v3.26.1
Line of Credit
 6 Months Ended
Jun. 30, 2026
Debt Disclosure [Abstract]  
Line of Credit

NOTE 6 – LINE OF CREDIT

Activity involving the line of credit during the six months ended June 30 is presented in the following table ($ in thousands).

 

 

 

2026

 

 

2025

 

Balance, January 1

 

$

—

 

 

$

4,000

 

Advances

 

 

1,900

 

 

 

2,000

 

Repayments

 

 

—

 

 

 

(6,000

)

Balance, June 30

 

$

1,900

 

 

$

—

 

Line of credit – average daily balance

 

$

1,753

 

 

$

492

 

On March 11, 2026, RMI IX entered into a Third Modification Agreement (“the 2026 modification agreement”) with Western Alliance Bank (“WAB”), which extended the company’s revolving line of credit under the Business Loan Agreement between WAB and the company entered into in March 2020, as amended by the First Loan Modification Agreement effective March 4, 2022 and the Second Loan Modification Agreement, effective March 13, 2024 (as so extended and amended, the “credit agreement”). Advances on the line of credit are to be used exclusively to fund secured loans.

Under the terms of the credit agreement, RMI IX can borrow up to a maximum principal of $10 million pursuant to a line of credit subject to a borrowing base calculation set forth in the credit agreement and the amounts advanced are secured by a first priority security interest in the notes and deeds of trust of the pledged loans in the borrowing base. At June 30, 2026, aggregate principal of pledged loans was approximately $4.8 million, with a maximum allowed advance thereon of approximately $10 million, subject to the borrowing base calculation. The maturity date of the credit agreement, as extended by the 2026 modification agreement, is March 13, 2028. Interest on the outstanding principal is payable monthly and accrues at the annual rate that is the greater of: (i) the one-month Term SOFR Reference Rate (‘Term SOFR’) plus three and one-half percent (3.5%) and (ii) six percent (6.0%). Term SOFR is published for loans in United States dollars by CME Group Benchmark Administration Limited and is obtained from Bloomberg Financial Services Systems with the code TSFR1M or, if no longer available, any similar or successor publication selected by WAB.

The credit agreement contains customary events of default for facilities of its type. At June 30, 2026, the loan payment delinquency – as determined by the terms of the credit agreement – was 28.51%, which exceeded the 20% maximum loan delinquency rate allowed under credit agreement. As the company was not in compliance with this covenant, it could not access the credit agreement for any additional borrowings as of June 30, 2026.

The credit agreement provides for customary financial and borrowing base reporting by the company to the bank and specifies that the company shall maintain (i) minimum tangible net worth of $50 million, net of amounts due from related companies; (ii) debt service coverage ratio at all times of not less than 2.00 to 1.00; (iii) liquid assets (excluding restricted cash or cash pledged to persons other than WAB) of at least $1.0 million measured on a quarterly basis; and (iv) loan payment delinquency of less than ten percent (10.0%) at calendar quarter-end, calculated as the principal of loans with payments over 61-days past due as determined by the bank’s guidance, less loan loss allowances, divided by total principal of the company’s loans. The credit agreement provides that in the event the credit payment delinquency rate exceeds 10.0% for two consecutive quarters or exceeds 20% as of the end of any quarter, the bank will cease to make any further advances until the company is compliant with the covenant but agrees not to accelerate repayment of the loan as long as no event of default (as defined in the credit agreement) has occurred, provided that WAB reserves the right to accelerate repayment of the loans upon the occurrence of any additional event of default under the credit agreement.

In addition, if the company does not maintain the required compensating balance with a minimum daily average of $1.0 million for the calendar quarter, the interest rate automatically increases by one-quarter of one percent (0.25%) above that rate which would otherwise be applicable for the next calendar quarter retroactive to the beginning of the calendar quarter in which the compensating balance is not maintained.

For each calendar quarter during which the aggregate average daily outstanding principal is less than fifty percent (50%) of the maximum credit amount of $10 million, there is a quarterly unused line fee equal to one-half of one percent (0.50%) per annum of the average daily difference between the average principal outstanding and fifty percent (50%) of the maximum credit amount of $10 million. For six months ended June 30, 2026, the unused line fee expense was $8 thousand.

The fair value of the balance on the line of credit is deemed to approximate the recorded amount as the interest rate and the other terms and conditions, including the two-year term, of the credit agreement as then in effect was reflective of market rate terms (Level 2 inputs).

The debt issuance costs of approximately $66 thousand from the credit agreement, as in effect on June 30, 2026, are being amortized on a straight line basis over the two-year term. Amortized debt issuance costs included in interest expense approximated $8 thousand for the three months ended June 30, 2026 and 2025 and $16 thousand for the six months ended June 30, 2026 and 2025.

Amounts borrowed under the revolving credit facility may be converted to a two-year term loan at the election of the company upon the expiration of the commitment term, subject to certain conditions, with monthly installments of principal and interest payable in an amount sufficient to fully amortize the outstanding principal balance over a 120-month period and interest at the related note rate. In addition, quarterly installment payments of principal would be due after a specified date.