Pittsburgh, PA	Pittsburgh, PA
Percent of Loan Commitments	25.00%	22.00%
Second Highest Concentration Risk [Member]
Borrower City	Orlando, FL	Sarasota, FL
Percent of Loan Commitments	10.00%	7.00%
Third Highest Concentration Risk [Member]
Borrower City	Cape Coral, FL	Savannah, GA
Percent of Loan Commitments	3.00%	5.00%

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Foreclosed Assets (Details Narrative) - USD ($) $ in Thousands	3 Months Ended							9 Months Ended		12 Months Ended
	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Proceeds from loan	$ 597							$ 4,737
Foreclosure of assets								4,494
Accrued interest reduction due to foreclosure								243
Proceeds from sale of foreclosed assets								370	1,890	1,890
Loss on sale of foreclosed asset	3							3
Gain on foreclosure	20							20
Loss on foreclosure	$ 47							$ 47

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Foreclosed Assets - Schedule of Roll Forward of Foreclosed Assets (Details) - USD ($) $ in Thousands	3 Months Ended							9 Months Ended		12 Months Ended
	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Beginning balance			$ 1,036	$ 1,079			$ 2,798	$ 1,036	$ 2,798	$ 2,798
Additions from loans	$ 597							4,737
Additions for construction/development								1,039	265	317
Sale proceeds								(370)	(1,890)	(1,890)
Gain on sale									77	77
Loss on sale								(3)
Gain on foreclosure	20							20
Loss on foreclosure	(47)							(47)
Impairment loss on foreclosed assets	(4)	$ (80)	$ (5)	(64)	(47)	$ (106)	$ (49)	(89)	(202)	(266)
Ending balance	$ 6,323			$ 1,036	$ 1,079			$ 6,323	$ 1,079	$ 1,036

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Borrowings (Details Narrative) - USD ($) $ in Thousands	1 Months Ended					3 Months Ended	9 Months Ended
	Jun. 30, 2018	Apr. 30, 2018	Mar. 31, 2018	Jan. 31, 2018	Jul. 31, 2017	Sep. 30, 2018	Sep. 30, 2018	Dec. 31, 2017	Sep. 30, 2017
Debt instrument interest rate stated percentage	3.00%
Debt description							The interest rate for this borrowing was 8.0% and 4.4% as of September 30, 2018 and 2017, respectively.
Borrowings under line of credit						$ 0	$ 0		$ 0
Principal amount of mortgage						$ 16,931	$ 16,931	$ 11,644
Public Offering [Member]
Debt instrument interest rate stated percentage						9.83%	9.83%
Notes Program [Member]
Debt instrument interest rate stated percentage								9.21%
Shuman LOC [Member]
Interest						$ 33	$ 100
Chief Executive Officer [Member]
Debt description							The interest rate for the Wallach LOC was 8.0% and 4.4% as of September 30, 2018 and 2017, respectively.
Chief Executive Officer [Member] | Prime Rate [Member]
Debt instrument interest rate stated percentage	3.00%
Wallach LOC [Member]
Interest on line of credit						10	$ 20
Remaining line of credit						1,250	1,250
Wallach Trust LOC [Member]
Borrowings under line of credit						0	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						4,380	4,380	$ 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		9.00%
Line of credit maturity date		Sep. 30, 2018
Line of credit termination description		Automatic renewal in September 2018 and extended for 15 months.
Swanson Line of Credit Agreement [Member]
Interest						180	445
Swanson Line of Credit Agreement [Member] | Paul Swanson [Member]
Line of credit maximum borrowing capacity				$ 660
Cost of funds percentage				5.07%
Line of credit maturity date				Jan. 31, 2033
Line of credit termination description				Due in January 2033
Interest						9	27
Principal amount of mortgage						651	651
Myrick LOC Agreement [Member]
Remaining line of credit						1,000	1,000
Line of credit maximum borrowing capacity	$ 1,000
Cost of funds percentage	3.00%
Interest						14	17
Master Loan Agreement [Member] | London Financial Company, LLC [Member]
Borrowings under line of credit						2,860	2,860
Remaining line of credit						390	390
Line of credit maximum borrowing capacity						3,250	$ 3,250
Cost of funds percentage							12.00%
Line of credit maturity date							Sep. 30, 2019
Line of credit termination description							Due in September 2019.
Interest						$ 3	$ 3

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Borrowings - Schedule of Borrowings (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Debt Disclosure [Abstract]
Borrowings secured by loans	$ 16,931	$ 11,644
Other secured borrowings	3,511
Unsecured line of credit (senior)	500
Other unsecured borrowings (senior subordinated)	1,008	279
Unsecured Notes through our public offering, gross	17,975	14,121
Other unsecured borrowings (subordinated)	5,008	2,617
Other unsecured borrowings (junior subordinated)	590	173
Total	$ 45,523	$ 28,834

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Borrowings - Schedule of Maturities of Long-term Debt (Details) $ in Thousands	Sep. 30, 2018 USD ($)
Total Amount Maturing [Member]
2018	$ 18,254
2019	12,888
2020	6,723
2021	3,789
2022 and thereafter	3,869
Total	45,523
Public Offering [Member]
2018	1,259
2019	7,386
2020	3,436
2021	3,773
2022 and thereafter	2,121
Total	17,975
Other Unsecured [Member]
2018	60
2019	2,628
2020	3,272
2021
2022 and thereafter	1,146
Total	7,106
Secured Borrowings [Member]
2018	16,935
2019	2,874
2020	15
2021	16
2022 and thereafter	602
Total	$ 20,442

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Borrowings - Schedule of Secured Borrowings (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Book Value of Loans which Served as Collateral	$ 24,373	$ 20,876
Due From Shepherd's Finance to Loan Purchaser or Lender	16,931	11,644
Builder Finance, Inc. [Member]
Book Value of Loans which Served as Collateral	7,467	7,483
Due From Shepherd's Finance to Loan Purchaser or Lender	4,510	4,089
S.K. Funding [Member]
Book Value of Loans which Served as Collateral	9,366	9,128
Due From Shepherd's Finance to Loan Purchaser or Lender	6,716	4,134
Shuman [Member]
Book Value of Loans which Served as Collateral	1,575	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	5,965	2,518
Due From Shepherd's Finance to Loan Purchaser or Lender	$ 4,380	$ 2,096

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Borrowings - Schedule of Other Unsecured Loans (Details) - USD ($) $ in Thousands		9 Months Ended
		Sep. 30, 2018	Dec. 31, 2017
Unsecured Note with Seven Kings Holdings, Inc. [Member]
Maturity Date	[1]	February 2019
Interest Rate	[2]	9.50%
Other Unsecured Loans		$ 500	$ 500
Unsecured Line of Credit from Builder Finance, Inc. [Member]
Maturity Date		January 2019
Interest Rate	[2]	10.00%
Other Unsecured Loans		$ 500
Unsecured Line of Credit from Paul Swanson [Member]
Maturity Date	[3]	April 2020
Interest Rate	[2]	9.00%
Other Unsecured Loans		$ 2,621	1,904
Subordinated Promissory Note [Member]
Maturity Date	[4],[5]	September 2019
Interest Rate	[2]	9.50%
Other Unsecured Loans		$ 1,125
Subordinated Promissory Note One [Member]
Maturity Date		December 2019
Interest Rate	[2]	10.50%
Other Unsecured Loans		$ 113	113
Subordinated Promissory Note Two [Member]
Maturity Date		April 2020
Interest Rate	[2]	10.00%
Other Unsecured Loans		$ 100	100
Subordinated Promissory Note Three [Member]
Maturity Date		October 2019
Interest Rate	[2]	10.00%
Other Unsecured Loans		$ 150
Senior Subordinated Promissory Note [Member]
Maturity Date	[4],[5]	March 2022
Interest Rate	[2]	10.00%
Other Unsecured Loans		$ 400
Senior Subordinated Promissory Note One [Member]
Maturity Date	[6]	March 2022
Interest Rate	[2]	1.00%
Other Unsecured Loans		$ 728
Junior Subordinated Promissory Note [Member]
Maturity Date	[6]	March 2022
Interest Rate	[2]	22.50%
Other Unsecured Loans		$ 417
Senior Subordinated Promissory Note Two [Member]
Maturity Date	[7]	October 2020
Interest Rate	[2]	1.00%
Other Unsecured Loans		$ 279	279
Junior Subordinated Promissory Note One [Member]
Maturity Date	[7]	October 2020
Interest Rate	[2]	20.00%
Other Unsecured Loans		$ 173	173
Other Unsecured Debt [Member]
Other Unsecured Loans		$ 7,106	$ 3,069

[1] Due in six months after lender gives notice.

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

[3] Automatically renewed in September 2018 and extended for 15 months.

[4] Due on the earlier of six months after lender gives notice or September 2019.

[5] Lender may require us to repay $20 of principal and all unpaid interest with 10 days' notice.

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

[7] 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	9 Months Ended
	Sep. 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]
Debt, principal amount	$ 20

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Borrowings - Schedule of Roll Forward of Notes Outstanding (Details) - USD ($) $ in Thousands	9 Months Ended		12 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
Debt Disclosure [Abstract]
Gross Notes outstanding, beginning of period	$ 14,121	$ 11,221	$ 11,221
Notes issued	6,357	8,299	8,375
Note repayments / redemptions	(2,503)	(5,381)	(5,475)
Gross Notes outstanding, end of period	17,975	14,139	14,121
Less deferred financing costs, net	233	311	286
Notes outstanding, net	$ 17,742	$ 13,828	$ 13,835

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Borrowings - Schedule of Roll Forward of Deferred Financing Costs (Details) - USD ($) $ in Thousands	9 Months Ended		12 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017	Dec. 31, 2016
Debt Disclosure [Abstract]
Deferred financing costs, beginning balance	$ 1,102	$ 1,014	$ 1,014
Additions	89	65	88
Deferred financing costs, ending balance	1,191	1,079	1,102
Less accumulated amortization	(958)	(768)	(816)	$ (603)
Deferred financing costs, net	$ 233	$ 311	$ 286

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Borrowings - Schedule of Roll Forward of Accumulated Amortization of Deferred Financing Costs (Details) - USD ($) $ in Thousands	9 Months Ended		12 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
Debt Disclosure [Abstract]
Accumulated amortization, beginning balance	$ 816	$ 603	$ 603
Additions	142	165	213
Accumulated amortization, ending balance	$ 958	$ 768	$ 816

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Redeemable Preferred Equity (Details Narrative) - USD ($) $ in Thousands		1 Months Ended
	Aug. 01, 2018	Aug. 30, 2018
Daniel M Wallach [Member]
Sale of stock, description	we sold 12 of our Preferred Units to Daniel M. Wallach
Sale of transaction, amount	$ 1,200
Two Investors [Member]
Sale of transaction, amount		$ 200,000

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Redeemable Preferred Equity - Schedule of Roll Forward of Series C Cumulative Preferred Units (Details) - USD ($) $ in Thousands	9 Months Ended		12 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
Equity [Abstract]
Series C Cumulative Preferred Equity, beginning balance	$ 1,097
Additions from new investment	1,400	1,004	1,004
Redemptions	(1,176)
Additions from reinvestment	105	61	93
Series C Cumulative Preferred Equity, ending balance	$ 1,426	$ 1,065	$ 1,097

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Redeemable Preferred Equity - Schedule of Redemption Option for Investors (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2018	Dec. 31, 2017	Sep. 30, 2017	Dec. 31, 2016
Equity [Abstract]
Year of Available Redemption	2024
Total Amount Redeemable	$ 1,426	$ 1,097	$ 1,065

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Members' Capital (Details Narrative) - USD ($) $ in Thousands	1 Months Ended
	Dec. 31, 2015	Sep. 30, 2018	Mar. 31, 2018	Jan. 31, 2018	Dec. 31, 2017
Series B preferred equity		$ 1,320			$ 1,240
Chief Financial Officer [Member]
Equity ownership, percentage				2.00%
EVP of Operations [Member]
Equity ownership, percentage				1.00%
EVP 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] | EVP of Operations [Member]
Equity ownership, percentage		2.00%
Class A Common Units [Member] | EVP of Sales [Member]
Equity ownership, percentage		15.30%
Series B Preferred Units [Member]
Number of units agreed to purchase	The Hoskins Group agreed to purchase 0.1 Series B Preferred Units for $10 at each closing of a lot to a third party in the Hamlet’s and Tuscany subdivision.
Number of preferred units value to purchase during the period	$ 10
Series B Preferred units, shares		13.2
Series B preferred equity		$ 1,320

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Related Party Transactions (Details Narrative) $ in Thousands	Sep. 30, 2018 USD ($) Integer	Aug. 01, 2018 USD ($) shares	Mar. 31, 2018 USD ($)	Feb. 28, 2018 USD ($)	Jan. 31, 2018	Dec. 31, 2017 USD ($)
Loans receivable	$ 42,541					$ 30,043
Senior Subordinated Promissory Note [Member]
Debt instrument, face amount	20
Wallach LOC [Member]
Amount available to borrow	1,250
Wallach Trust LOC [Member]
Amount available to borrow	250
Reduction in line of credit	0
Myrick LOC [Member]
Amount available to borrow	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%
EVP of Operations [Member]
Percentage of ownership interest					1.00%
EVP of Sales [Member]
Percentage of ownership interest			14.30%
Loans receivable	$ 394
Number of loans sold | Integer	2
Cash received from related party	$ 94
Reduction in line of credit	300
Builder deposits	6
Joyce S. Wallach [Member] | Chief Executive Officer [Member]
Number of preferred units sold | shares		12
Number of preferred units sold, value		$ 1,200
CEO [Member]
Loans receivable	$ 281
Number of loans sold | Integer	3
Cash received from related party	$ 104
Reduction in line of credit	177
Builder deposits	$ 16
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] | EVP of Operations [Member]
Percentage of ownership interest	2.00%
Class A Common Units [Member] | EVP of Sales [Member]
Percentage of ownership interest	15.30%

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Commitments and Contingencies (Details Narrative) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Commitments and Contingencies Disclosure [Abstract]
Letter of credit, amount outstanding	$ 22,163	$ 19,312

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Selected Quarterly Condensed Consolidated Financial Data (Unaudited) - Summarized Unaudited Quarterly Condensed Consolidated Financial Data (Details) - USD ($) $ in Thousands	3 Months Ended							9 Months Ended		12 Months Ended
	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
Quarterly Financial Information Disclosure [Abstract]
Net Interest Income after Loan Loss Provision	$ 904	$ 996	$ 926	$ 802	$ 917	$ 725	$ 617
Non-Interest Income	20						77	$ 20	$ 77
SG&A expense	680	691	617	643	525	456	454	1,983	1,423
Depreciation and Amortization	23	21	17		12		6	61	24
Loss from sale of foreclosed assets	3							3
Non-Interest Expense	757				584			2,188	1,649
Impairment loss on foreclosed assets	4	80	5	64	47	106	49	89	202	$ 266
Net Income	$ 167	$ 204	$ 287	$ 95	$ 333	$ 163	$ 191	$ 658	$ 687

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Non-Interest Expense Detail - Schedule of Selling General and Administrative Expenses (Details) - USD ($) $ in Thousands	3 Months Ended							9 Months Ended
	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Sep. 30, 2018	Sep. 30, 2017
Non-interest Expense Detail
Legal and accounting								$ 277	$ 164
Salaries and related expenses								1,306	976
Board related expenses								54	82
Advertising								58	42
Rent and utilities								38	22
Loan and foreclosed asset expenses								80	30
Travel								73	45
Other								102	62
Total SG&A	$ 680	$ 691	$ 617	$ 643	$ 525	$ 456	$ 454	$ 1,983	$ 1,423

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Subsequent Events (Details Narrative) - Subsequent Event [Member] - Series C Preferred Stock [Member] - Investor [Member]	Oct. 31, 2018 USD ($) shares
Number of units sold | shares	4
Proceeds from sale of preferred stock | $	$ 400