Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)

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 consolidated financial statements and the notes thereto contained elsewhere in this report and with our audited annual consolidated financial statements and related notes and other consolidated financial data (the "2025 Financial Statements") included in the Company's Annual Report on Form 10-K for the year ended December 31, 2025 (the "2025 Form 10-K"). See also "Cautionary Note Regarding Forward-Looking Statements" preceding Part I.

Overview

As of June 30, 2026, the Company's portfolio consisted of 182 construction loans with 51 borrowers and 15 development loans with 14 borrowers in 20 states.

During the quarter and six months ended June 30, 2026, the Company continued to focus on the reduction of non-interest earning assets. As of June 30, 2026, 22 loans were classified as individually evaluated with a net loan receivables balance of $4,500 compared to 29 loans and $6,192 as of December 31, 2025. In addition, as of June 30, 2026, we had three assets with a net foreclosed asset balance of $586 compared to one and $499 as of December 31, 2025.

The estimated loss on interest income resulting from non-interest earning assets for the quarter and six months ended June 30, 2026 was $152 and $300 compared to $252 and $504 for the same periods of 2025, respectively. Looking ahead, we expect the balance of non-interest earnings to remain somewhat consistent.

As of June 30, 2026, the Company's gross loan receivables balance increased by $15,751 to $77,434 as compared to $61,683 as of December 31, 2025. As of June 30, 2026, the total committed amount (not necessarily funded) increased by $42,256 to $110,687 compared to $68,431, as of June 30, 2025. The increase in June 2026 includes $11,500 commitment related to one development loan which originated in August 2025. In addition, the increases in balances relate both to an increase in loan originations and a slowing of payoffs. Originations are higher due to changes in our sales and marketing efforts, and the slowing of payoffs is likely related to regional and national economic issues, including but not limited to: long term mortgage rates for our customers' customers, soft home sales in certain regions, declining home values in certain regions and price ranges, and unwillingness of our borrowers to lower their prices to market.

While the Company continues to face risks as it relates to the economy and the homebuilding industry, management has decided to focus on the following during the remainder of 2026 and the beginning of 2027:

	1.	Continue to manage the balance of non-interest-bearing assets, which includes foreclosed real estate and individually evaluated assets.
	2.	Control SG&A expenses.
	3.	Maintain gross margin prior to loan loss.
	4.	Maintain liquidity at a level sufficient for loan originations.
	5.	Manage loan loss and impairment expense.
	6.	Increase originations and loan balances.

While some geographic markets are seeing some declines in pricing at certain price levels, generally we are not seeing reductions in selling prices as something that is creating losses for us. There is still a housing shortage, and many homeowners are not moving out of their sub 3% interest rates. The starter market and high-end market seem to be strong in most geographic locations, while the middle market seems to be weak. Mortgage interest rates for homeowners have slightly increased back up from recent lows late last year. Mortgage interest rates impact the middle market more than the higher and lower markets.

Net cash provided by operations increased $1,794 to $2,664 for the quarter ended June 30, 2026 compared to the same period of 2025. The increase in operating cash flow was due primarily to accrued interest payable.

Critical Accounting Estimates

To assist in evaluating our interim 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 2025 Form 10-K, 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, 2025, unless listed below.

Credit 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.

Change in Fair Value Assumption		June 30, 2026 Loan Loss Provision Higher/(Lower)
Increasing fair value of the real estate collateral by 35%*		$	-
Decreasing fair value of the real estate collateral by 35%**		$	8,004

* 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 non-performing and a book amount of the loan assets of $73,831.

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).

Change in Fair Value Assumption		June 30, 2026 Foreclosed Assets Higher/(Lower)
Increasing fair value of the foreclosed asset by 35%*		$	-
Decreasing fair value of the foreclosed asset by 35%**		$	205

* 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 assets.

** Assumes a book amount of the foreclosed assets of $586.

Results of Operations

Interest Spread

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

		Three Months Ended																Six Months Ended
		June 30,																June 30,
		2026								2025								2026								2025
Interest Income							*								*								*								*
Interest income on loans		$	2,905				15	%		$	1,872				15	%		$	5,291				15	%		$	3,786				15	%
Fee income on loans			1,028				6	%			816				6	%			1,885				6	%			1,482				6	%
Deferred loan fees			(108	)			(1	)%			(152	)			(1	)%			(213	)			(1	)%			(303	)			(1	)%
Fee income on loans, net			920				5	%			664				5	%			1,672				5	%			1,179				5	%
Interest and fee income on loans			3,825				20	%			2,536				20	%			6,963				20	%			4,965				20	%
Interest expense unsecured			1,023				6	%			835				7	%			1,975				6	%			1,677				7	%
Interest expense secured			600				3	%			327				3	%			1,039				3	%			611				3	%
Amortization offering costs			18				-	%			59				-	%			41				-	%			113				-	%
Interest expense			1,641				9	%			1,221				10	%			3,055				9	%			2,401				10	%
Net interest and fee income (spread)		$	2,184				11	%		$	1,315				10	%		$	3,908				11	%		$	2,564				10	%
Weighted average outstanding loan asset balance **		$	75,126							$	51,014							$	69,849							$	50,348

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

Primarily three main components impact our interest spread:

● Difference between the interest rate received (on our loan assets) and the interest rate paid (on our borrowings). Our loan originations include interest rates which are based on our cost of funds, with a minimum rate of 10.25%. Primarily, the margin is fixed at 2.5%; however, for our development loans the margin is generally fixed at 7%. This component is also impacted by the lending of money with no interest cost (common equity). For both the quarters and six months ended June 30, 2026 and 2025, interest income on loans was 15%.

We anticipate our standard margin to be 2.5% on all future construction loans and generally 7% on all development loans, which yields a blended margin of approximately 3.5%. This 2.5% margin may increase because some customers run past the standard repayment time and pay a higher rate of interest after that.

● Fee income. Our construction loan fee is 5% on the amount we commit to lend, which is amortized over the expected life of each loan. When loans terminate before their expected life, the remaining fee is recognized at that time.

Fee income on loans before deferred loan fee adjustments was 6% for the quarters and six months ended June 30, 2026 and 2025.

● Amount of non-performing assets. Generally, two types of non-performing assets negatively affect our interest spread which are individually evaluated loans and foreclosed assets.

As of June 30, 2026 and December 31, 2025, we had 22 individually evaluated loans, net of reserves of $4,500 and 29 individually evaluated loans, net of reserves of $6,192 that were not paying interest, respectively.

As of June 30, 2026 and December 31, 2025, foreclosed assets, net of reserves were $586 and $499, respectively, which resulted in a negative impact to our interest spread.

Provision for Credit Losses

Provision for credit losses (expense throughout the period) was $744 and $994 for the quarter and six months ended June 30, 2026, respectively. During the quarter and six months ended June 30,2025 the Company had a credit of $13 and expense of $120, respectively.

The allowance for credit losses as of June 30, 2026 and December 31, 2025, was $2,059 and $1,113, respectively. The increase in the allowance for credit losses is due to the increase in originations and increase in individually evaluated allowances. As of June 30, 2026, the allowance on individually evaluated loans increased to $1,580 compared to $745 as of December 31, 2025. The Company believes it has properly reserved for all foreclosed and individually evaluated loans.

Non-Interest Income

Revenue from the Sale of Land Parcels

Revenue from the sale of land parcels was $0 during the quarter and six months ended June 30, 2026 compared to $968 and $2,805 during the quarters ended June 30, 2025, respectively.

Option Fee Income

Option fee income was $0 during the quarter and six months ended June 30, 2026 compared to $120 and $274 during the quarters ended June 30, 2025, respectively.

Other Income

During the quarters ended June 30, 2026, and 2025, we consulted for several of our construction and development loan customers, which included accounting guidance. Other income related to our consulting fees were $55 and $54 for the quarters ended and $142 and $101 for the six months ended June 30, 2026 and 2025, respectively. We anticipate continuing our consulting services to our customers on an as needed basis during 2026.

Non-Interest Expense

Selling, General and Administrative ("SG&A") Expenses

The following table displays SG&A expenses:

		Six Months Ended June 30, 2026				Six Months Ended June 30, 2025
Selling, general and administrative expenses
Legal and accounting		$	194			$	239
Salaries and related expenses			1,335				1,137
Board related expenses			60				54
Advertising			69				69
Rent and utilities			33				41
Loan and foreclosed asset expenses			83				29
Travel			94				123
Other			120				202
Total SG&A		$	1,990			$	1,894

Our SG&A expense increased $96 to $1,990 during the six months ended June 30, 2026 compared to the same period of 2025. The change in SG&A was primarily due to higher salaries and related expenses, which were slightly offset by lower legal and accounting fees. The increase in salaries and related expenses related to additional employees hired during the nine months ended December 31, 2025, which resulted in higher compensation costs during the first six months of 2026.

Loss on Real Estate Investments

During the six months ended June 30, 2026, we sold one real estate investment, which resulted in a loss of $3. No loss on real estate investments was expensed during the six months ended June 30, 2025.

Loss on Foreclosed Assets

During the quarter and six months ended June 30, 2026 and 2025, we transferred one and three loan receivable assets to foreclosed assets, respectively. Losses on foreclosed assets were $75 and $4 for the quarter ended June 30, 2026 and 2025, respectively. Losses on foreclosed assets were $81 and $19 for the six months ended June 30, 2026 and 2025, respectively.

Consolidated Financial Position

Loans Receivables, net

Financing receivables are comprised of the following as of June 30, 2026 and December 31, 2025:

		June 30, 2026				December 31, 2025
Loans receivable, gross		$	77,434			$	61,683
Less: Deferred loan fees			(1,788	)			(1,516	)
Plus: Deferred origination costs			244				169
Less: Allowance for credit losses			(2,059	)			(1,113	)
Loans receivable, net		$	73,831			$	59,223

Commercial Loans - Construction Loan Portfolio Summary

We anticipate that the aggregate balance of our construction loan portfolio will increase as we originate more loan dollars than we receive in payoffs.

The following is a summary of our loan portfolio to builders for home construction loans as of June 30, 2026:

State		Number of Borrowers				Number of Loans				Value of Collateral(1)				Commitment Amount				Gross Amount Outstanding				Loan to Value Ratio(2)				Loan Fee
Arizona			1				2			$	1,350			$	934			$	605				69	%			5	%
California			2				2				5,016				3,877				2,211				77	%			5	%
Connecticut			1				3				1,670				1,162				976				70	%			5	%
Florida			13				68				34,376				24,038				15,336				70	%			5	%
Georgia			4				8				4,296				2,961				2,231				69	%			5	%
Idaho			2				6				5,442				3,373				1,667				62	%			5	%
Illinois			1				1				1,490				894				127				60	%			5	%
Louisiana			1				3				822				569				149				69	%			5	%
Michigan			2				2				1,300				821				701				63	%			5	%
Missouri			2				3				1,275				900				900				71	%			5	%
New Jersey			1				2				812				589				431				72	%			5	%
New York			1				5				2,248				1,631				823				73	%			5	%
North Carolina			8				20				8,116				5,272				4,103				65	%			5	%
Oklahoma			1				1				167				117				113				70	%			5	%
Pennsylvania			1				17				21,089				19,443				18,437				92	%			5	%
South Carolina			7				34				14,367				10,798				6,315				75	%			5	%
Texas			1				1				480				336				276				70	%			5	%
Utah			1				2				9,205				6,674				3,210				73	%			5	%
Virginia			1				2				592				362				277				61	%			5	%
Total			51				182			$	114,113			$	84,751			$	58,888				74	%(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.

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

State		Number of Borrowers				Number of Loans				Value of Collateral(1)				Commitment Amount				Gross Amount Outstanding				Loan to Value Ratio(2)				Loan Fee
Arizona			2				4			$	1,719			$	1,126			$	1,126				66	%			5	%
California			1				1				1,285				1,750				1,439				137	%			5	%
Connecticut			1				3				1,730				1,162				890				67	%			5	%
Florida			10				50				23,854				16,637				10,984				70	%			5	%
Georgia			7				10				6,448				4,228				3,068				66	%			5	%
Idaho			1				1				2,770				1,500				874				54	%			5	%
Illinois			1				1				1,500				815				606				54	%			5	%
Louisiana			2				3				825				623				594				76	%			5	%
Michigan			1				1				970				582				171				60	%			5	%
Mississippi			1				1				335				258				258				77	%			5	%
Montana			2				2				975				683				578				70	%			5	%
New Jersey			1				4				1,798				1,531				1,471				85	%			5	%
New York			1				5				2,248				1,345				488				60	%			5	%
North Carolina			8				14				6,530				4,135				1,861				63	%			5	%
Oklahoma			1				1				167				117				77				70	%			5	%
Pennsylvania			2				18				20,748				16,368				13,055				79	%			5	%
South Carolina			7				26				10,739				8,394				4,808				78	%			5	%
Tennessee			2				3				1,061				743				718				70	%			5	%
Utah			1				1				4,880				3,538				1,213				73	%			5	%
Virginia			1				2				592				362				236				61	%			5	%
Total			53				151			$	91,174			$	65,897			$	44,515				72	%(3)			5	%

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

Commercial Loans - Real Estate Development Loan Portfolio Summary

The following is a summary of our loan portfolio to builders for land development as of June 30, 2026:

States		Number of Borrowers				Number of Loans				Value of Collateral(1)				Commitment Amount				Gross Amount Outstanding				Loan to Value Ratio(2)					Interest Spread(4)
California			1				1				8,640				2,950				1,239				34	%				7	%
Florida			4				4				8,870				6,638				4,469				75	%				7	%
Georgia			1				1				490				100				99				20	%				7	%
Louisiana			1				1				150				88				89				59	%				7	%
New Jersey			1				1				348				50				50				53	%				7	%
North Carolina			1				1				394				210				210					%				7	%
Pennsylvania			1				2				12,290				13,450				9,899				109	%				varies
South Carolina			1				1				1,500				487				611				32	%				7	%
Texas			1				1				62				28				28				45	%				7	%
Utah			1				1				510				300				218				59	%				7	%
Wyoming			1				1				2,875				1,635				1,634				57	%				7	%
Total			14				15			$	36,129			$	25,936			$	18,546				72	%(3)				7	%

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

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

States		Number of Borrowers				Number of Loans				Value of Collateral(1)				Commitment Amount				Gross Amount Outstanding				Loan to Value Ratio(2)				Interest Spread(4)
Florida			2				2				550				630				350				115	%			7	%
Georgia			1				1				560				100				99				18	%			7	%
Louisiana			1				1				150				88				88				59	%			7	%
New Jersey			1				1				88				56				56				64	%			7	%
North Carolina			2				2				3,037				681				680				22	%			7	%
Pennsylvania			1				2				15,337				14,066				12,854				92	%			varies
South Carolina			1				1				1,500				487				539				32	%			7	%
Utah			2				2				3,146				1,600				868				51	%			7	%
Wyoming			1				1				2,750				1,635				1,634				59	%			7	%
Total			12				13			$	27,118			$	19,343			$	17,168				71	%(3)			7	%

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

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

		Six Months Ended June 30, 2026				Twelve Months Ended December 31, 2025
Beginning balance		$	59,223			$	49,254
Originations and modifications			35,536				59,571
Principal collections			(17,186	)			(48,205	)
Loan receivables, net transferred to foreclosed assets			(665	)			(909	)
Loan receivables, net transferred to real estate investments			(1,935	)			-
Change in allowance for credit losses			(946	)			(245	)
Change in loan fees, net			(196	)			(243	)
Ending balance		$	73,831			$	59,223

Credit Quality Information

The following table presents the Company's gross loans receivable, commitment value and ACL for each respective credit rank loan pool category as of June 30, 2026:

		Loans Receivable Gross				Commitment Value				ACL
Construction Loans Collectively Evaluated:
A Credit Risk		$	26,129			$	44,906			$	168
B Credit Risk			26,027				30,375				248
C Credit Risk			1,263				2,108				16
Individually Evaluated			5,469				7,362				1,580
Development Loans Collectively Evaluated:
A Credit Risk		$	7,720			$	11,319			$	2
B Credit Risk			10,116				14,030				43
C Credit Risk			99				100				2
Individually Evaluated			611				487				-
Total		$	77,434			$	110,687			$	2,059

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

		Loans Receivable Gross				Commitment Value				ACL
Construction Loans Collectively Evaluated:
A Credit Risk		$	23,490			$	37,488			$	122
B Credit Risk			13,799				18,830				151
C Credit Risk			828				1,099				12
Individually Evaluated			6,399				8,480				745
Development Loans Collectively Evaluated:
A Credit Risk		$	3,457			$	4,390			$	2
B Credit Risk			13,072				14,366				79
C Credit Risk			99				100				2
Individually Evaluated			539				487				-
Total		$	61,683			$	85,240			$	1,113

The following table presents the amortized cost basis of loans on non-accrual status and loans past due over 90 days non-accruing as of June 30, 2026:

		Non-accrual without ACL				Non-accrual with ACL				Accrual Loans Past Due Over 90 Days
Construction Loans:
Individually Evaluated		$	1,209			$	2,969			$	-
Development Loans:
Individually Evaluated		$	611			$	-			$	-
Total		$	1,820			$	2,969			$	-

The following table presents the amortized cost basis of loans on individually evaluated status and loans past due over 90 days non-accruing as of December 31, 2025:

		Non-accrual without ACL				Non-accrual with ACL				Accrual Loans Past Due Over 90 Days
Construction Loans:
Individually Evaluated		$	1,887			$	3,160			$	-
Development Loans:
Individually Evaluated		$	539			$	-			$	-
Total		$	2,426			$	3,160			$	-

The following is an aging of our gross loan portfolio as of June 30, 2026:

		Gross Loan				Current				Past Due				Past Due				Past Due
		Value				0 - 89				90 - 179				180 - 269				>270
Construction Loans:
A Credit Risk		$	26,129			$	26,129			$	-			$	-			$	-
B Credit Risk			26,027				26,027				-				-				-
C Credit Risk			1,263				1,263				-				-				-
Individually Evaluated			5,469				2,818				-				2,419				232
Development Loans:
A Credit Risk			7,720				7,720				-				-				-
B Credit Risk			10,116				10,116				-				-				-
C Credit Risk			99				99				-				-				-
Individually Evaluated			611				-				-				-				611
Total		$	77,434			$	74,172			$	-			$	2,419			$	843

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

		Gross Loan				Current				Past Due				Past Due				Past Due
		Value				0 - 89				90 - 179				180 - 269				>270
Construction Loans:
A Credit Risk		$	23,490			$	23,490			$	-			$	-			$	-
B Credit Risk			13,799				13,799				-				-				-
C Credit Risk			828				828				-				-				-
Individually Evaluated			6,399				5,201				618				446				134
Development Loans:
A Credit Risk			3,457				3,457				-				-				-
B Credit Risk			13,072				13,072				-				-				-
C Credit Risk			99				99				-				-				-
Individually Evaluated			539				-				539				-				-
Total		$	61,683			$	59,946			$	1,157			$	446			$	134

Below is an aging schedule of loans receivable as of June 30, 2026, on a recency basis:

		No. Loans				Unpaid Balances				%
Current loans (current accounts and accounts on which more than 50% of an original contract payment was made in the last 59 days)			190			$	74,172				95.8	%
60-89 days			-				-				-	%
90-179 days			-				-				-	%
180-269 days			4				2,419				3.1	%
>270 days			3				843				1.1	%
Subtotal			197			$	77,434				100.0	%
Interest only accounts (Accounts on which interest, deferment, extension and/or default charges were received in the last 60 days)			-			$	-				-	%
Partial Payment accounts (Accounts on which the total received in the last 60 days was less than 50% of the original contractual monthly payment. "Total received" to include interest on simple interest accounts, as well as late charges on deferment charges on pre-computed accounts.)			-			$	-				-	%
Total			197			$	77,434				100.0	%

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

		No. Loans				Unpaid Balances				%
Contractual terms (All current Direct Loans and Sales Finance Contracts with installments past due less than 60 days from due date.)			155			$	58,507				94.9	%
60-89 days			1				1,439				2.3	%
90-179 days			5				1,157				1.8	%
180-269 days			2				446				0.7	%
>270 days			1				134				0.3	%
Subtotal			164			$	61,683				100.0	%
Interest only accounts (Accounts on which interest, deferment, extension and/or default charges were received in the last 60 days)			-			$	-				-	%
Partial payment accounts (Accounts on which the total received in the last 60 days was less than 50% of the original contractual monthly payment. "Total received" to include interest on simple interest accounts, as well as late charges on deferment charges on pre-computed accounts.)			-			$	-				-	%
Total			164			$	61,683				100.0	%

Below is an aging schedule of loans receivable as of June 30, 2026, on a contractual basis:

		No. Loans				Unpaid Balances				%
Contractual Terms (All current Direct Loans and Sales Finance Contracts with installments past due less than 60 days from the due date.)			190			$	74,172				95.8	%
60-89 days			-				-				-	%
90-179 days			-				-				-	%
180-269 days			4				2,419				3.1	%
>270 days			3				843				1.1	%
Subtotal			197			$	77,434				100.0	%
Interest only accounts (Accounts on which interest, deferment, extension and/or default charges were received in the last 60 days.)			-			$	-				-	%
Partial Payment accounts (Accounts on which the total received in the last 60 days was less than 50% of the original contractual monthly payment. "Total received" to include interest on simple interest accounts, as well as late charges on deferment charges on pre-computed accounts.)			-			$	-				-	%
Total			197			$	77,434				100.0	%

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

		No. Loans				Unpaid Balances				%
Contractual terms (All current Direct Loans and Sales Finance Contracts with installments past due less than 60 days from due date.)			155			$	58,507				94.9	%
60-89 days			1				1,439				2.3	%
90-179 days			5				1,157				1.8	%
180-269 days			2				446				0.7	%
>270 days			1				134				0.3	%
Subtotal			164			$	61,683				100.0	%
Interest only accounts (Accounts on which interest, deferment, extension and/or default charges were received in the last 60 days)			-			$	-				-	%
Partial payment accounts (Accounts on which the total received in the last 60 days was less than 50% of the original contractual monthly payment. "Total received" to include interest on simple interest accounts, as well as late charges on deferment charges on pre-computed accounts.)			-			$	-				-	%
Total			164			$	61,683				100.0	%

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

Allowance for Credit Losses on Loans

The following table provides a roll forward of the allowance for credit losses and unfunded commitments as of June 30, 2026:

		Construction																Development
		A Credit Risk				B Credit Risk				C Credit Risk				Individually Evaluated				A Credit Risk				B Credit Risk				C Credit Risk				Individually Evaluated				Total
Allowance for credit losses as of December 31, 2025		$	(122	)		$	(151	)		$	(12	)		$	(746	)		$	(2	)		$	(78	)		$	(2	)		$	-			$	(1,113	)
Charge-offs			-				-				-				8				-				-				-				-				8
Recoveries			-				-				-				(11	)			-				-				-				-				(11	)
(Provision) benefit for credit losses on funded balances			(46	)			(97	)			(4	)			(831	)			-				35				-				-				(943	)
Allowance for credit losses as of June 30, 2026		$	(168	)		$	(248	)		$	(16	)		$	(1,580	)		$	(2	)		$	(43	)		$	(2	)		$	-			$	(2,059	)
Reserve for unfunded commitments as of December 31, 2025		$	(73	)		$	(55	)		$	(4	)		$	-			$	-			$	(8	)		$	-			$	-			$	(140	)
(Provision) benefit for credit losses on unfunded commitments			(48	)			13				(6	)			-				(1	)			(9	)			-				-				(51	)
Reserve for unfunded commitments as of June 30, 2026		$	(121	)		$	(42	)		$	(10	)		$	-			$	(1	)		$	(17	)		$	-			$	-			$	(191	)

The following table provides a roll forward of the allowance for credit losses and unfunded commitments as of June 30, 2025:

		Construction																Development
		A Credit Risk				B Credit Risk				C Credit Risk				Individually Evaluated				A Credit Risk				B Credit Risk				C Credit Risk				Individually Evaluated				Total
Allowance for credit losses as of December 31, 2024		$	(150	)		$	(28	)		$	(13	)		$	(658	)		$	(1	)		$	-			$	(18	)		$	-			$	(868	)
Charge-offs			-				-				-				152				-				-				-				-				152
Recoveries			-				-				-				(3	)			-				-				-				-				(3	)
(Provision) benefit for credit losses on funded balances			23				(32	)			4				(133	)			-				-				8				-				(130	)
Allowance for credit losses as of June 30, 2025		$	(127	)		$	(60	)		$	(9	)		$	(642	)		$	(1	)		$	-			$	(10	)		$	-			$	(849	)
Reserve for unfunded commitments as of December 31, 2024		$	(65	)		$	(10	)		$	(12	)		$	-			$	(1	)		$	-			$	-			$	-			$	(88	)
(Provision) benefit for credit losses on unfunded commitments			10				(17	)			3				-				1				-				-				-				(3	)
Reserve for unfunded commitments as of June 30, 2025		$	(55	)		$	(27	)		$	(9	)		$	-			$	-			$	-			$	-			$	-			$	(91	)

Allowance for Credit Losses on Unfunded Loan Commitments

Unfunded commitments to extend credit, which have similar collateral, credit and market risk to our outstanding loans, were $33,254 and $23,557 as of June 30, 2026 and December 31, 2025, respectively. The ACL is calculated at an estimated loss rate on the total commitment value for loans in our portfolio. The ACL on unfunded commitments is calculated as the difference between the ACL on commitment value less the estimated loss rated and the total gross loan value for loans in our portfolio. As of June 30, 2026, and December 31, 2025, the ACL for unfunded commitments was $191 and $140, respectively, and we had no off-balance sheet transactions, nor do we currently have any such arrangements or obligations.

Loan Portfolio by Year of Origination

The table below presents the Company's loan portfolio by year of origination, category, and credit quality indicator as of June 30, 2026. Loans acquired are shown in the tables by origination year.

		2026				2025				2024				2023				2022				Prior				Total
Construction loans Collectively Evaluated:
A Credit Risk		$	11,135			$	10,635			$	1,138			$	2,459			$	762			$	-			$	26,129
B Credit Risk			4,768				13,671				5,939				636				1,013				-				26,027
C Credit Risk			127				-				1,136				-								-				1,263
Individually Evaluated			-				2,811				2,012				526				120				-				5,469
			16,030				27,117				10,225				3,621				1,895				-				58,888
Current Period Charge Offs			-				-				-				(8	)			-				-				(8	)
Development Loans Collectively Evaluated:
A Credit Risk			5,736				1,895				89				-				-				-				7,720
B Credit Risk			-				8,555				-								-				1,561				10,116
C Credit Risk			-				-				-				99				-								99
Individually Evaluated			-				-				-				-				-				611				611
			5,736				10,450				89				99				-				2,172				18,546
Current Period Charge Offs			-				-				-				-				-				-				-
Total		$	21,766			$	37,567			$	10,314			$	3,720			$	1,895			$	2,172			$	77,434

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

		2025				2024				2023				2022				2021				Prior				Total
Construction loans Collectively Evaluated:
A Credit Risk		$	15,907			$	3,786			$	2,277			$	939			$	581			$	-			$	23,490
B Credit Risk			7,228				4,938				620				1,013				-				-				13,799
C Credit Risk			-				827				-				-				-				-				827
Individually Evaluated			2,323				2,429				1,050				597				-				-				6,399
			25,458				11,980				3,947				2,549				581				-				44,515
Current Period Charge Offs			-				-				-				(125	)			(27	)			(670	)			(822	)
Development Loans Collectively Evaluated:
A Credit Risk			3,020				438				-				-				-				-				3,458
B Credit Risk			11,602				-				-				-				-				1,470				13,072
C Credit Risk			-				-				99				-				-				-				99
Individually Evaluated			-				-				-				-				-				539				539
			14,622				438				99				-				-				2,009				17,168
Current Period Charge Offs			-				-				-				-				-				-				-
Total		$	40,080			$	12,418			$	4,046			$	2,549			$	581			$	2,009			$	61,683

Concentration of Risks

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of loans receivable. Our concentration risks for our top three customers listed by geographic real estate market are summarized in the table below:

June 30, 2026

December 31, 2025

Percent of

Percent of

Borrower

Loan

Borrower

Loan

City

Commitments

City

Commitments

Highest concentration risk

Pittsburgh, PA

30

%

Pittsburgh, PA

36

%

Second highest concentration risk

Central and Southwest FL

7

%

Central and Southwest, FL

7

%

Third highest concentration risk

St. George, UT

6

%

St. George, UT

6

%

Foreclosed Assets

Below is a roll forward of foreclosed assets:

		Six Months Ended June 30, 2026				Year Ended December 31, 2025				Six Months Ended June 30, 2025
Beginning balance		$	499			$	1,356			$	1,356
Foreclosed assets transferred from loans receivables, net			665				909				909
Additions for construction in foreclosed assets			5				96				92
Sale proceeds			(502	)			(1,657	)			(824	)
Loss on foreclosed assets			(81	)			(205	)			(19	)
Ending balance		$	586			$	499			$	1,514

Segment Reporting

Effective January 1, 2026, the Company changed their reportable segments to a single reportable segment. Following the sale of 339 Justabout Land Company on August 6, 2025, which was a reportable segment of the Company, the Company no longer has any separately reportable segments.

The Company's one reportable segment generates income principally from interest on loans, as well as from fees charged in connection with various lending services. The chief operating decision maker ("CODM") is the Chief Executive Officer, who for the purposes of assessing performance, making operating decisions, and allocating Company resources, regularly reviews net income as reported in the consolidated statements of operations. The level of disaggregation and amounts of significant segment income and expenses, such as interest and fee income, interest expense, provision for credit losses, salaries and employee benefits expense and other items, that are regularly provided to the CODM are the same as those presented in the accompanying consolidated statements of operations. Likewise, the measure of segment assets is reported on the accompanying consolidated balance sheets as total assets.

Information about reportable segments, and reconciliations of such information to the Interim Consolidated Financial Statements are described below.

Reconciliation of Consolidated Statements of Operations:

Shepherd's Finance, LLC

Interim Consolidated Statements of Operations

For the Quarter Ended June 30, 2025

(in thousands of dollars)		339 Justabout Land Company, LLC				Shepherds Finance, LLC				Total
Net Interest and Fee Income
Interest and fee income on loans		$	-			$	2,536			$	2,536
Interest expense:
Interest related to secure borrowings			-				327				327
Interest related to unsecured borrowings			-				894				894
Interest expense			-				1,221				1,221
Net interest and fee income			-				1,315				1,315
Less: Provision for credit losses			-				(13	)			(13	)
Net interest and fee income after provision for credit losses			-				1,328				1,328
Non-Interest Income
Revenue from the sale of land parcels			968				-				968
Option fee income			120				-				120
Other income			-				54				54
Total non-interest income			1,088				54				1,142
Income before non-interest expense			1,088				1,382				2,470
Non-Interest Expense
Cost on the sale of land parcels			968				-				968
Selling, general and administrative			-				957				957
Depreciation and amortization			-				20				20
Loss on foreclosed assets			-				4				4
Total non-interest expense			968				981				1,949
Net income		$	120			$	401			$	521

Shepherd's Finance, LLC

Interim Consolidated Statements of Operations

For the Six Months Ended June 30, 2025

(in thousands of dollars)		339 Justabout Land Company, LLC				Shepherds Finance, LLC				Total
Net Interest and Fee Income
Interest and fee income on loans		$	-			$	4,965			$	4,965
Interest expense:			-
Interest related to secure borrowings			-				611				611
Interest related to unsecured borrowings			-				1,791				1,791
Interest expense			-				2,401				2,401
Net interest and fee income			-				2,564				2,564
Less: Provision for credit losses			-				120				120
Net interest and fee income after provision for credit losses			-				2,444				2,444
Non-Interest Income
Revenue from the sale of land parcels			2,805				-				2,805
Option fee income			274				-				274
Other income			-				101				101
Total non-interest income			3,079				101				3,180
Income before non-interest expense			3,079				2,545				5,624
Non-Interest Expense
Cost on the sale of land parcels			2,805				-				2,805
Selling, general and administrative			-				1,894				1,894
Depreciation and amortization			-				40				40
Loss on foreclosed assets			-				19				19
Total non-interest expense			2,805				1,953				4,758
Net income		$	274			$	592			$	866

Reconciliation of total assets:

(in thousands of dollars)		339 Justabout Land Company, LLC				Shepherds Finance, LLC				Elimination				Total
Total assets as of December 31, 2025		$	-			$	68,536			$	-			$	68,536

Real Estate Investments

During the quarter and six months ended June 30, 2026, the Company purchased five real estate development lots for $1,960 and sold one asset for sale proceeds of $169 and a loss on sale of $3, respectively.

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

		Six Months Ended June 30, 2026				Year Ended December 31, 2025				Six Months Ended June 30, 2025
Beginning balance		$	169			$	13,529			$	13,529
Proceeds from disposal of 339			-				(9,876	)			-
Gain on sale of real estate investments			-				276				-
Loss on sale of real estate investments			(3	)			-				-
Proceeds from the sale of real estate investments			(169	)			(4,956	)			(2,805	)
Real estate investments transferred from loan receivables, net			1,935				-				-
Investments in real estate assets			25				-				-
Additions for construction/development			4				1,196				870
Ending balance		$	1,961			$	169			$	11,594

Capitalized Interest Activity

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

		June 30, 2026				June 30, 2025
Capitalized interest		$	1			$	463
Cost of funds			9.39	%			10.01	%

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

Refundable Prepaid Interest

Below is a roll forward of refundable prepaid interest:

		Six Months Ended June 30, 2026				Year Ended December 31, 2025				Six Months Ended June 30, 2025
Beginning balance		$	965			$	353			$	353
Additions from Pennsylvania loans			618				1,198				-
Additions from other loans			754				1,312				935
Interest, fees, principal or repaid to borrower			(1,351	)			(1,898	)			(509	)
Ending balance		$	986			$	965			$	779

Related Party Borrowings

As of June 30, 2026 and December 31, 2025, the Company had $6 and $26 borrowed against its lines of credit from affiliates, respectively, with a total limit of $2,500 as of June 30, 2026 and December 31, 2025.

Borrowings

Secured Borrowings-Lines of Credit

Lines of Credit with Mr. Wallach and His Affiliates

As of June 30, 2026 and December 31, 2025, the Company had $6 and $26 borrowed against its lines of credit from affiliates, respectively, with a total limit of $2,500 as of June 30, 2026 and December 31, 2025.

United Lines of Credit

In January 2025, we established a revolving line of credit with United Bank for $2,275, maturing in January 2027. The interest rate on this line of credit is 5.5%. As of June 30, 2026 and December 31, 2025, the amount due on this line of credit was $2,275.

In January 2025, we established a revolving line of credit with United Bank for $725, with an expiration date of January 2040. The interest rate on this line of credit is 7.5%. As of June 30, 2026 and December 31, 2025, the amount due on this line of credit was $725. The Company's office in Jacksonville, FL, is used as collateral for this line of credit.

Liberty Savings Bank Line of Credit

In December 2025, we established a revolving line of credit with Liberty Savings Bank for $5,000, which may be terminated upon 90 days' written notice. The interest rate on this line of credit varies and is indexed to the current Prime rate plus 0.5%. As of June 30, 2026 and December 31, 2025, the Company had borrowed $5,000 and $0 against the revolving line of credit, respectively.

Loan Purchase and Sale Agreements

As of June 30, 2026 and December 31, 2025, there is no limit on the maximum principal amount under the Builder Finance loan purchase and sale agreement, and the outstanding principal under such agreement was $2,024 and $1,459, respectively, with an interest rate of 8.99% for both periods. The agreement has a term of 12 months and renews automatically for an additional 12 months unless either party provides written notice of intent not to renew at least six months prior to the end of the term.

As of June 30, 2026 and December 31, 2025, the maximum principal amount under the S.K. Funding loan purchase and sale agreement was $6,500 for both period end dates. Borrowings up to $1,400 over the principal amount may be unsecured. There were $0 of unsecured borrowings as of both June 30, 2026 and December 31, 2025, with an interest rate of 10% for both periods. The agreement has a term of 12 months and renews automatically for an additional 12 months unless either party provides written notice of intent not to renew at least six months prior to the end of the term. Additionally, the Company executed an amendment to the agreement with S.K. Funding that allowed the Company to sell participating interests in loans. The balance of the portion sold on these loans is removed from the balance sheet of the Company, and interest on the portion sold is not reflected in its statement of operations. As of June 30, 2026 and December 31, 2025, the loan receivable principal balance sold under this agreement was $1,400.

Secured Deferred Financing Costs

The Company had secured deferred financing costs of $11 and $12 as of June 30, 2026 and December 31, 2025, respectively.

Secured Borrowings Secured by Loan Assets

Borrowings secured by loan assets are summarized below:

		June 30, 2026								December 31, 2025
		Book Value of Loans which Served as Collateral				Due from Shepherd's Finance to Loan Purchaser or Lender				Book Value of Loans which Served as Collateral				Due from Shepherd's Finance to Loan Purchaser or Lender
Loan Purchaser
Builder Finance		$	6,750			$	2,024			$	1,813			$	1,458
S.K. Funding			14,200				6,500				16,867				6,500
Lender
Shuman			-				-				210				125
Jeff Eppinger			6,913				3,000				5,859				200
R. Scott Summers			1,865				928				2,731				903
John C. Solomon			857				563				1,057				563
Judith Swanson			11,946				7,000				12,990				6,407
Liberty Savings Bank			6,003				5,001				-				-
Total		$	48,534			$	25,016			$	41,527			$	16,156

Unsecured Borrowings

Unsecured Notes through the Public Offering ("Notes Program")

The effective interest rate on borrowings through our Notes Program as of June 30, 2026 and December 31, 2025, was 8.95% and 8.90%, respectively.

We generally offer four durations at any given time, ranging from 12 to 48 months from the date of issuance. All Notes sold in our fifth public offering, which was declared effective on April 30, 2026, include a mandatory early redemption option, provided that the proceeds are reinvested. In our other historical offerings, there were limited rights of early redemption. Our 36-month Note sold in our third public note offering had a mandatory early redemption option, subject to certain conditions.

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

		Six Months Ended June 30, 2026				Year Ended December 31, 2025				Six Months Ended June 30, 2025
Gross Notes outstanding, beginning of period		$	22,164			$	19,968			$	19,968
Notes issued			1,479				7,612				1,632
Note repayments / redemptions			(1,558	)			(5,416	)			(1,921	)
Gross Notes outstanding, end of period		$	22,085			$	22,164			$	19,679
Less deferred financing costs, net			(278	)			(229	)			(89	)
Notes outstanding, net		$	21,807			$	21,935			$	19,590

The following is a roll forward of deferred financing costs related to the Notes Program:

		Six Months Ended June 30, 2026				Year Ended December 31, 2025				Six Months Ended June 30, 2025
Deferred financing costs, beginning balance		$	1,302			$	1,060			$	1,060
Additions			90				242				52
Disposals			(693	)			-				-
Deferred financing costs, ending balance			699				1,302				1,112
Less accumulated amortization			(421	)			(1,073	)			(1,023	)
Deferred financing costs, net		$	278			$	229			$	89

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

		Six Months Ended June 30, 2026				Year Ended December 31, 2025				Six Months Ended June 30, 2025
Accumulated amortization, beginning balance		$	1,073			$	910			$	910
Additions			41				163				113
Disposals			(693	)			-				-
Accumulated amortization, ending balance		$	421			$	1,073			$	1,023

Other Unsecured Debts

The following table is a detail of other unsecured debts are detailed below:

Loan		Maturity Date		Interest Rate(1)				June 30, 2026				December 31, 2025
Unsecured Line of Credit		July 2026			10.0	%		$	-			$	592
Unsecured Line of Credit		April 2027			10.0	%			500				500
Unsecured Line of Credit		July 2026			9.75	%			500				-
Unsecured Line of Credit - Senior Subordinated		January 2027			10.0	%			750				-
Subordinated Promissory Note		July 2026			11.0	%			1,000				-
Subordinated Promissory Note		February 2027			9.0	%			600				600
Subordinated Promissory Note		March 2028			9.75	%			500				500
Subordinated Promissory Note		December 2027			10.0	%			20				20
Subordinated Promissory Note		January 2029			9.0	%			15				15
Subordinated Promissory Note		February 2027			8.5	%			200				200
Subordinated Promissory Note		March 2027			10.0	%			26				26
Subordinated Promissory Note		November 2026			9.5	%			200				200
Subordinated Promissory Note		March 2027			9.5	%			1,000				1,000
Subordinated Promissory Note		September 2027			10.0	%			108				108
Subordinated Promissory Note		July 2028			8.5	%			100				100
Subordinated Promissory Note		August 2026			8.0	%			291				291
Senior Subordinated Promissory Note		July 2026(2)			1.0	%			740				740
Junior Subordinated Promissory Note		July 2026(2)			20.0	%			460				460
Senior Subordinated Promissory Note		October 2028(2)			1.0	%			1,072				1,072
Junior Subordinated Promissory Note		October 2028(2)			20.0	%			666				666
Subordinated Promissory Note		March 2029			10.0	%			1,200				1,200
Subordinated Promissory Note		May 2027			10.0	%			97				97
Subordinated Promissory Note		November 2027			10.0	%			120				120
Subordinated Promissory Note		April 2028			10.0	%			149				149
Subordinated Promissory Note		April 2029			11.0	%			2,000				2,000
Subordinated Promissory Note		October 2027			8.5	%			200				200
Subordinated Promissory Note		October 2028			10.0	%			1,043				1,043
Subordinated Promissory Note		December 2028			10.0	%			149				149
Subordinated Promissory Note		October 2026			10.0	%			1,142				1,142
Subordinated Promissory Note		April 2029			9.0	%			301				301
Subordinated Promissory Note		December 2029			8.0	%			248				248
Subordinated Promissory Note		October 2028			8.5	%			100				100
Subordinated Promissory Note		March 2029			6.5	%			442				-
Subordinated Promissory Note		January 2030			8.0	%			15				-
Subordinated Promissory Note		February 2031			11.0	%			400				-
Subordinated Promissory Note		February 2031			11.0	%			300				-
Subordinated Promissory Note		February 2031			11.0	%			365				-
Subordinated Promissory Note		February 2031			11.0	%			400				-
Subordinated Promissory Note		February 2031			11.0	%			300				-
Subordinated Promissory Note		March 2031			11.0	%			500				-
Subordinated Promissory Note		March 2031			11.0	%			497				-
								$	18,716			$	13,839

(1)	Interest rate per annum, based upon actual days outstanding and a 365/366-day year.
(2)	These notes were issued to the same holder and, when calculated together, yield a blended rate of 10% per annum.

Series C Preferred Equity

Series C preferred equity distributions, liquidation rights and conversion features are determined based on the undiscounted value, which was $9,363 and $9,085 as of June 30, 2026 and December 31, 2025, respectively.

The following table shows the earliest conversion options for investors in Series C preferred equity as of June 30, 2026. Amounts are presented at redeemable values, which are prior to discounts reflected in the carrying amounts:

Year Maturing		Total Amount Convertible
Currently convertible (requires notice of 12 months)		$	3,498
2027			309
2028			1,381
2029			206
2030 and thereafter			3,969
Total		$	9,363

Priority of Borrowings

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

		Priority Rank				June 30, 2026				December 31, 2025
Borrowing Source
Purchase and sale agreements and other secured borrowings			1			$	28,015			$	18,431
Secured line of credit from affiliates			2				6				26
Unsecured line of credit (senior)			3				750				-
Other unsecured debt (senior subordinated)			4				1,812				1,812
Unsecured Notes through our public offering, gross			5				22,085				22,164
Other unsecured debt (subordinated)			5				15,028				10,901
Other unsecured debt (junior subordinated)			6				1,126				1,126
Less deferred financing fees							(289	)			(241
Total						$	68,533			$	54,219

Liquidity and Capital Resources

Our primary liquidity management objective is to meet expected cash flow needs while continuing to service our business and customers. As of June 30, 2026 and December 31, 2025, we had combined loans outstanding of 197 and 161, respectively. In addition, loans receivables, gross were $77,434 and $61,683 as of June 30, 2026 and December 31, 2025, respectively.

Unfunded commitments to extend credit, which have similar collateral, credit and market risk to our outstanding loans, were $33,254 and $23,557 as of June 30, 2026, and December 31, 2025, respectively. For off-balance-sheet credit exposures, the estimate of expected credit losses has been presented as a liability on the balance sheet as of June 30, 2026. Other than unfunded commitments, we had no off-balance sheet transactions, nor do we currently have any such arrangements or obligations.

We anticipate the Company's originations to be higher in 2026 due to an increase in marketing and sales efforts.

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

Source of Liquidity		As of June 30, 2026				As of December 31, 2025
Secured debt, net of deferred financing costs		$	28,010			$	18,445
Unsecured debt, net of deferred financing costs		$	40,523			$	35,774
Members' Capital		$	8,884			$	8,211
Cash and cash equivalents		$	5,316			$	6,015

As of June 30, 2026 and December 31, 2025, cash, cash equivalents and restricted cash were $5,316 and $6,015, respectively.

Secured debt, net of deferred financing costs increased $9,565 to $28,010 as of June 30, 2026, compared to $18,445 for the year ended December 31, 2025. The increase in secured debt was due primarily to borrowings to partially fund our increase in loan assets.

Unsecured debt, net of deferred financing costs increased $4,749 to $40,523 as of June 30, 2026, compared to $35,774 as of December 31, 2025. The increase in unsecured debt was due primarily to borrowings to partially fund our increase in loan assets.

Members' Capital increased $673 to $8,884 as of June 30, 2026, compared to $8,211 as of December 31, 2025.

We anticipate equity to increase during the last six months of 2026, mostly through retained earnings. If we cannot maintain our equity, we will rely more heavily on raising additional funds through the Notes Program.

The total amount of our debt maturing as of June 30, 2026 is $32,145 which consists of secured borrowings of $25,021 and unsecured borrowings of $7,124.

Secured borrowings maturing as of June 30, 2026 significantly consists of loan purchase and sale agreements with two loan purchasers (Builder Finance and S. K. Funding) and secured lines of credit with several lenders. These secured borrowings are listed as maturing over the next 12 months due primarily to their related demand loan collateral.

The following are secured facilities listed as principal maturing in 2026 with actual maturity and renewal dates:

	●	Swanson - $7,000 automatically renews unless notice given;
	●	S. K. Funding - $4,500 due July 2027 and automatically renews unless notice is given;
	●	S. K. Funding - $2,000 of the total due January 2027;
	●	Builder Finance, Inc - $2,024 with no expiration date;
	●	Liberty Savings Bank - $5,001 no expiration date and may terminate upon 90 days of written notice
	●	New LOC Agreements - $4,490 generally one-month notice and nine months to reduce principal balance to zero;
	●	Line of credits with affiliates - $6 and due upon demand.

Unsecured borrowings due by December 31, 2026, consist of Notes issued pursuant to the Notes Program and other unsecured debt of $1,541 and $5,583, respectively. To the extent that Notes issued pursuant to the Notes Program are not reinvested upon maturity, we will be required to fund the maturities, which we anticipate funding through the issuance of new Notes in our Notes Program. During the last twelve months, approximately 88% of our Notes Program holders reinvested upon maturity. The 36-month Note sold in our public note offerings had a mandatory early redemption option, subject to certain conditions. Historically, our other unsecured debt has renewed. For more information on other unsecured borrowings, see Note 7 - Borrowings. If other unsecured borrowings are not renewed in the future, we anticipate funding such maturity 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 an increase in our assets during the remainder of 2026 due to an increase in our marketing efforts. We are prepared for an increase in assets through the net sources and uses (12-month liquidity) listed above as well as future capital from debt, preferred equity, and regular equity. Although our secured debt is almost entirely listed as current 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 has a positive impact on our operations. When we lend initially, we are lending a percentage of a home's expected value, based on historical sales. If those estimates prove to be low (in an inflationary market), the percentage we loaned of the value actually decreases, reducing potential losses on defaulted loans. The opposite is true in a deflationary housing price market. It is our opinion that values are well above average in many of the housing markets in the U.S. today, and our lending against these values is having more risk than prior years. In some of our markets, prices of homes sold are dropping. This is both because some homes are selling for less and because the average home selling is smaller (more affordable). However, we anticipate significant declines in home values in some markets over the next 12 months.

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. Housing starts have been in a tight range over the last year, and generally payoffs appear stable. 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 5%, 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.

However, we note that one difference between the current housing cycle compared to prior cycles is that the supply of used homes in the market is low due to the number of homes owned with lower interest rates. Due to the new data on used homes in the market, this makes understanding future results an issue for the Company. Meanwhile, as housing cycles start to decline, foreclosures increase and with their initial interest rate at 3% or less if started within the last 24 months, foreclosures may not have as large of an impact.

Below is a chart showing three-year U.S. treasury rates and 30-year fixed mortgage rates. The U.S. treasury rates are used by us here to approximate CD rates. Both the short- and long-term interest rates have risen slightly to historically normal levels.

Housing prices are also generally correlated with housing starts; therefore, increases in housing starts usually coinciding with increases in housing values, and the reverse is generally true. Looking at the chart below, housing starts have fallen back from the pandemic high; however, since then the change has remained relatively flat.

Below is a graph showing single family housing-starts from 2000 through today which is provided by Federal Reserve Economic Data ("FRED):

Off-Balance Sheet Arrangements

As of June 30, 2026, we had no off-balance sheet transactions, nor do we currently have any such arrangements or obligations.