Shepherd’s Finance, LLC

Company overview

• Name: Shepherd’s Finance, LLC (name change effective Dec 2, 2011; Delaware LLC since Mar 29, 2012)
• Location: Jacksonville, Florida
• Website: www.shepherdsfinance.com (website content not incorporated by reference)
• Business: Commercial lending to participants in residential construction and development; loan origination, servicing and real estate-secured lending.
• Subsidiaries: Previously owned two consolidating subsidiaries (339 Justabout Land Company and Builder’s Assistance). 339 Justabout Land Co. LLC was sold on Aug 6, 2025; Builder’s Assistance remains a principal operating segment.

Core lines of business

1) Construction and related real estate lending (primary business)

• Purpose: Extend and service commercial loans to small-to-medium sized homebuilders for lot purchases, home construction, land purchase and development, and rehabilitation of older homes.
• Collateral: Mortgages on underlying real estate (homes, lots, land), commonly first-priority liens; occasionally second or other liens.
• Typical borrower: Builders with deposits, cash flow and project plans who often do not meet traditional bank underwriting standards (the company applies more flexible underwriting).
• Portfolio characteristics (as of 12/31/2025):
  • Construction/rehab loan portfolio:
    • Total borrowers: 53
    • Number of loans: 151
    • Value of collateral: $91,174,000
    • Commitment amount: $65,897,000
    • Gross amount outstanding: $44,515,000
    • Weighted average loan-to-value (LTV): 72%
    • Loan fees: 5%
    • Geographic dispersion across multiple states, including Florida, North Carolina and Pennsylvania
  • 2024 comparison:
    • Total borrowers: 59
    • Total loans: 177
    • Value of collateral: $99,462,000
    • Commitment: $67,391,000
    • Gross outstanding: $48,004,000
    • Weighted average LTV: 68%
    • Loan fees: 5%
  • Land development loans:
    • 2025: 12 borrowers, 13 loans
    • Value of collateral: $27,118,000
    • Commitment: $19,343,000
    • Gross outstanding: $17,168,000
    • Weighted average LTV: 71%
    • Interest spread (where disclosed): 7% (varies by state)
    • States involved include Florida, Georgia, New Jersey, North Carolina, Pennsylvania, South Carolina, Utah and Wyoming
• Funding sources: Available cash, borrowings, loan purchase/sale agreements, proceeds from the Notes Program, equity and net operating cash flow.

2) Acquisition and debt purchases

• Purchases of defaulted unsecured debt from suppliers to homebuilders, defaulted secured debt from financial institutions at discounts, and real estate acquisitions to support lending or improve collateral positions.

3) Builder’s Assistance (support services for builders)

• Services: Accounting-related services (data entry, journal entries, cash balancing, purchase orders, budget control, financial statements) excluding tax services, plus consulting on gross profit analysis and cash management to help builders grow profit and production capacity.

2025 corporate activity

• On Feb 15, 2024 the company acquired 339 Justabout Land Co. LLC for $9,122,000 (cash plus intercompany debt). On Aug 6, 2025, 339’s assets were sold to Benjamin Marcus Homes (BMH) for $9,876,000.
• 339 Justabout Land Co. LLC engaged in lot development activities associated with Phase 1 and Phase 2 lots while owned by the company.

Geography and customer concentration

• Geographic reach: Lending and real estate activities across 21 states as of 12/31/2025.
• Customer concentration (as of 12/31/2025):
  • Hoskins Group (Benjamin Marcus Homes and 339 Justabout Land Co., LLC): ~35% of outstanding loan commitments
  • Second-largest customer (Central and Southwest Florida): ~7% of outstanding loan commitments
• Governance note: Gregory L. Sheldon (independent manager) also lends money to Hoskins Group, creating a potential advisory conflict of interest.

People and governance

• CEO and Chairman: Mr. Wallach
• Selected executives:
  • Barbara L. Harshman — Executive Vice President of Operations
  • Catherine Leslie — Chief Financial Officer
  • Mark Reynolds — Executive Vice President of Sales
• Employees: 25 as of 12/31/2025 (4 are lending representatives)
• Equity ownership (as of 12/31/2025):
  • CEO owns ~91.78% of common equity
  • Independent managers own ~1.17% each of common equity
  • One member owns ~15.94% of Series C cumulative preferred units
  • CEO and related family interests hold additional interests in Series C and common equity

Financial position and liquidity (highlights)

• Loan assets, net: $59,223,000
• Development loan assets: $17,168,000
• Real estate investments: $169,000
• Unfunded commitments to builders: $23,557,000
• Total debt (as of 12/31/2025): approximately $54,219,000, including lines of credit, loan purchase/sale agreements and other secured debt
  • Outstanding on lines of credit: $2,540,000
  • Outstanding under loan purchase/sale agreements: ~$7,959,000
  • Affiliate lines of credit (Wallach LOCs): $1,500,000 total capacity; $26,000 outstanding on Wallach LOC; $1,224,000 remaining availability
  • Wallach affiliate LOC interest: Prime rate + 3% (9.75% as of 12/31/2025)
  • Notes due in 2026: about $2,383,000
• Equity to loan assets: ~14% as of 12/31/2025 (18% in 2024). The company targets approximately 15% equity-to-loan-assets.
• Liquidity channels: Notes program proceeds, lines of credit, loan repayments and operating cash flow. The company does not maintain a sinking fund for Notes.

Portfolio risk and risk management

• Concentration risk: Heavy focus on construction and development lending to residential real estate, which is cyclical and sensitive to housing starts, interest rates and local market conditions.
• Collateral risk: Loans secured by real estate that could be impaired by declines in collateral values.
• Market and liquidity risk: Real estate loans are relatively illiquid and the company depends on debt facilities and notes issuance for liquidity.
• Operational risk: Underwriting standards are more flexible than traditional lenders, and growth will require investment in technology and systems to manage scale.
• Compliance and regulatory risk: The company is not regulated as a bank and faces investment company act considerations and SOX 404 control matters.
• Cybersecurity and fraud: The company maintains a cybersecurity program with independent reviews and relies on third-party service providers, exposing it to fraud and payment-related risks.

Use of proceeds (Notes program)

• Net offering proceeds are intended to fund lending opportunities, redeem or service existing obligations and support general corporate purposes. Management evaluates investment opportunities as they arise.

Summary

Shepherd’s Finance, LLC focuses on short- to medium-term secured real estate lending to homebuilders and developers, supplemented by distressed debt and real estate investments and a Builder’s Assistance services arm. The company operates across a broad geographic footprint but carries customer concentration risk—most notably exposure to the Hoskins Group. As of 12/31/2025 it employed 25 people, held $59.2 million in loan assets (net) and $17.2 million in development loans, and maintained unfunded commitments and leverage through lines of credit and loan purchase agreements. The Notes program is a primary funding channel used alongside other borrowing sources.