2. Summary of Significant Accounting Policies

Principles of Consolidation

These consolidated financial statements include the consolidated accounts of the Company’s subsidiary and reflect all adjustments (all of which are normal recurring accruals) which are, in the opinion of management, necessary for a fair presentation of the consolidated financial position, operating results, and cash flows for the periods. All intercompany balances and transactions have been eliminated.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. It is reasonably possible that market conditions could deteriorate, which could materially affect our consolidated financial position, results of operations and cash flows. Among other effects, such changes could result in the need to increase the amount of our allowance for credit losses and impair our foreclosed assets.

Operating Segments

Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic (“ASC”) 280, Segment Reporting, requires that the Company report financial and descriptive information about reportable segments and how these segments were determined. We determine the allocation of resources and performance of business units based on net income. Segments are identified and aggregated based on products sold or services provided. Based on these factors, we have determined that the Company’s operations were in two segments prior to the sale of 339 Justabout Land Company, LLC, as further described below. The segments were commercial lending and the development of land parcels. Information about reportable segments, and reconciliations of such information to the Consolidated Financial Statements are described below.

On August 6, 2025, the Company completed the sale of all assets held by 339 Justabout Land Company, LLC (“339”), a business segment, to the principal owners of the Company’s largest customer, Benjamin Marcus Homes (“BMH” or “Buyer”), for a sales price of $9,876. The assets sold consisted primarily of undeveloped lots, which had a net book value of $9,683 at the time of the sale. The sale includes the settlement of $725 in option fees receivable from BMH at the time of closing and a reduction of $240 in deferred revenue associated with prior deposits from BMH for lot purchases from 339. The Company recognized a gain of $193 on the sale.

Concurrent with the sale of 339, the Company amended its existing credit agreement with BMH to increase the total loan commitment to $13,450. At closing, BMH borrowed $11,416 under the amended agreement. Of this amount, $9,876 was used to fund the purchase of 339, $1,000 was allocated to a refundable prepaid interest account related to the increased loan commitment, and $54 was used to settle outstanding payables to the Company for accounting services. The balance on this credit agreement is presented in loans receivable in the accompanying Consolidated Balance Sheet as of December 21, 2025. All assets transferred to BMH in connection with the sale of 339 sale are pledged as collateral under the amended credit agreement.

Revenue Recognition

Interest income is recognized on an accrual basis. The accrual of interest is generally discontinued on all loans where the contractual payment of principal or interest is past due 90 days or more or the loan is demanded unless management deems the loan an exception, All interest accrued but not collected for loans that are placed on nonaccrual or charged off is reversed against interest income. Interest received on nonaccrual loans is applied against principal. Interest on accruing individually evaluated loans is recognized if such loans do not meet the criteria for nonaccrual status. Our construction loans charge a fee on the amount that we commit to lend, which is amortized over the expected life of each of those loans.

Advertising

Advertising costs are expensed as incurred and are included in selling, general and administrative. Advertising expenses were $129 and $82 for the years ended December 31, 2025 and 2024, respectively.

Cash and Cash Equivalents

Management considers highly liquid investments with original maturities of three months or less to be cash equivalents. The Company maintains its cash account in a deposit account which, at times, may exceed federally insured limits. The Company monitors this bank account and does not expect to incur any losses from such an account.

Restricted Cash

We maintain certain cash balances that are restricted as to withdrawal or use. Our restricted cash is comprised of cash held as collateral for a line of credit. We report restricted cash as a separate line in the consolidated balance sheet.

Certificates of Deposit, Restricted

We maintain an investment through the Certificate of Deposit Account Registry Service. This investment is required as part of line of credit with a bank and is restricted as to withdrawal in direct correlation with the outstanding balance in the related line of credit. This investment is facilitated by the lending bank for the line of credit and is reported as a separate line on the balance sheet.

Fair Value Measurements

Fair value is 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. Fair value measurements are not adjusted for transaction costs. The Company uses a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

Loans Receivable

Loans are stated at the amount of unpaid principal, net of any allowances for credit losses, and adjusted for the net unrecognized portion of direct costs and non-refundable loan fees associated with lending. The net amount of non-refundable loan origination fees and direct costs associated with the lending process, including commitment fees, is deferred and accreted to interest income over the lives of the loans using a method that approximates the interest method.

Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. A loan is classified as nonaccrual, and the accrual of interest on such loan is discontinued, when the contractual payment of principal or interest becomes 90 days past due or when the loan is demanded unless management deems the loan an exception. In addition, a loan may be placed on nonaccrual at any other time management has serious doubts about further collectability of principal or interest according to the contractual terms, even though the loan is currently performing. A loan may remain in accrual status if it is in the process of collection and well-secured (i.e., the loan has sufficient collateral value). Loans are restored to accrual status when the obligation becomes current or has been performed in accordance with the contractual terms for a reasonable period and the ultimate collectability of the total contractual principal and interest is no longer in doubt.

Allowance for Credit Losses

The Company uses the aggregate method or loss-rate method to estimate expected credit losses. When developing the estimate of expected credit losses, the Company considers its historical loss experience, current borrower performance and economic conditions, as well as reasonable and supportable forecasts of future economic conditions that may affect expected credit losses. An expected loss ratio is applied based on internal historical losses and originations. The aggregate method relies upon the performance of an entire segment of the loan portfolio to best represent the behavior of these specific segments over time. In addition, the modified open pool approach was used which utilizes our borrowers credit rankings for both construction and development loans. Internal risk-rating grades are assigned by the Company’s management based on an analysis of financial and collateral strength and other credit attributes underlying each loan. Loan grades are A, B, C and individually evaluated for both construction and development loans where A and C define the highest and lowest scores, respectively.

The Company defines loan grades based on the following credit risks:

Individually evaluated loans, or portions thereof, are charged off when deemed uncollectible. Once a loan is 90 days past due, management begins a workout plan with the borrower or commences its foreclosure process on the collateral.

Each loan pool is adjusted for qualitative factors not inherently considered in the quantitative analysis. The qualitative adjustments either increase or decrease the quantitative model estimation. We consider factors that are relevant within the qualitative framework which include the following: lending policy, changes in nature and volume of loans, staff experience, changes in volume and trends of non-performing loans, trends in underlying collateral values, quality of our loan review system and other economic conditions, including inflation.

The following is performed by the Company’s Production Loan Operations department to determine the loan grades included within our loan’s receivable portfolio:

Each is rated on a scale of 1-5. With 5 being the highest rating, equal weight is given based on cash (split between average balance and ending balance), credit, and experience.

POINTS-CASH

Bank statements received from the borrower are entered by the loan processors at the time of the initial application or annual credit renewal. The Company’s Loan Administration System (“LAS”) automatically calculates the grading points given for cash based on the borrower’s approval limits and calculated cash ending and average balances.

POINTS-CREDIT

Credit scores are entered into LAS by the loan processors at the time of the initial application or annual credit renewal. LAS automatically calculates the grading points given for credit scores based on the average of the scores entered for the reporting agencies TransUnion and Equifax for all guarantors.

POINTS-EXPERIENCE

At the time of the initial application, the loan processor and underwriter determine whether the applicant meets the minimum experience requirements and enters this information into LAS under the application processing checklist. LAS then determines, based on how the question is answered, how many points are allocated to this category.

At the time of each loan approval, the underwriter confirms the grade calculated by LAS prior to signing off on the loan approval.

POINTS

Points from the three categories are added to come up with their 1-5 rating. The grading scale is as follows:

Once the grading is established or locked in at the time of origination the loan then is populated into the Historical Loan Loss Analysis report. This report populates each loan ranking at the time of origination and does not fluctuate.

Borrower’s credit rankings do change over time based on new information obtained when available.

The CECL calculation for credit loss is performed using the following for the quantitative portion of the analysis:

The Loan Committee reviews ongoing activity regarding loans, to include discussion regarding any changes in the reserve and charge-offs. These meetings are documented within the related Board of Managers minutes.

Individually Evaluated Loans

Individually evaluated loans are loans for which it is probable that all the amounts due under the contractual terms of the loan will not be collected. The ACL on loans that are individually evaluated is based on a comparison of the loan receivable balance, observable market price for the loan or the fair value of the collateral underlying secured loans.

Refundable Builder Deposit

A builder deposit by the borrower of 6.0% to 16.0% of the loan amount (builder deposit is not required on rehab loans), depending on the market grade and the amount of the loan is required at closing. The deposit is a liability on the Company’s balance sheet during the loan and refunded to the borrower upon reaching 90% completion of the asset. Refunding the deposit will be subject to a re-certification of value evidencing no change in loan to value, subject to verification that all outstanding invoices for the home have been paid, including interest due on the loan and the percentage of funding on the loan does not exceed the percentage of the home’s completion. The deposit will not accrue interest to be paid to the builder.

Refundable Prepaid Interest

In specific instances the Company may offer or require borrowers the ability to have a refundable prepaid interest deposit, which we call refundable prepaid interest. Refundable prepaid interest is a separate liability on the Company’s balance sheet used to apply towards or pay the borrowers monthly interest payment when due. The Company may require this to ensure cash on hand considered in underwriting is used to make interest payments to the Company. If the customer has already used a substantial amount of cash to purchase a lot, we might require one to be funded with loan proceeds. In some land development and lot loan cases where the interest will be substantial due to the length of the loan, the Company may require a funded interest escrow to start but then continue to have the builder fund the interest escrow with each lot paydown (as lots are released from the loan).

Foreclosed Assets

When a foreclosed asset is acquired in the settlement of a loan, the asset is recorded at the as-is fair value minus expected selling costs establishing a new cost basis. If the fair value of the collateral is less than the carrying value of the loan, the difference is charged off against our allowance for loan losses. If the fair value, less estimated closing costs, is higher than the carrying value of the loan, the difference is recorded as a gain on foreclosure in the income statement. Subsequent to foreclosure, if the fair value of the asset declines, a write-down is recorded through non-interest expense. Fair value is determined based on highest and best use of the asset. Assets which are not going to be improved are still evaluated on an as-is basis. Assets we intend to improve, are improving, or have improved are appraised based on the to-be-completed value, minus reasonable selling costs, and we adjust the portion of the appraised value related to construction improvements for the percentage of the improvements which have not yet been made. Subsequently, if a foreclosed asset has an increase in fair value the increase may be recognized up to the cost basis which was determined at the foreclosure date.

Real Estate Investments

The Company’s real estate investments are carried on our books at cost, unless we determine that our realistic exit from any real estate investment would result in a loss, in which case the Company would impair the investment to the expected net realizable amount. Cost includes but is not limited to interest accrued at our cost of funds, purchase price, improvements, and real estate taxes. Gains or losses on the sale of real estate investments are not recognized until a sale of an asset occurs.

Deferred Financing Costs, Net

Deferred financing costs consist of certain costs associated with financing activities related to the issuance of debt securities (deferred financing costs). These costs consist primarily of professional fees incurred related to the transactions. Deferred financing costs are amortized into interest expense over the life of the related debt. The deferred financing costs are reflected in a reduction in the unsecured notes offering liability.

Interest Capitalization

The Company capitalizes interest costs incurred during the construction of qualifying assets, such as real estate development projects, when the construction period extends beyond one year and the expenditures for the asset are significant.

Interest is capitalized based on the weighted average cost of funds, which reflects the blended interest rate of the Company’s outstanding borrowings, including both specific project-related debt, if any, and general corporate borrowings. The weighted average interest rate is determined monthly or whenever there is a significant change in the Company’s debt structure. Capitalization of interest commences when expenditures for the asset have been made, activities necessary to prepare the asset for its intended use are in progress, and interest costs are being incurred. Capitalization ceases when the asset is substantially complete and ready for its intended use, or when construction activities are suspended for an extended period.

Interest expense that is not capitalized is recognized in the statement of operations as incurred.

For the year ended December 31, 2025 and 2024, the Company applied a COF rate of 9.61% and 11.48%, respectively, reflecting the estimated cost of internally funded capital.

Premises and Equipment

Equipment the Company qualifies as a capital asset is defined as follows:

Items less than $1,000 are expensed as incurred.

Income Taxes

The entities included in the consolidated financial statements are organized as pass-through entities under the Internal Revenue Code. As such, taxes are the responsibility of the members. Other significant taxes for which the Company is liable are recorded on an accrual basis.

The Company applies FASB ASC 740, Income Taxes (ASC 740). ASC 740 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the consolidated financial statements and requires the evaluation of tax positions taken or expected to be taken while preparing the Company’s consolidated financial statements to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority. Tax positions with respect to income tax at the LLC level not deemed to meet the “more-likely-than-not” threshold would be recorded as a tax benefit or expense in the appropriate period. Management concluded that there are no uncertain tax positions that should be recognized in the consolidated financial statements.

The Company’s policy is to record interest and penalties related to taxes in selling, general and administrative expenses on the consolidated statements of operations. The Company paid $42 in interest and penalties during 2025. There were no significant interest or penalties assessed or paid during 2024.

Reclassifications

Certain reclassifications have been made to the prior period’s financial statements and disclosures to conform to the current period’s presentation.

Risks and Uncertainties

The Company is subject to many of the risks common to the commercial lending and real estate industries, such as general economic conditions, decreases in home values, decreases in housing starts, increases in interest rates, and competition from other lenders. As of December 31, 2025, our loans were significantly concentrated in a suburb of Pittsburgh, Pennsylvania, so the housing starts and prices in that area are more significant to our business than other areas until and if more loans are created in other markets.

Concentration

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:

 Summary of Concentration Risks

Recent Accounting Pronouncements

In November 2025, FASB issued ASU 2025-08, “Financial Instruments - Credit Losses (Topic 326): Purchased Loans” (“ASU 2025-08”), which expands the population of acquired financial assets subject to the gross-up approach. ASU 2025-08 will be effective January 1, 2027 and is not expected to have a significant impact on the Company’s financial statements.