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 UNITED
STATES

 SECURITIES
AND EXCHANGE COMMISSION

 WASHINGTON,
DC 20549

 FORM

Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 For
the Fiscal Year Ended December 31, 2023

 or

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 For
the Transition Period From ________ to ________

 Commission
File Number 333-263759

 SHEPHERD'S
FINANCE, LLC

 (Exact
name of registrant as specified on its charter)

 36-4608739

 (State
 or other jurisdiction of

 (I.R.S.
 Employer

 Incorporation
 or organization)

 Identification
 No.)

 13241
Bartram Park Blvd., Suite 2401, Jacksonville, Florida 32258

 (Address
of principal executive offices)

 (302) 752-2688

 (Registrant's
telephone number including area code)

 Securities
registered pursuant to Section 12(b) of the Act:

 Title
 of Each Class

 Trading
 Symbol(s)

 Name
 of Each Exchange on Which Registered

 None

 None

 None

 Securities
registered pursuant to Section 12(g) of the Act: None

by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No

by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No

by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2)
has been subject to such filing requirements for the past 90 days. Yes No

by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). Yes No

by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer,"
"smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 Large
 accelerated filer

 Accelerated
 filer

 Non-accelerated
 filer

 Smaller
 reporting company

 Emerging
 growth company

 If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report.

 If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements.

by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b).

by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

 The
aggregate market value of the common equity held by non-affiliates of the registrant as of June 30, 2023: There is currently no established
public market for the registrant's membership interests.

 DOCUMENTS
INCORPORATED BY REFERENCE:

 None.

 FORM

 SHEPHERD'S
FINANCE, LLC

 TABLE
OF CONTENTS

 Cautionary Note Regarding Forward-Looking Statements

 PART I.

 Item 1. Business

 Item 1A. Risk Factors

 Item 1B. Unresolved Staff Comments

 Item 1C. Cybersecurity

 Item 2. Properties

 Item 3. Legal Proceedings

 Item 4. Mine Safety Disclosures

 PART II.

 Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 Item 6. [Reserved]

 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

 Item 7A. Quantitative and Qualitative Disclosures About Market Risk

 Item 8. Financial Statements and Supplementary Data

 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 Item 9A. Controls and Procedures

 Item 9B. Other Information

 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

 PART III.

 Item 10. Directors, Executive Officers and Corporate Governance

 Item 11. Executive Compensation

 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 Item 13. Certain Relationships and Related Transactions, and Director Independence

 Item 14. Principal Accountant Fees and Services

 PART IV.

 Item 15. Exhibits and Financial Statement Schedules

 Item 16. Form 10-K Summary

 SIGNATURES

 CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS

 Certain
statements contained in this Form 10-K of Shepherd's Finance, LLC, other than historical facts, may be considered forward-looking
statements within the meaning of the federal securities laws. Words such as "may," "will," "expect,"
"anticipate," "believe," "estimate," "continue," "predict," or other similar
words identify forward-looking statements. Forward-looking statements appear in a number of places in this report, including without
limitation, "Management's Discussion and Analysis of Financial Condition and Results of Operations," and include statements
regarding our intent, belief or current expectation about, among other things, trends affecting the markets in which we operate, our
business, financial condition and growth strategies.

 Although
we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, forward-looking statements
are not guarantees of future performance and involve risks and uncertainties. These risks and uncertainties include, but are not limited
to: The recent rise in interest rates; the coming anticipated drop-in interest rates; general economic and geopolitical uncertainty;
and those other risks described in other risk factors as outlined in this Form 10-K. Actual results may differ materially from those
predicted in the forward-looking statements as a result of various factors, including but not limited to those set forth in the "Risk
Factors" section of this Form 10-K. For further information regarding risks and uncertainties associated with our business, and
important factors that could cause our actual results to vary materially from those expressed or implied in such forward-looking statements,
please refer to the factors set forth in the "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Risk Factors" sections of the documents we file from time to time with the U.S. Securities and Exchange
Commission, including, but not limited to, this report and subsequent Quarterly Reports on Form 10-Q.

 When
considering forward-looking statements, our risk factors, as well as the other cautionary statements in this report and in our Registration
Statement on Form S-1, should be kept in mind. Do not place undue reliance on any forward-looking statement. We are not obligated to
update forward-looking statements.

 PART
I

 ITEM
1. BUSINESS

 Purpose
and History

 Our
business is focused on commercial lending to participants in the residential construction and development industry. We believe this market
is underserved because of the lack of traditional lenders currently fully participating in the market. We were originally formed as a
Pennsylvania limited liability company on May 10, 2007. To meet our business objectives, we changed our name to Shepherd's Finance,
LLC on December 2, 2011. We converted to a Delaware limited liability company on March 29, 2012. We are located in Jacksonville, Florida.
As used in this report, "we," "us," "our," and "Company" refer to Shepherd's Finance,
LLC. We have an internet website at www.shepherdsfinance.com. We are not incorporating by reference into this report any material
from our website. The reference to our website is an inactive textual reference to the uniform resource locator (URL) and is for reference
only.

 The
commercial loans we extend are secured by mortgages on the underlying real estate. We extend and service commercial loans to small-to-medium
sized homebuilders for the purchase of lots and/or the construction of homes thereon. In some circumstances, the lot is purchased with
an older home on the lot which is then either removed or rehabilitated. If the home is rehabilitated, the loan is referred to as a "rehab"
loan. We also extend and service loans for the purchase of lots and undeveloped land and the development of that land into residential
building lots. In addition, we may, depending on our cash position and the opportunities available to us, do neither or either of the
following: purchase defaulted unsecured debt from suppliers to homebuilders at a discount (and then secure that debt with real estate
or other collateral), and purchase defaulted secured debt from financial institutions at a discount.

 Experience
and Resources

 Our
Chief Executive Officer ("CEO"), Mr. Wallach, has been in the housing industry since 1985. He was the Chief Financial Officer
of a multi-billion-dollar supplier of building materials to home builders for 12 years. He also was responsible for that company's
lending business for 20 years. During those years, he was responsible for the creation and implementation of many secured lending programs
to builders. Some of these were performed fully by that company, and some were performed in partnership with banks. In general, the creation
of all loans, and the resolution of defaulted loans, was his responsibility, whether the loans were company loans or loans in partnership
with banks. Through these programs, he was responsible for the creation of approximately $2,000,000,000 in loans which generated interest
spread of $50,000,000, after deducting for credit losses. Through the years, he managed the development of systems for reducing and managing
the risks and losses on defaulted loans. Mr. Wallach also was responsible for that company's unsecured debt to builders, which
reached over $300,000,000 at its peak. He also gained experience in securing defaulted unsecured debt.

 In
addition, our Executive Vice President of Operations has 18 years of experience in this type of lending. Our Chief Financial Officer
("CFO") has 18 years of SEC registrant accounting experience and over six years of experience in this industry. Our Executive
Vice President has been in the housing industry for over 39 years including holding executive level positions for the majority of that
time. Our Executive Vice President of Sales was appointed in April 2021 and has over 21 years of experience in the construction finance
industry.

 Human
Capital Resources

 As
of December 31, 2023, we have retained 19 employees (three of which are lending representatives) including our CEO. In his previous experience,
our CEO had a nationwide staff of 20 lenders within in the field. The development, attraction, and retention of employees is a strong
focus for the Company, as is fostering and maintaining a strong, healthy corporate culture. Additionally, as described in more detail
elsewhere in this report, we have an executive compensation program designed to attract, retain, and motivate highly talented executives
and to align each executive's incentives with our short-term and long-term objectives, while maintaining a healthy and stable financial
position.

 Opportunity,
Strategy, and Approach

 Background
and Strategy

markets are highly fragmented, with numerous large, mid-size, and small lenders and investment companies, such as banks, savings and
loan associations, credit unions, insurance companies, and institutional lenders, all competing for investment opportunities. Many of
these market participants experienced losses, as a result of the housing market (which started to decline in 2006, reached its bottom
in 2008, improved through early 2022, then declined through most of 2023, and since has been relatively stable nationally), and their
participation in lending in it. As a result of credit losses and restrictive government oversight, the financial institutions are not
participating in this market to the extent they had before the 2008 credit crisis. Nonregulated builder focused lenders (of which we
are one) have increased their presence since 2008. Our goal is not to be a customer's only source of commercial lending, but an
extra, more user-friendly piece of their financing.

 Our
loans are marketed by lending representatives who work for us and are driven to maintain long-term customer relationships. Compensation
for loan originators is focused on the profitability of loans originated, not simply the volume of loans originated.

 Our
efforts are designed to create a loan portfolio that includes some or all of the following investment characteristics: (i) provides current
income; (ii) is well-secured by residential real estate; (iii) is short term in nature; and (iv) provides high interest spreads.

 Our
investment policies may be amended or changed at any time by our board of managers. In the years ahead, we plan on maintaining or growing
our current level of lending, increasing our geographic diversity, growing our rehab lending program, and improving our financial performance.
We may be adding systems and people to accomplish these goals.

 As
we continue to grow our business, we are focusing some of our efforts on our rehab program, which we believe in the long run will face
less bank competition and have more stable demand than our new construction program.

 Risk
and Mitigation

 We
believe that, while creating speculative construction loans is a high-risk venture, the opportunity for margin, the differences in our
lending versus typical small bank lending, and our loss mitigation techniques will all help this type of lending to continue to be a
profitable business.

 We
engage in various activities to try to mitigate the risks inherent in this type of lending by:

 Keeping
 the loan-to-value ratio ("LTV"), between 60% and 75% on a portfolio basis, however, individual loans may, from time to
 time, have a greater LTV;

 Generally
 using deposits from the builder on home construction loans to ensure the completion of the home. Lending losses on defaulted loans
 are usually a higher percentage when the home is not built, or is only partially built;

 Having
 a higher yield than other forms of secured real estate lending;

 Using
 interest escrows for some of our loans;

 Aggressively
 working with builders who are in default on their loan before and during foreclosure. This technique generally yields a reduced realized
 loss; and

 Market
 grading. We review all lending markets, analyzing their historic housing start cycles. Then, the current position of housing starts
 is examined in each market. Markets are classified into volatile, average, or stable, and then graded based on that classification
 and our opinion of where the market is in its housing cycle. This grading is then used to determine the builder deposit amount, LTV,
 and how much of the lot purchase the builder is required to fund.

 The
following table contains items that we believe differentiate us from our competitors:

 Item

 Our
 Methods

 Comments

 Lending
 Regulation

 We
 follow various state and federal laws, but are not regulated and controlled by bank examiners from the government. We follow best
 practices we have learned through our experience, some of which are required of banks.

 For
 instance, banks are not required to buy title insurance by law, but typically banks do purchase title insurance for the properties
 on which they lend. We generally do not, as it is very difficult to collect on title policies. Instead, we use title searches to
 protect our interests.

 FDIC
 Insurance

 We
 do not offer FDIC insurance to our unsecured notes investors.

 Our
 yield to our customers, and our cost of funds, is typically higher than that of most banks. We charge our borrowers higher interest
 rates than do most banks. We also save money by not paying for FDIC insurance.

 Capital
 Structure

 Typically,
 our unsecured notes offered through our notes program are due in one to four years, or when the Note matures.

 This
 results in liquidity risk (i.e., funding borrowing requests or maturities of debt). Our assets typically turnover much quicker (about
 4 times faster) than our average unsecured debt does, and our unsecured debt is mostly prepayable. These items help keep liquidity
 stable.

 Community
 Reinvestment Act (CRA) (1)

 We
 do not participate in the CRA.

 Our
 sole purpose in making each individual loan is to maximize our returns while maintaining proper risk management.

 Leverage

 We
 try to maintain a 15% ratio of equity (including redeemable preferred equity) to loan assets.

 Our
 equity to loan assets, net ratio was 11.6% as of December 31, 2023. The higher the percentage, the more potential losses the company
 can absorb without impacting debt holders.

 Product
 Diversification

 We
 generally make loans to builders to purchase lots and/or to construct or rehab homes.

 We
 have extensive experience in our field.

 Geographic
 Diversity

 We
 lend in 20 states as of December 31, 2023.

 We
 believe that this geographic diversity helps in down markets, as not all housing markets decrease at the same rate and time.

 Governmental
 Bailouts

 Most
 likely not eligible.

 We
 are not likely to be eligible for bank bailouts, which have happened periodically. We maintain a better leverage ratio to counter
 this.

 Underwriting

 We
 focus on items that, in our experience, tend to predict risk.

 These
 items include using collateral, controlling LTVs, controlling the number of loans in one subdivision, underwriting appraisals, conducting
 property inspections, and maintaining certain files and documents similar to those that a bank might maintain.

 (1)

 The
 CRA subjects a bank who receives FDIC insurance to regulatory assessment to determine if the bank meets the credit needs of its entire
 community, and to consider that determination in its evaluation of any application made by the bank for, among other things, approval
 of the acquisition or establishment of a bank branch.

 Lines
of Business

 Our
efforts are designed to create a loan portfolio that includes some or all of the following investment characteristics: (i) provides current
income; (ii) is well-secured by residential real estate; (iii) is short term in nature; and (iv) provides high interest spreads. While
we primarily provide commercial construction loans to homebuilders (for residential real estate), we may also purchase defaulted unsecured
debt from suppliers to homebuilders at a discount (and then secure that debt with real estate or other collateral), purchase defaulted
secured debt from financial institutions at a discount, and purchase real estate in which we will operate our business.

 Our
investment policies may be amended or changed at any time by our board of managers.

Construction Loans to Homebuilders

 We
extend and service commercial loans to small-to-medium sized homebuilders for the purchase of lots and/or the construction of homes thereon.
Our customers generally benefit from doing business with us not just because they are able to sell additional homes (which we finance),
but because, as they build additional homes, they are able to increase sales of homes that are built as contracted homes, where the eventual
home owner obtains the loan. Builders generally have more success selling homes when a model or spec home is available for customers
to see. We also extend and service loans for the purchase of undeveloped land and the development of that land into residential building
lots. In addition, we lend money to purchase and rehabilitate older existing homes. Most of the loans are for "spec homes"
or "spec lots," meaning they are built or developed speculatively (with no specific end-user home owner in mind).

 In
a typical home construction transaction, a homebuilder obtains a loan to purchase a lot and build a home on that lot. In some cases,
the builder has a contract with a customer to purchase the home upon its completion. In other cases, the home is built as a spec home,
but the homebuilder believes it will sell before or shortly after completion, and therefore, building the home before it is under contract
will increase the homebuilder's sales and profitability. The builder may also believe that the construction of a spec home will
increase the number of contract sales the homebuilder will have in a given year, as it may be easier to sell contract homes when the
customer can see the builder's work in the spec home. In some cases, these speculatively built homes are constructed with the intention
to keep them as a model for a period of time, to increase contract sales, and then be sold. These are called model homes. While we may
lend to a homebuilder for any of these types of new construction homes, through December 31, 2023, about 84% of our construction loans
have been spec homes and 16% have been contracts.

 In
a typical rehab transaction, we fund all of the purchase price, and then all or a portion of the cost to complete the project. In some
circumstances, we are unable to see the inside of the home prior to closing, so we assume that anything from drywall to completion needs
to be redone, as well as what we can see from the outside. Because we are flexible in our need to see the inside of the home, and we
only use experienced builders as customers for this type of lending, we believe that this differentiates us from banks.

 We
fund the loans that we originate using available cash resources that are generated primarily from borrowings, our loan purchase and sale
agreements, proceeds from the fixed rate subordinated notes ("Notes") offered pursuant to our public offering ("Notes
Program"), equity, and net operating cash flow. We intend to continue funding loans we originate using the same sources.

 There
is a seasonal aspect to home construction, and this affects our monthly cash flow. In general, since the home construction loans, we
made will last less than a year on average and we are geographically diverse, the seasonality impact is somewhat mitigated.

 Generally,
our real estate loans are secured by one or more of the following:

 the
 parcels of land to be developed;

 finished
 lots;

 new
 or rehabbed single-family homes; and/or

 in
 most cases, personal guarantees of the principals of the borrower entity.

 Most
of our lending is based on the following general policies:

 Type

 Small-to-Medium
 Size Homebuilders

 Loan
 Type

 Loan
 Purpose

 Construction/Rehabilitation
 of Homes or Development of Lots

 Security

 Homes,
 Lots, and/or Land

 Priority

 Generally,
 our loans are secured by a first priority mortgage lien; however, we may make loans secured by a second or other lower priority mortgage
 lien.

 Loan-to-Value
 Averages

 60-75%

 Loan
 Amounts

 Average
 home construction loan was $310,000 as of December 31, 2023. Development loans vary greatly.

 Term

 Demand,
 however most home construction loans typically payoff in under one year, and development loans are typically three to five-year projects.

 Rate

 Cost
 of Funds ("COF") plus 2.5%, minimum rate of 7%

 Origination
 Fee

 5%
 for home construction loans, development loans on a case-by-case basis

 Title
 Insurance

 Only
 on high-risk loans and rehabs

 Hazard
 Insurance

 Always

 General
 Liability Insurance

 Always

 Builder
 should have significant building experience in the market, be building in the market currently, be able to make payments of interest,
 be able to make the required deposit, have acceptable personal credit, and have open lines of credit (unsecured) with suppliers reasonably
 within terms. Required deposits may be able to be avoided if we do not fund the purchase of land. We generally do not advertise to
 find customers, but use our loan representatives and our builder website, www.constructionspecloans.com.

 Third
 Party Guarantor

 None,
 however the loans are generally guaranteed by the owners of the borrower.

 We
may change these policies at any time based on then-existing market conditions or otherwise, at the discretion of our CEO and the Board
of Managers.

 2024
Outlook

2024, the housing market in most of the areas in which we do business will likely increase as compared to the same period of time in
2023 due to the already reduced long term mortgage interest rates, and an anticipated continuing reduction of those rates as a result
of short-term interest rate cuts by the Federal Reserve Bank. We should experience no further losses from our COVID-19 loans, as the
final balances of those loans were either paid off or written off in 2023, so we expect total credit losses for 2024 to be lower than
2023. There is a risk if mortgage rates continue to drop that many homeowners in existing low-rate mortgages will decide to "move
up" and sell their low mortgage rate home, flooding the market with homes. Offsetting that risk is the fact that they will also
increase demand for homes as they will need one to live in. Rents may become less affordable vs. owing a home, which helps our customer.
While we don't anticipate the market flooding to negatively impact us, there is little history to go by and this might cause housing
prices to drop steeply, which will hurt our existing loans.

 In 2024, we anticipate adding some assets in
the housing industry designed to generate income. The assets include but are not limited to, the purchase of an existing land
development company which is currently developing 61 lots in Pittsburgh, PA, the construction of two homes in Reunion, FL using a
builder (approved as one of our borrowers) for construction, and investing in a development company using another one of our
customers to build houses for it.

Loans – Construction Loan Portfolio Summary

 The
following is a summary of our loan portfolio to builders for home construction loans as of December 31, 2023:

 (All
dollar [$] amounts shown in table in thousands.)

 State

 of

 of
 Loans

 Gross

 Value

 Loan Fee

 Arizona

 $
 2,148

 $
 1,504

 $

 %

 %

 California

 2,551

 1,530

 1,511

 %

 %

 1,039

 %

 %

 36,644

 19,279

 14,093

 %

 %

 2,963

 1,831

 1,229

 %

 %

 Illinois

 1,600

 %

 %

 Indiana

 %

 %

 Louisiana

 %

 %

 Maryland

 %

 %

 Missouri

 %

 %

 1,985

 1,563

 %

 %

 10,637

 6,681

 2,994

 %

 %

 Ohio

 3,776

 2,601

 1,686

 %

 %

 21,301

 16,763

 13,205

 %

 %

 20,029

 12,624

 6,694

 %

 %

 1,554

 1,047

 %

 %

 Texas

 1,970

 1,773

 1,693

 %

 %

 Utah

 2,918

 1,792

 %

 %

 Virginia

 %

 %

 Washington

 2,789

 2,427

 2,376

 %

 %

 Total

 $
 117,169

 $
 75,300

 $
 51,788

 %(3)

 %

 (1)

 The

 (2)

 The
 loan to value ratio is calculated by taking the commitment amount and dividing by the appraised value.

 (3)

 The
following is a summary of our loan portfolio to builders for home construction loans as of December 31, 2022:

 (All
dollar [$] amounts shown in table in thousands.)

 State

 of

 of
 Loans

 Gross

 Value

 Loan Fee

 Arizona

 $

 $

 $

 %

 %

 2,045

 1,463

 1,365

 %

 %

 1,035

 %

 %

 42,605

 30,573

 21,155

 %

 %

 3,116

 1,798

 %

 %

 Illinois

 1,245

 %

 %

 Louisiana

 %

 %

 Maryland

 %

 %

 Michigan

 1,437

 1,003

 %

 %

 3,127

 2,259

 2,769

 %

 %

 New York

 %

 %

 7,067

 4,143

 2,676

 %

 %

 Ohio

 1,178

 %

 %

 Oregon

 %

 %

 20,132

 14,016

 9,831

 %

 %

 7,525

 5,133

 3,582

 %

 %

 1,554

 %

 %

 Texas

 3,118

 2,039

 1,828

 %

 %

 Utah

 %

 %

 Virginia

 %

 %

 Washington

 3,995

 2,732

 2,158

 %

 %

 Total

 $
 104,993

 $
 72,526

 $
 52,796

 %(3)

 %

 (1)

 The

 (2)

 The
 loan to value ratio is calculated by taking the commitment amount and dividing by the appraised value.

 (3)

Loans – Real Estate Development Loan Portfolio Summary

 In
a typical development transaction, a homebuilder/developer purchases a specific parcel or parcels of land. Developers must secure financing
in order to pay the purchase price for the land as well as to pay expenses incurred while developing the lots. This is the financing
we provide. Once financing has been secured, the lot developers create individual lots. Developers secure permits allowing the property
to be developed and then design and build roads and utility systems for water, sewer, gas, and electricity to service the property. The
individual lots are then sold before a home is built on them; paid off, built on and then sold; or built on, then sold and paid off (in
these cases, we may subordinate our loan to the home construction loan).

 The
following is a summary of our loan portfolio to builders for land development as of December 31, 2023:

 (All
dollar [$] amounts shown in table in thousands.)

 of Borrowers

 of
 Loans

 Value of Collateral (1)

 Commitment Amount

 Gross
 Outstanding (4)

 Value Ratio (2)

 Spread (5)

 %

 %

 1,378

 %

 %

 %

 %

 1,110

 %

 %

 19,983

 8,500

 8,365

 %

 1,980

 %

 %

 Total

 $
 23,873

 $
 11,256

 $
 9,505

 %(3)

 %

 (1)

 The
 value is determined by the appraised value adjusted for remaining costs to be paid and third-party mortgage balances. In the event
 of a foreclosure on the property securing these loans, the portion of our collateral that is preferred equity in our Company might
 be difficult to sell, which could impact our ability to eliminate the loan balance.

 (2)

 The
 loan to value ratio is calculated by taking the outstanding amount and dividing by the appraised value calculated as described above.

 (3)

 (4)

 Gross
 Amount Outstanding credit balances are due to deposits on account.

 (5)

 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, 2022:

 (All
dollar [$] amounts shown in table in thousands.)

 of Borrowers

 of
 Loans

 Value of Collateral (1)

 Commitment Amount

 Gross
 Outstanding (4)

 Value Ratio (2)

 Spread (5)

 $

 $

 $

 %

 %

 %

 %

 1,196

 (117
)

 (67
)%

 %

 %

 %

 %

 %

 %

 %

 16,664

 8,500

 6,153

 %

 1,401

 1,386

 1,367

 %

 %

 Texas

 -

 (28
)

 %

 %

 Total

 $
 19,718

 $
 12,110

 $
 8,178

 %(3)

 %

 (1)

 The
 value is determined by the appraised value adjusted for remaining costs to be paid and third-party mortgage balances. Part of this
 collateral is $1,900 of preferred equity in our Company. In the event of a foreclosure on the property securing these loans, the
 portion of our collateral that is preferred equity in our Company might be difficult to sell, which could impact our ability to eliminate
 the loan balance.

 (2)

 The
 loan to value ratio is calculated by taking the outstanding amount and dividing by the appraised value calculated as described above.

 (3)

 (4)

 Gross
 Amount Outstanding credit balances are due to deposits on account.

 (5)

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

Quality Information

 See
the notes to our financial statements for credit quality information.

 Competition

 Historically,
our industry has been highly competitive. We compete for opportunities with numerous public and private investment vehicles, including
financial institutions, specialty finance companies, mortgage banks, pension funds, opportunity funds, hedge funds, REITs, and other
institutional investors, as well as individuals. Many competitors are significantly larger than us, have well-established operating histories
and may have greater access to capital, resources and other advantages over us. These competitors may be willing to accept lower returns
on their investments or to modify underwriting standards and, as a result, our origination volume and profit margins could be adversely
affected.

 We
believe that this is a good time to extend commercial loans to builders in the residential real estate market because this market appears
underserved. We expect our loans to be different than other lenders in the markets in which we are active. Typically, the differences
are:

 our
 loans may have a higher fee;

 our
 loans typically require a small deposit which is refundable, versus a large upfront payment for the lot which is not refundable;
 and

 some
 of our loans may have lower costs as a result of not requiring title insurance.

 Regulatory
Matters

Regulation

 Our
operations are not subject to the stringent regulatory requirements imposed upon the operations of commercial banks, savings banks, and
thrift institutions. We are not subject to periodic compliance examinations by federal or state banking regulators. Further, our Notes
are not certificates of deposit or similar obligations or guaranteed by any depository institution and are not insured by the FDIC or
any governmental or private insurance fund, or any other entity.

 The
Investment Company Act of 1940

 An
investment company is defined under the Investment Company Act of 1940, as amended (the "Investment Company Act"), to include
any issuer engaged primarily in the business of investing, reinvesting, or trading in securities. Absent an exemption, investment companies
are required to register as such with the SEC and to comply with various governance and operational requirements. If we were considered
an "investment company" within the meaning of the Investment Company Act, we would be subject to numerous requirements and
restrictions relating to our structure and operation. If we were required to register as an investment company under the Investment Company
Act and to comply with these requirements and restrictions, we may have to make significant changes in our structure and operations to
comply with exemption from registration, which could adversely affect our business. Such changes may include, for example, limiting the
range of assets in which we may invest. We intend to conduct our operations so as to fit within an exemption from registration under
the Investment Company Act for purchasing or otherwise acquiring mortgages and other liens on and interest in real estate. In order to
satisfy the requirements of such exemption, we may need to restrict the scope of our operations.

 Environmental
Compliance

 We
do not believe that compliance with federal, state, or local laws relating to the protection of the environment will have a material
effect on our business in the foreseeable future. However, loans we extend or purchase are secured by real property. In the course of
our business, we may own or foreclose and take title to real estate that could be subject to environmental liabilities with respect to
these properties. We (or our loan customers) may be held liable to a governmental entity or to third parties for property damage, personal
injury, investigation, and clean-up costs incurred by these parties in connection with environmental contamination or may be required
to investigate or clean up hazardous or toxic substances or chemical release at a property. The costs associated with the investigation
or remediation activities could be substantial. In addition, if we become the owner of or discover that we were formerly the owner of
a contaminated site, we may be subject to common law claims by third-parties based on damages and costs resulting from environmental
contamination emanating from the property. To date, we have not incurred any significant costs related to environmental compliance and
we do not anticipate incurring any significant costs for environmental compliance in the future. Generally, when we are lending on property
which is being developed into single family building lots, an environmental assessment is done by the builder for the various governmental
agencies. When we lend for new construction on newly developed lots, the lots have generally been reviewed while they were being developed.
We also perform our own physical inspection of the lot, which includes assessing potential environmental issues. Before we take possession
of a property through foreclosure, we again assess the property for possible environmental concerns, which, if deemed to be a significant
risk compared to the value of the property, could cause us to forego foreclosure on the property and to seek other avenues for collection.

 ITEM
1A. RISK FACTORS

 Below
are risks and uncertainties that could adversely affect our operations that we believe are material to investors. Other risks and uncertainties
may exist that we do not consider material based on the information currently available to us at this time.

 Risks
Related to our Business

 Our
business is not industry-diversified. Deterioration in the homebuilding industry or economic conditions, including as a result of pandemics,
could decrease demand and pricing for new homes and residential home lots. A decline in housing values similar to the national downturn
in the real estate market that began in 2007 would have a negative impact on our business. Smaller value declines will also have a negative
impact on our business. These factors may decrease the likelihood we will be able to generate enough cash to repay the Notes.

 Developers
and homebuilders to whom we may make loans use the proceeds of our loans to develop raw land into residential home lots and construct
homes. The developers obtain the money to repay our development loans by selling the residential home lots to homebuilders or individuals
who will build single-family residences on the lots, or by obtaining replacement financing from other lenders. A developer's ability
to repay our loans is based primarily on the amount of money generated by the developer's sale of its inventory of single-family
residential lots. Homebuilders obtain the money to repay our loans by selling the homes they construct or by obtaining replacement financing
from other lenders, and thus, the homebuilders' ability to repay our loans is based primarily on the amount of money generated
by the sale of such homes.

 The
homebuilding industry is cyclical and is significantly affected by changes in industry conditions, as well as in general and local economic
conditions, such as:

 employment
 level and job growth;

 demographic
 trends, including population increases and decreases and household formation;

 availability
 of financing for homebuyers;

 interest
 rates;

 affordability
 of homes;

 consumer
 confidence;

 levels
 of new and existing homes for sale, including foreclosed homes and homes held by investors and speculators; and

 housing
 demand generally.

 These
conditions may occur on a national scale or may affect some of the regions or markets in which we operate more than others.

 We
generally lend a percentage of the values of the homes and lots. These values are determined shortly prior to the lending. If the values
of homes and lots in markets in which we lend drop fast enough to cause the builders losses that are greater than their equity in the
property, we will be forced to liquidate the loan in a fashion which will cause us to lose money. If these losses when combined and added
to our other expenses are greater than our revenue from interest charged to our customers, we will lose money overall, which will hurt
our ability to pay interest and principal on the Notes. Values are typically affected by demand for homes, which can change due to many
factors, including but not limited to, demographics, interest rates, the overall economy, which can be impacted by outbreaks of communicable
illnesses, cost of building materials and labor, availability of financing for end-users, inventory of homes available and governmental
action or inaction. If there is a tightening of the credit markets, it would be more difficult for potential homeowners to obtain financing
to purchase homes. If housing prices decline or sales in the housing market decline, our customers may have a hard time selling their
homes at a profit. This could cause the amount of defaulted loans that we will own to increase. An increase in defaulted loans would
reduce our revenue and could lead to losses on our loans. A decline in housing prices will further increase our losses on defaulted loans.
If the amount of defaulted loans or the loss per defaulted loan is large enough, we will operate at a loss, which will decrease our equity.
This could cause us to become insolvent, and we will not be able to pay back Note holders' principal and interest on the Notes.

 The
homebuilding industry could experience adverse conditions, and the industry's implementation of strategies in response to such
conditions may not be successful.

 The
United States homebuilding industry experienced a significant downturn beginning in 2007. During the course of the downturn, many homebuilders
focused on generating positive operating cash flow, resizing and reshaping their product for a more price-conscious consumer and adjusting
finished new home inventories to meet demand, and did so in many cases by significantly reducing the new home prices and increasing the
level of sales incentives. Notwithstanding these strategies, homebuilders continued to experience an elevated rate of sales contract
cancelations, as many of the factors that affect new sales and cancelation rates are beyond the control of the homebuilding industry.
Although the homebuilding industry has experienced positive gains over the last decade, there can be no assurance that these gains will
continue, or if there is a negative impact on the homebuilding industry's expectations for future home sales. The homebuilding
industry could suffer similar, or worse, adverse conditions in the future. Decreases in new home sales would increase the likelihood
of defaults on our loans and, consequently, reduce our ability to repay Note holders' principal and interest on the Notes.

 We
have $58,130,000 of loan assets, net as of December 31, 2023. A 35% reduction in total collateral value would reduce our earnings and
net worth by $3,847,000. Larger reductions would result in lower earnings and lower net worth.

 As
of December 31, 2023, we had $58,130,000 of loan assets, net on our books. These assets are recorded on our balance sheet at the lower
of the loan amount or the value of the collateral after deduction for expected selling expenses. A reduction in the value of the underlying
collateral could result in significant losses. A 35% reduction, for instance, would result in a $3,847,000 loss. Accordingly, our business
is subject to risk of a loss of a portion of our Note holders' investments if such a reduction were to occur.

 We
have $9,505,000 of development loan assets as of December 31, 2023, which unlike our construction loans, are long term loans. This longer
duration as well as the nature of collateral (raw ground and lots) creates more risk for that portion of our portfolio.

 We
have $9,505,000 of development loan assets as of December 31, 2023. Development loans are riskier than construction loans for two reasons:
the duration of the loan and the nature of the collateral. The duration (being three to five years as compared to generally less than
one year on construction loans) allows for a greater period of time over which the collateral value could decrease. Also, the collateral
value of development loans is more likely to change in greater percentages than that of built homes. For example, during a 70% reduction
in housing starts, newly completed homes still have value, but lots may be worthless. This added risk to this portion of our portfolio
adds risk to our investors as our net worth would be significantly impacted by losses.

 Currently,
we are reliant on a single developer and homebuilder, the Hoskins Group, who is concentrated in the Pittsburgh, Pennsylvania market,
for a significant portion of our revenues and a portion of our capital. Our second largest customer is in the Cape Coral, Florida market
and is also a significant portion of our portfolio.

 As
of December 31, 2023, 29.0% of our outstanding loan commitments consisted of loans made to Benjamin Marcus Homes, LLC and Investor's
Mark Acquisitions, LLC, both of which are owned by Mark Hoskins (collectively all two parties are referred to herein as the "Hoskins
Group"). We refer to the loans to the Hoskins Group as the "Pennsylvania Loans." The Hoskins Group is concentrated
in the Pittsburgh, Pennsylvania market. Prior to March 3, 2023, the Hoskins Group also had a preferred equity interest in us, and in
January 2021 we invested approximately $500,000 in Series A Preferred Units in Benjamin Marcus Homes, LLC. During 2022, $62,000 of dividend
income was earned related to the Series A Preferred Units investment.

 Currently,
we are reliant upon a single developer and homebuilder who is concentrated in a single city, for a significant portion of our revenues
and a portion of our capital. Any event of bankruptcy, insolvency, or general downturn in the business of this developer and homebuilder
or in the Pittsburgh housing market generally will have a substantial adverse financial impact on our business and our ability to pay
back Note holders' investments in the Notes in the long term. Adverse conditions affecting the local housing market could include,
but are not limited to, declines in new housing starts, declines in new home prices, declines in new home sales, increases in the supply
of available building lots or built homes available for sale, increases in unemployment, and unfavorable demographic changes. One of
our independent managers, Gregory L. Sheldon, also serves an advisor to the Hoskins Group and, consequently, Mr. Sheldon may face conflicts
of interest in the advice that he provides to us and the Hoskins Group, including if any such adverse condition were to materialize.

 In
addition, as of December 31, 2023, 7% of our outstanding loan commitments consisted of loans made to our second largest customer, in
Cape Coral, Florida.

 We
have foreclosed assets as of December 31, 2023, which unlike our loans, are recorded on our balance sheet at the value of the collateral,
net of estimated selling expenses.

 We
have foreclosed assets as of December 31, 2023. A reduction in the value of the underlying collateral of our foreclosed assets could
result in significant losses. For example, a 35% reduction in the value of the underlying collateral (net of estimated selling expenses)
would result in a $45,000 loss. Our business is subject to increased risk of not being able to repay timely our Note holders' investments
if such a reduction were to occur.

 Increases
in interest rates, reductions in mortgage availability, or increases in other costs of home ownership could prevent potential customers
from buying new homes and adversely affect our business and financial results.

 Most
new home purchasers finance their home purchases through lenders providing mortgage financing. Immediately prior to 2007, interest rates
were at historically low levels and a variety of mortgage products were available. As a result, home ownership became more accessible.
The mortgage products available included features that allowed buyers to obtain financing for a significant portion or all of the purchase
price of the home, had very limited underwriting requirements or provided for lower initial monthly payments. Accordingly, more people
were qualified for mortgage financing.

 Since
2007, the mortgage lending industry has experienced significant instability, beginning with increased defaults on subprime loans and
other nonconforming loans and compounded by expectations of increasing interest payment requirements and further defaults. This, in turn,
resulted in a decline in the market value of many mortgage loans and related securities. Lenders, regulators and others questioned the
adequacy of lending standards and other credit requirements for several loan products and programs offered in those years. Credit requirements
tightened, and investor demand for mortgage loans and mortgage-backed securities declined. In general, fewer loan products, tighter loan
qualifications, and a reduced willingness of lenders to make loans make it more difficult for many buyers to finance the purchase of
homes. These factors served to reduce the pool of qualified homebuyers and made it more difficult to sell to first-time and move-up buyers.

 Mortgage
rates rose significantly as the Federal Reserve Bank battled inflation. While interest rates have come down recently quite significantly,
they could go back up, possibly reducing home ownership and housing demand. Also, the looming commercial lending situation may cause
rates to rise as lenders try to make up for losses on that type of lending.

 A
reduction in the demand for new homes may reduce the amount and price of the residential home lots sold by the developers and homebuilders
to which we loan money and/or increase the amount of time such developers and homebuilders must hold the home lots in inventory. These
factors increase the likelihood of defaults on our loans, which would adversely affect our business and consolidated financial results.

 Most
of our assets are commercial construction loans to homebuilders and/or developers which are a higher-than-average credit risk, and therefore
could expose us to higher rates of loan defaults, which could impact our ability to repay amounts owed to Note holders.

 Our
primary business is extending commercial construction loans to homebuilders, along with some loans for land development. These loans
are considered higher risk because the ability to repay depends on the homebuilder's ability to sell a newly built home. These
homes typically are not sold by the homebuilder prior to commencement of construction. Therefore, we may have a higher risk of loan default
among our customers than other commercial lending companies. If we suffer increased loan defaults in any given period, our operations
could be materially adversely affected, and we may have difficulty making our principal and interest payments on the Notes.

 Our
underwriting standards and procedures are more lenient than conventional lenders.

 We
invest in loans with borrowers who will not be required to meet the credit standards of conventional mortgage lenders, which is riskier
than investing in loans made to borrowers who are required to meet those higher credit standards. Because we generally approve loans
more quickly than some other lenders or providers of capital, there may be a risk that the due diligence we perform as part of our underwriting
procedures will not reveal the need for additional precautions. If so, the interest rate that we charge and the collateral that we require
may not adequately protect us or generate adequate returns for the risk undertaken.

 If
we lose or are unable to hire or retain key personnel, we may be delayed or unable to implement our business plan, which would adversely
affect our ability to repay the Notes.

 We
do not have an employment agreement with any of our employees and cannot guarantee that they will remain affiliated with us. Although
we have purchased key person life insurance on our Chief Executive Officer, we do not have key person insurance on any of our other employees.
If any of our key employees were to cease their affiliation with us, our consolidated operating results could suffer. We believe that
our future success depends, in part, upon our ability to hire and retain additional personnel. We cannot assure our investors that we
will be successful in attracting and retaining such personnel, which could hinder our ability to implement our business plan.

 Employee
misconduct could harm us by subjecting us to monetary loss, significant legal liability, regulatory scrutiny, and reputational harm.

 Our
reputation is critical to maintaining and developing relationships with our existing and potential customers and third parties with whom
we do business. There is a risk that our employees could engage in misconduct that adversely affects our business. For example, if an
employee were to engage - or be accused of engaging - in illegal or suspicious activities including fraud or theft, we could suffer direct
losses from the activity, and in addition we could be subject to regulatory sanctions and suffer serious harm to our reputation, financial
condition, customer relationships, and ability to attract future customers or employees. Employee misconduct could prompt regulators
to allege or to determine based upon such misconduct that we have not established adequate supervisory systems and procedures to inform
employees of applicable rules or to detect and deter violations of such rules. It is not always possible to deter employee misconduct,
and the precautions we take to detect and prevent misconduct may not be effective in all cases. Misconduct by our employees, or even
unsubstantiated allegations of misconduct, could result in a material adverse effect on our reputation and our business.

 A
failure in, or breach of, our operational or security systems or infrastructure, or those of our third-party vendors, including as a
result of cyber-attacks, could disrupt our business, result in the disclosure or misuse of confidential or proprietary information, damage
our reputation, increase our costs, and cause losses.

 We
rely heavily on communications and information systems to conduct our business. Information security risks for our business have generally
increased in recent years in part because of the proliferation of new technologies; the use of the Internet and telecommunications technologies
to process, transmit, and store electronic information, including the management and support of a variety of business processes, including
financial transactions and records, personally identifiable information, and customer and investor data; and the increased sophistication
and activities of organized crime, hackers, terrorists, activists, and other external parties. As customer, public, and regulatory expectations
regarding operational and information security have increased, our operating systems and infrastructure must continue to be safeguarded
and monitored for potential failures, disruptions, and breakdowns. Certain of our software and technology systems have been developed
internally and may be vulnerable to unauthorized access or disclosure. Our business, financial, accounting, and data processing systems,
or other operating systems and facilities, may stop operating properly or become disabled or damaged as a result of a number of factors,
including events that are wholly or partially beyond our control. For example, there could be electrical or telecommunication outages;
natural disasters such as earthquakes, tornadoes, and hurricanes; disease pandemics; events arising from local or larger scale political
or social matters, including terrorist acts; and, as described below, cyber-attacks.

 Our
business relies on its digital technologies, computer and email systems, software, and networks to conduct its operations. Although we
have information security procedures and controls in place, our technologies, systems, and networks and, because the nature of our business
involves the receipt and retention of personal information about our customers, our customers' personal accounts may become the
target of cyber-attacks or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse,
loss, or destruction of our customers', or other third parties' confidential information. Third parties with whom we do business
or who facilitate our business activities, including intermediaries or vendors that provide service or security solutions for our operations,
and other third parties, could also be sources of operational and information security risk to us, including from breakdowns or failures
of their own systems or capacity constraints. In addition, hardware, software, or applications we develop or procure from third parties
may contain defects in design or manufacture or other problems that could unexpectedly compromise information security.

 While
we have disaster recovery and other policies and procedures designed to prevent or limit the effect of the failure, interruption, or
security breach of our information systems, there can be no assurance that any such failures, interruptions, or security breaches will
not occur or, if they do occur, that they will be adequately addressed. Our risk and exposure to these matters remain heightened because
of the evolving nature of these threats. As a result, cyber security and the continued development and enhancement of our controls, processes,
and practices designed to protect our systems, computers, software, data, and networks from attack, damage, or unauthorized access remain
a focus for us. As threats continue to evolve, we may be required to expend additional resources to continue to modify or enhance our
protective measures or to investigate and remediate information security vulnerabilities. Disruptions or failures in the physical infrastructure
or operating systems that support our business and customers, or cyber-attacks or security breaches of the networks or systems, could
result in regulatory fines, penalties or intervention, reputation damage, reimbursement or other compensation costs, and/or additional
compliance costs, any of which could have a material effect on our results of operations or financial condition. Furthermore, if such
attacks are not detected immediately, their effect could be compounded.

 We
are susceptible to customer fraud which includes among other things wires and achs and could cause us to suffer losses on our loan portfolio.

 Because
most of our customers do not publicly report their financial condition and therefore typically are not required to be audited on a regular
basis, we are susceptible to a customer's fraud, which could cause us to suffer losses on our loan portfolio. The failure of a
customer to accurately report its financial position, compliance with loan covenants, or eligibility for additional borrowings could
result in our providing loans that do not meet our underwriting criteria, defaults in loan payments, and the loss of some or all of the
principal of a particular loan or loans. Customer fraud can come in other forms, including but not limited to fraudulent invoices for
work done, appraisal fraud, and fraud related to inspections done by third parties.

 We
have entered into loan purchase and sale agreements with third parties to sell them portions of some of our loans. This increases our
leverage. While the agreements are intended to increase our profitability, large credit losses and/or idle cash could actually reduce
our profitability, which could impair our ability to pay principal and/or interest on the Notes.

 The
loan purchase and sale agreements we entered into have allowed us to increase our loan assets and debt. If loans that we create have
significant losses, the benefit of larger balances can be outweighed by the additional credit losses. Also, while these transactions
are booked as secured financing, they are not lines of credit. Accordingly, we will have increased our loan balances without increasing
our lines of credit, which can cause a decrease in liquidity. One solution to this liquidity problem is having idle cash for liquidity,
which then could reduce our profitability. If either of these problems is persistent and/or significant, our ability to pay interest
and principal on our Notes may be impaired.

 Additional
competition may decrease our profitability, which would adversely affect our ability to repay the Notes.

 We
may experience increased competition for business from other companies and financial institutions that are willing to extend the same
types of loans that we extend at lower interest rates and/or fees. These competitors also may have substantially greater resources, lower
cost of funds, and a better-established market presence. If these companies increase their marketing efforts to our market niche of borrowers,
or if additional competitors enter our markets, we may be forced to reduce our interest rates and fees in order to maintain or expand
our market share. Any reduction in our interest rates, interest income, or fees could have an adverse impact on our profitability and
our ability to repay the Notes.

 Our
real estate loans are illiquid, which could restrict our ability to respond rapidly to changes in economic conditions.

 The
real estate loans we currently hold and intend to extend are illiquid. As a result, our ability to sell under-performing loans in our
portfolio or respond to changes in economic, financial, investment, and other conditions may be very limited. We cannot predict whether
we will be able to sell any real estate loan for the price or on the terms set by us, or whether any price or other terms offered by
a prospective purchaser would be acceptable to us. We also cannot predict the length of time needed to find a willing purchaser and to
close the sale of a loan. The relative illiquidity of our loan assets may impair our ability to generate sufficient cash to make required
interest and principal payments on the Notes.

 Our
systems and procedures might be inadequate to handle our potential growth. Failure to successfully improve our systems and procedures
would adversely affect our ability to repay the Notes.

 We
may experience growth that could place a significant strain upon our operational systems and procedures. Initially, all of our computer
systems used electronic spreadsheets and we utilized other methods that a small company would use. During 2021 and 2022, we added loan
and production documentation systems which many banks use to produce closing documents for loans. If any of these systems fail, they
could have a material adverse effect on our business, financial condition, results of operations, and, ultimately, our ability to repay
principal and interest on the Notes.

 If
we do not meet the requirements to maintain effective internal controls over financial reporting, our ability to raise new capital will
be harmed.

 If
we do not maintain effective internal controls over our financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act
of 2002, then it could result in delaying future SEC filings or future offerings. If future SEC filings or future offerings are delayed,
it could have an extreme negative impact on our cash flow causing us to default on our obligations, including on the Notes.

 We
are required to devote resources to comply with various provisions of the Sarbanes-Oxley Act, including Section 404 relating to internal
controls testing, and this may reduce the resources we have available to focus on our core business.

to Section 404 of the Sarbanes-Oxley Act and the related rules adopted by the SEC and the Public Company Accounting Oversight Board,
or PCAOB, our management is required to report on the effectiveness of our internal controls over financial reporting. We may encounter
problems or delays in completing any changes necessary to our internal controls over financial reporting. Among other things, we may
not be able to conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section
404. Any failure to comply with the various requirements of the Sarbanes-Oxley Act may require significant management time and expenses
and divert attention or resources away from our core business. In addition, we may encounter problems or delays in completing the implementation
of any requested improvements provided by our independent registered public accounting firm.

 We
are subject to risk of significant losses on our loans because we do not require our borrowers to insure the title of their collateral
for our loans.

 It
is customary for lenders extending loans secured by real estate to require the borrower to provide title insurance with minimum coverage
amounts set by the lender. We do not require most of our homebuilders to provide title insurance on their collateral for our loans to
them. This represents an additional risk to us as the lender. The homebuilder may have a title problem which normally would be covered
by insurance, but may result in a loss on the loan because insurance proceeds are not available.

 The
collateral securing our real estate loans may not be sufficient to pay back the principal amount in the event of a default by the borrowers.

 In
the event of default, our real estate loan investments are generally dependent entirely on the loan collateral to recover our investment.
Our loan collateral consists primarily of a mortgage on the underlying property. In the event of a default, we may not be able to recover
the premises promptly and the proceeds we receive upon sale of the property may be adversely affected by risks generally related to interests
in real property, including changes in general or local economic conditions and/or specific industry segments, declines in real estate
values, increases in interest rates, real estate tax rates and other operating expenses including energy costs, changes in governmental
rules, regulations and fiscal policies (including environmental legislation), acts of God, and other factors which are beyond our or
our borrowers' control. Current market conditions may reduce the proceeds we are able to receive in the event of a foreclosure
on our collateral. Our remedies with respect to the loan collateral may not provide us with a recovery adequate to recover our investment.

 If
a large number of our current and prospective borrowers are unable to repay their loans within a normal average number of months, we
will experience a significant reduction in our income and liquidity, and may not be able to repay the Notes as they become due.

 Construction
loans that we extend are expected to be repaid in a normal average number of months, typically nine months, depending on the size of
the loan. Development loans are expected to last for many years. We have interest paid on a monthly basis, but also charge a fee which
will be earned over the life of the loan. If these loans are repaid over a longer period of time, the amount of income that we receive
on these loans expressed as a percentage of the outstanding loan amount will be reduced, and fewer loans with new fees will be able to
be made, since the cash will not be available. This will reduce our income as a percentage of the Notes, and if this percentage is significantly
reduced it could impair our ability to pay principal and interest on the Notes.

 Our
cost of funds is substantially higher than that of banks.

 Because
we do not offer FDIC insurance, and because we want to grow our Notes Program faster than most banks want to grow their CD base, our
Notes offer significantly higher rates than bank CDs. Our cost of funds is higher than banks' cost of funds due to, among other
factors, the higher rate that we pay on our Notes and other sources of financing. This may make it more difficult for us to compete against
banks when they re-join our niche lending market in large numbers. This could result in losses which could impair or eliminate our ability
to pay interest and principal on our outstanding Notes.

 We
are subject to the general market risks associated with real estate construction and development.

 Our
financial performance depends on the successful construction and/or development and sale of the homes and real estate parcels that serve
as security for the loans we make to homebuilders and developers. As a result, we are subject to the general market risks of real estate
construction and development, including weather conditions, the price and availability of materials used in construction of homes and
development of lots, environmental liabilities and zoning laws, and numerous other factors that may materially and adversely affect the
success of the projects.

 Our
operations are not subject to the stringent banking regulatory requirements designed to protect investors, so repayment of Note holders'
investments is completely dependent upon our successful operation of our business.

 Our
operations are not subject to the stringent regulatory requirements imposed upon the operations of commercial banks, savings banks, and
thrift institutions, and are not subject to periodic compliance examinations by federal or state banking regulators. For example, we
will not be well diversified in our product risk, and we cannot benefit from government programs designed to protect regulated financial
institutions. Therefore, an investment in our Notes does not have the regulatory protections that the holder of a demand account or a
certificate of deposit at a bank does. The return on any Notes purchased by a Note holder is completely dependent upon our successful
operations of our business. To the extent that we do not successfully operate our business, our ability to pay interest and principal
on the Notes will be impaired.

 We
are an "emerging growth company" under the federal securities laws and are subject to reduced public company reporting requirements.

 We
are an "emerging growth company," as defined in the Jumpstart Our Business Startups Act, or the JOBS Act, and are eligible
to take advantage of certain exemptions from, or reduced disclosure obligations relating to, various reporting requirements that are
normally applicable to public companies.

 We
will remain an "emerging growth company" until the earliest of (1) the last day of the first fiscal year in which we have
total annual gross revenues of $1.07 billion or more, (2) the last day of the fiscal year following the fifth anniversary of the date
of the first sale of our common equity securities pursuant to an effective registration statement, (3) the date on which we become a
"large accelerated filer" as defined in Rule 12b-2 under the Exchange Act (which would occur if the market value of our common
equity held by non-affiliates exceeds $700 million, measured as of the last business day of our most recently completed second fiscal
quarter, and we have been publicly reporting for at least 12 months), or (4) the date on which we have issued more than $1 billion in
non-convertible debt during the preceding three-year period. Under the JOBS Act, emerging growth companies are not required to (1) provide
an auditor's attestation report on management's assessment of the effectiveness of internal control over financial reporting,
pursuant to Section 404 of the Sarbanes-Oxley Act, (2) comply with new requirements adopted by the PCAOB which require mandatory audit
firm rotation or a supplement to the auditor's report in which the auditor must provide additional information about the audit
and the issuer's financial statements, (3) comply with new audit rules adopted by the PCAOB after April 5, 2012 (unless the SEC
determines otherwise), (4) provide certain disclosures relating to executive compensation generally required for larger public companies,
or (5) hold shareholder advisory votes on executive compensation.

 Additionally,
the JOBS Act provides that an "emerging growth company" may take advantage of an extended transition period for complying
with new or revised accounting standards that have different effective dates for public and private companies. This means an "emerging
growth company" can delay adopting certain accounting standards until such standards are otherwise applicable to private companies.
However, we have elected to "opt out" of such extended transition period, and will therefore comply with new or revised accounting
standards on the applicable dates on which the adoption of such standards is required for non-emerging growth companies. Section 107
of the JOBS Act provides that our decision to opt out of such extended transition period for compliance with new or revised accounting
standards is irrevocable.

 We
are exposed to risk of environmental liabilities with respect to properties of which we take title. Any resulting environmental remediation
expense may reduce our ability to repay the Notes.

 In
the course of our business, we foreclose and take title to real estate that could be subject to environmental liabilities. We may be
held liable to a governmental entity or to third parties for property damage, personal injury, investigation and clean-up costs incurred
by these parties in connection with environmental contamination, or may be required to investigate or clean up hazardous or toxic substances
or chemical release at any property. The costs associated with investigation or remediation activities could be substantial. In addition,
as the owner or former owner of a contaminated site, we may be subject to common law claims by third parties based on damages and costs
resulting from environmental contamination emanating from the property. If we ever become subject to significant environmental liabilities,
our business, financial condition, liquidity, and results of operations could be materially and adversely affected.

 Risks
Related to Conflicts of Interest

 Our
CEO (who is also on our board of managers) and Executive Vice President will face conflicts of interest as a result of the secured lines
of credit made to us, which could result in actions that are not in the best interests of our Note holders.

 We
have two lines of credit from Daniel M. Wallach (our CEO and chairman of the board of managers) and his affiliates, and one line of credit
from William Myrick (our Executive Vice President). The first line of credit has a maximum principal borrowing amount of $1,250,000 and
is payable to Mr. Wallach and his wife, Joyce S. Wallach, as tenants by the entirety (the "Wallach LOC"). The second line
of credit has a maximum principal borrowing amount of $250,000 and is payable to the 2007 Daniel M. Wallach Legacy Trust (the "Wallach
Trust LOC," and together with the Wallach LOC, the "Wallach Affiliate LOCs"). The third line of credit has a maximum
principal borrowing amount of $1,000,000 and is payable to Mr. Myrick (the "Myrick LOC"). As of December 31, 2023, there
was $166,000 outstanding pursuant to the Wallach Trust LOC, with availability on that line of credit of $84,000, there was $160,000 outstanding
pursuant to the Wallach LOC, with remaining availability on that line of credit of $1,090,000. As of December 31, 2023, the amount outstanding
pursuant to the Myrick LOC was $0 with availability on that line of credit of $1,000,000. The interest rates on the Wallach Affiliate
LOCs and the Myrick LOC generally equal the prime rate plus 3% and were 11.5% as of December 31, 2023. The Wallach Affiliate LOCs and
the Myrick LOC are collateralized by a lien against all of our assets. The Notes are subordinated in right of payment to all secured
debt, including these Wallach Affiliate LOCs and the Myrick LOC. Pursuant to the promissory note for each Wallach Affiliate LOCs and
the Myrick LOC, the lenders have the option of funding any amount up to the face amount of the note, in the lender's sole and absolute
discretion. Therefore, Mr. Wallach and Mr. Myrick will face conflicts of interest in deciding whether and when to exercise any rights
pursuant to the Wallach Affiliate LOCs and Myrick LOC, respectively. If Mr. Wallach or Mr. Myrick exercise their rights to collect on
their collateral upon a default by us, we could lose some or all of our assets, which could have a negative effect on our ability to
repay the Notes.

 As
a result of his large equity ownership in the Company, our CEO will face a conflict of interest in deciding the number of distributions
to equity owners, which could result in actions that are not in the best interests of Note holders.

 As
of December 31, 2023, our CEO (who is also on the board of managers) beneficially owned 78.2% of the common equity of the Company. He
and his wife also own 25.2% the Series C cumulative preferred units outstanding as of December 31, 2023. Since the Company is taxed as
a partnership for federal income tax purposes, all profits and losses flow through to the equity owners. Therefore, Mr. Wallach and his
affiliated equity owners of the Company will be motivated to distribute profits to the equity owners on an annual basis, rather than
retain earnings in the Company for Company purposes. There is currently no limit in the indenture or otherwise on the amount of funds
that may be distributed by the Company to its equity owners. If substantial funds are distributed to the equity owners, the liquidity
and capital resources of the Company will be reduced and our ability to repay the Notes may be negatively impacted.

 Some
of our employees and managers may face conflicts of interest as a result of their and their relatives' investment in the Notes,
which could result in actions that are not in the best interests of our Note holders.

 Employees,
managers, members, and relatives of managers and members have invested in the Notes, in the aggregate amount of $4,454,000 as of December
31, 2023. While investment in the Notes by our affiliates may align their interests with those of other Note holders, it could also create
conflicts of interest by influencing those employees' or managers' actions during times of financial difficulties. For example,
the fact that certain of our managers hold Notes, and the value of Notes they hold, could influence their decision to redeem Notes at
a time or times when it would be prudent to use our cash resources to build capital, pay down other outstanding obligations, or grow
our business. There may be other situations not presently foreseeable in which the ownership of Notes by related persons may create conflicts
of interest. These conflicts of interest could result in action or inaction by management that is adverse to other holders of the Notes.

 We
have three lines of credit from affiliates which allow us to incur a significant amount of secured debt. These lines are collateralized
by a lien against all of our assets. Our purchase and sale agreements function as secured debt as well. We expect to incur a significant
amount of additional debt in the future, including issuance of the Notes, which will subject us to increased risk of loss.

 As
of December 31, 2023, we had $326,000 of secured debt outstanding on our senior debt lines of credit from affiliates of $2,500,000 and
the capacity to sell portions of many loans under the terms of our loan purchase and sale agreements. The affiliate loans are collateralized
by a lien against all of our assets. The loan purchase and sale agreements and other secured debt are with third-parties and are collateralized
by loans. In addition, we expect to incur a significant amount of additional debt in the future, including issuance of the Notes, borrowing
under credit facilities and other arrangements. The Notes will be subordinated in right of payment to all secured debt, including the
affiliate loans. Therefore, in the event of a default on the secured debt, affiliates of our Company, including Mr. Wallach, have the
right to receive payment ahead of Note holders, as do other secured debt holders, such as the loan purchasers under the purchase and
sale agreements. Accordingly, our business is subject to increased risk of a total loss of our Note holders' investments if we
are unable to repay all of our secured debt.

 Risks
Related to Liquidity

 We
depend on the availability of significant sources of credit to meet our liquidity needs and our failure to maintain these sources of
credit could materially and adversely affect our liquidity in the future.

 We
plan to maintain our loan purchase and sale agreements and our lines of credit from affiliates so that we may draw funds when necessary
to meet our obligation to redeem maturing Notes, pay interest on the Notes, meet our commitments to lend money to our customers, and
for other general corporate purposes. Certain features of the loan purchase and sale agreements with third parties have added liquidity
and flexibility, which have lessened the need for the lines of credit from affiliates. If we fail to maintain liquidity through our loan
purchase and sale agreements and lines of credit for any reason, including a potential negative impact to the credit markets as a result
of an outbreak of a communicable illness such as COVID-19, we will be more dependent on the proceeds from the Notes for our continued
liquidity. If the sale of the Notes is significantly reduced or delayed for any reason and we fail to obtain or renew a line of credit,
or we default on any of our lines of credit, then our ability to meet our obligations, including our Note obligations, could be materially
adversely affected, and we may not have enough cash to pay back Note holders' investments.

 In
addition, the borrowing capacity on two of our lines of credit is based on the amount outstanding on the underlying collateral loans.
If we are unable to find suitable investment opportunities, we may not be able to replace the underlying collateral loans with new loans
and, in such a situation, the borrowing capacity on those lines of credit would be reduced. Also, the failure to maintain an active line
of credit (and therefore using cash for liquidity instead of a borrowing line) will reduce our earnings, because we will be paying interest
on the Notes, while we are holding cash instead of reducing our borrowings.

 We
have unfunded commitments to builders as of December 31, 2023. If every builder borrowed every amount allowed (which would mean all of
their homes were complete) and no builders paid us back, we would need to fund that amount. While some of that amount would automatically
come from our loan purchase and sale agreements, the rest would have to come from our Notes Program and/or our lines of credit. Therefore,
we may not have the ability to fund our commitments to builders.

 As
of December 31, 2023, we have $25,263,000 of unfunded commitments to builders. If every builder borrowed every amount allowed and no
builders repaid us then we would need to fund that amount. Lines of credit, loan purchase and sale agreements, payoffs from builders,
and immediate investments in our Notes may not be enough to fund our commitments to builders as they become payable. If we default on
these obligations, then we may face any one or more of the following: a higher default rate, lawsuits brought by customers, an eventual
lack of business from borrowers, missed principal and interest payments to Note holders and holders of other debt, and a lack of desire
for investors to invest in our Notes Program. Therefore, we could default on our repayment obligations to our Note holders.

 We
have two secured lines of credit which expire in 2024, and the unsecured portion of one of those lines of credit also expires in 2024.
Failure of those lines to renew could strain our ability to pay other obligations.

 We
have a $1,325,000 line of credit (the "Shuman LOC"). As of December 31, 2023, the amount outstanding under the Shuman LOC
was $125,000 which is due in July 2024. We do not know whether the Shuman LOC will be renewed. We also have a $7,000,000 line of credit
(the "Judith Swanson LOC"), a portion of which is unsecured (the "Unsecured Judith Swanson LOC"). The balances
on the Judith Swanson LOC that were secured and unsecured as of December 31, 2023 were $5,164,000 and $1,836,000 respectively. Both the
secured and unsecured portions of the Judith Swanson LOC are due in July 2024. We do not know whether the Judith Swanson LOC will be
renewed. If we are unable to renegotiate or extend these lines of credit, then we may default on one or both of those lines of credit.
Therefore, we could default on repayment obligations to some of our debt holders, including our Note holders.

 We
have a significant amount of debt and expect to incur a significant amount of additional debt in the future, including issuance of the
Notes, which will subject us to increased risk of loss. Our present and future senior debt may make it difficult to repay the Notes.

 We
have a significant amount of debt and expect to incur a significant amount of additional debt in the future. As of December 31, 2023,
we have approximately $53,305,000 of debt, net of deferred financing costs. Our primary sources of debt include our lines of credit,
loan purchase and sale agreements, and the Notes. As of December 31, 2023, we have a total outstanding balance of $9,249,000 on our lines
of credit and approximately $12,270,000 on our loan purchase and sale agreements. We also have the capacity to sell portions of many
loans under the terms of our loan purchase and sale agreements. The loan purchase and sale agreements and other secured debt are with
third parties and all but one of the lines of credit are collateralized by loans that we have issued to builders. The Notes are subordinate
and junior in priority to any and all of our senior debt and senior subordinated debt, and equal to any and all non-senior debt, including
other Notes. There are no restrictions in the indenture regarding the amount of senior debt or other indebtedness that we may incur.
As of December 31, 2023, we had approximately $8,430,000 in Notes coming due by December 2024, and we cannot be certain whether we will
be able to fund those Notes upon maturity. Upon the maturity of our senior debt, by lapse of time, acceleration or otherwise, the holders
of our senior debt have first right to receive payment, in full, prior to any payments being made to a Note holder or to other non-senior
debt. Therefore, upon such maturity of our senior debt Note holders would only be repaid in full if the senior debt is satisfied first
and, following satisfaction of the senior debt, if there is an amount sufficient to fully satisfy all amounts owed under the Notes and
any other non-senior debt.

 In
addition, we expect to incur a significant amount of additional debt in the future, including issuance of the Notes, borrowing under
credit facilities, and other arrangements. The Notes will be subordinated in right of payment to all secured debt, including the Wallach
Affiliate LOCs, Myrick LOC, loan purchase and sale agreements, the senior subordinated note discussed in the prior paragraph, and the
line of credit discussed in the prior paragraph. Therefore, in the event of a default on the secured debt, affiliates of our Company,
including Mr. Wallach, have the right to receive payment ahead of Note holders, as do other secured debt holders, such as the loan purchasers
under the loan purchase and sale agreements. Accordingly, our business is subject to increased risk of a total loss of a Noteholder's
investment if we are unable to repay all of our secured debt.

 If
the proceeds from the issuance of the Notes exceed the cash flow needed to fund the desirable business opportunities that are identified,
we may not be able to invest all of the funds in a manner that generates sufficient income to pay the interest and principal on the Notes.

 Our
ability to pay interest on our debt, including the Notes, pay our expenses, and cover credit losses is dependent upon interest and fee
income we receive from loans extended to our customers. If we are not able to lend to a sufficient number of customers at high enough
interest rates, we may not have enough interest and fee income to meet our obligations, which could impair our ability to pay interest
and principal on the Notes. If money brought in from new Notes and from repayments of loans from our customers exceeds our short-term
obligations such as expenses, Notes interest and redemptions, and line of credit principal and interest, then it is likely to be held
as cash, which will have a lower return than the interest rate we are paying on the Notes. This will lower earnings and may cause losses
which could impair our ability to repay the principal and interest on the Notes.

 Increases
in interest rates would increase the amount of debt payments under the Wallach Affiliate LOCs and Myrick LOC which could impair our ability
to repay the principal and interest on the Notes.

 The
interest rate under the Wallach Affiliate LOCs and Myrick LOC is generally equal to the prime rate plus three percent. Increases in interest
rates will increase the applicable prime rate and therefore, the interest rate under the Wallach Affiliate LOCs and the Myrick LOC will
increase. An increase in the interest rate would increase the amount of debt payments under the Wallach Affiliate LOCs and the Myrick
LOC which would reduce our cash flows and may impair our ability to repay the principal and interest on the Notes.

 We
incurred indebtedness secured by our office property, which may result in foreclosure.

 The
debt incurred by us in connection with our office property is secured by a mortgage. If we default on our secured indebtedness, the lender
may foreclose and the entire investment in the office property could be lost, which could adversely affect our ability to repay the principal
and interest on the Notes.

 The
indenture does not contain the type of covenants restricting our actions, such as restrictions on creating senior debt, paying distributions
to our owners, merging, recapitalizing, and/or entering into highly leveraged transactions. The indenture does not contain provisions
requiring early payment of Notes in the event we suffer a material adverse change in our business or fail to meet certain financial standards.
Therefore, the indenture provides very little protection of Note holders' investments.

 The
Notes do not have the benefit of extensive covenants. The covenants in the indenture are not designed to protect Note holders'
investments if there is a material adverse change in our consolidated financial condition, results of operations, or cash flows. For
example, the indenture does not contain any restrictions on our ability to create or incur senior debt or other debt to pay distributions
to our equity holders, including our Chief Executive Officer and our Executive Vice President. It also does not contain any financial
covenants (such as a fixed charge coverage or a minimum amount of equity) to help ensure our ability to pay interest and principal on
the Notes. The indenture does not contain provisions that permit Note holders to require that we redeem the Notes if there is a takeover,
recapitalization or similar restructuring. In addition, the indenture does not contain covenants specifically designed to protect Note
holders if we engage in a highly leveraged transaction. Therefore, the indenture provides very little protection of Note holders'
investments.

 Payment
on the Notes is subordinate to the payment of our outstanding present and future senior debt, if any. Since there is no limit to the
amount of senior debt we may incur, our present and future senior debt may make it difficult to repay the Notes.

 Our
loan purchase and sale agreements and secured lines of credit with third-parties also function as senior debt. The balance on those loan
purchase and sale agreements and other secured debt, net of deferred financing costs was $21,519,000 on December 31, 2023, and is expected
to grow in the future. In addition, we have $1,250,000 in senior unsecured lines of credits which were fully drawn as of December 31,
2023. We also have senior subordinated notes which are senior to the Notes of $1,094,000 as of December 31, 2023. The Notes are subordinate
and junior in priority to any and all of our senior debt and senior subordinated debt, and equal to any and all non-senior debt, including
other Notes. The Notes are senior to junior subordinated notes. There are no restrictions in the indenture regarding the amount of senior
debt or other indebtedness that we may incur. Upon the maturity of our senior debt, by lapse of time, acceleration or otherwise, the
holders of our senior debt have first right to receive payment, in full, prior to any payments being made to a Note holder or to other
non-senior debt. Therefore, upon such maturity of our senior debt Note holders would only be repaid in full if the senior debt is satisfied
first and, following satisfaction of the senior debt, if there is an amount sufficient to fully satisfy all amounts owed under the Notes
and any other non-senior debt.

 Additional
competition for investment dollars may decrease our liquidity, which would adversely affect our ability to repay the Notes.

 We
could experience increased competition for investment dollars from other companies and financial institutions that are willing to offer
higher interest rates. We may be forced to increase our interest rates in order to maintain or increase the issuance of Notes. Any increase
in our interest rates could have an adverse impact on our liquidity and our ability to meet a debt covenant under any future lines of
credit obtained and/or to repay the Notes.

 If
we are unable to meet our Note maturity and redemption obligations, and we are unable to obtain additional financing or other sources
of capital, we may be forced to sell off our operating assets or we might be forced to cease our operations, and Note holders could lose
some or all of their investment.

 Our
Notes have maturities ranging from one year to four years. In addition, holders of our Notes may request redemption upon death and we
would be obligated to fulfill such redemption request. Holders of a 36-month Note issued on or after February 4, 2020 may request redemption
at any time and, subject to certain limitations, we would be obligated to fulfill such redemption request. We intend to pay our Note
maturity and redemption obligations using our normal cash sources, such as collections on our loans to customers, as well as proceeds
from the Notes Program. We may experience periods in which our Note maturity and redemption obligations are high. Since our loans are
generally repaid when our borrower sells a real estate asset, our operations and other sources of funds may not provide sufficient available
cash flow to meet our continued Note maturity and redemption obligations. While we have secured lines of credit from affiliates of up
to $2,500,000 with $326,000 borrowed as of December 31, 2023, our affiliates are not obligated to fund our borrowing requests. For all
of these reasons we may be substantially reliant upon the net offering proceeds we receive from the Notes Program to pay these obligations.
If we are unable to repay or redeem the principal amount of the Notes when due, and we are unable to obtain additional financing or other
sources of capital, we may be forced to sell off our operating assets or we might be forced to cease our operations, and Note holders
could lose some or all of their investment.

 There
is no "early warning" on the Notes if we perform poorly. Only interest and principal payment defaults on the Notes can trigger
a default on the Notes prior to a bankruptcy.

 There
are a limited number of performance covenants to be maintained under the Notes and/or the indenture. Therefore, no "early warning"
of a possible default by us exists. Under the indenture, only (i) the non-payment of interest and/or principal on the Notes by us when
payments are due, (ii) our bankruptcy or insolvency, or (iii) a failure to comply with provisions of the Notes or the indenture (if such
failure is not cured or waived within 60 days after receipt of a specific notice) could cause a default to occur.

 Note
holders do not have the opportunity to evaluate our investments before they are made.

 We
intend to use the net offering proceeds in accordance with the "Use of Proceeds" section of our prospectus, including investment
in secured real estate loans for the acquisition and development of parcels of real property as single-family residential lots and/or
the construction of single-family homes. Since we have not identified any investments that we will make with the net proceeds of this
offering, we are generally unable to provide Note holders with information to evaluate the potential investments we may make with the
net offering proceeds before purchasing the Notes. Note holders must rely on our management to evaluate our investment opportunities,
and we are subject to the risk that our management may not be able to achieve our objectives, may make unwise decisions, or may make
decisions that are not in our best interest.

 Because
we require a substantial amount of cash to service our debt, we may not be able to pay our obligations under the Notes.

 To
service our total indebtedness, we require a significant amount of cash. Our ability to generate cash depends on many factors, including
our successful financial and operating performance. We cannot assure Note holders that our business plans will succeed or that we will
achieve our anticipated financial results, which may prevent us from being able to pay our obligations under the Notes.

 The
indenture and terms of our Notes do not restrict our use of leverage. A relatively small loss can cause over leveraged companies to suffer
a material adverse change in their financial position. If this happened to us, it may make it difficult to repay the Notes.

institutions which are federally insured typically have 8-12% of their total assets in equity. A reduction in their loan assets due to
losses of 2% reduces their equity by roughly 20%. We had 12% and 14% of our loan assets, net in equity as of December 31, 2023 and 2022,
respectively. If we allow our assets to increase without increasing our equity, we could have a much lower equity as a percentage of
assets than we have today, which would increase our risk of non-payment on the Notes. Note holders have no structural mechanism to protect
them from this action, and rely solely on us to keep equity at a satisfactory ratio.

 We
expect to be substantially reliant upon the net offering proceeds we receive from the sale of our Notes to meet principal and interest
obligations on previously issued Notes.

 We
intend to use the net offering proceeds from the sale of Notes to, among other things, make payments on other borrowings, fund redemption
obligations, make interest payments on the Notes, and to run our business to the extent that other sources of liquidity from our operations
(e.g., repayment of loans we have previously extended to our customers) and our credit lines are inadequate. However, these other sources
of liquidity are subject to risks. Our operations alone may not produce a sufficient return on investment to repay interest and principal
on our outstanding Notes. We may not be able to obtain an additional line of credit when needed or retain one or more of our existing
lines of credit. We may not be able to attract new investors, have sufficient loan repayments, or have sufficient borrowing capacity
when we need additional funds to repay principal and interest on our outstanding Notes or redeem our outstanding Notes. If any of these
things occur, our liquidity and capital needs may be severely affected, and we may be forced to sell off our loan receivables and other
operating assets, or we may be forced to cease our operations.

 If
we default in our Note payment obligations, the indenture agreements provide that the trustee could accelerate all payments due under
the Notes, which would further negatively affect our consolidated financial position and cash flows.

 Our
obligations with respect to the Notes are governed by the terms of indenture agreements with U.S. Bank Trust Company, National Association
as trustee. Under the indentures, in addition to other possible events of default, if we fail to make a payment of principal or interest
under any Note and this failure is not cured within 30 days, then we will be deemed in default. Upon such a default, the trustee or holders
of 25% in principal of the outstanding Notes could declare all principal and accrued interest immediately due and payable. If our total
assets do not cover these payment obligations, then we would most likely be unable to make all payments under the Notes when due, and
we might be forced to cease our operations.

 There
is no sinking fund to ensure repayment of the Notes at maturity, so Note holders are totally reliant upon our ability to generate adequate
cash flows.

 We
do not contribute funds to a separate account, commonly known as a sinking fund, to repay the Notes upon maturity. Because funds are
not set aside periodically for the repayment of the Notes over their respective terms, Note holders must rely on our consolidated cash
flows from operations, investing and financing activities and other sources of financing for repayment, such as funds from sale of the
Notes, loan repayments, and other borrowings. To the extent cash flows from operations and other sources are not sufficient to repay
the Notes, the Note holders may lose all or part of their investment.

 If
we have a large number of repayments on the Notes, whether because of maturity or redemption, we may be unable to make such repayments.

 We
are obligated to redeem a Note without any interest penalty (i) upon the death of an investor, if requested by the executor or administrator
of the investor's estate (or if the Note is held jointly, by the surviving joint investor), and (ii) subject to certain limitations,
upon request by an investor holding a 36-month Note issued on or after February 4, 2020. Such redemption requests are not subject to
our consent but are subject to restrictions in the indenture. We may be faced with a large number of such redemption requests at one
time. We are also required to repay all of the Notes upon their maturity. If the amounts of those repayments are too high, and we cannot
offset them with loan repayments, secure new financing, or issue additional Notes, we may not have the liquidity to repay the investments.

 ITEM
1B. UNRESOLVED STAFF COMMENTS

 Not
applicable.

 ITEM
 1C. CYBERSECURITY

 We
face cybersecurity risks due primarily to our position in the industry and identity as a financial service company with potential for
harm that could occur to us, our investors and our customers were we to suffer impacts of a material cybersecurity incident. We are committed
to maintaining robust governance and oversight of these risks and to implementing mechanisms, controls, technologies, and processes designed
to help us assess, identify, and manage these risks. While we have not, as of the date of this Annual Report, experienced a cybersecurity
threat or incident that resulted in a material adverse impact to our business or operations, our business strategy, results of operations,
or financial condition, there can be no guarantee that we will not experience such an incident in the future. In addition, the environment
and threats are constantly evolving, thereby increasing the difficulty of successfully defending against them or implementing adequate
preventative measures. We seek to detect and investigate unauthorized attempts and attacks against our network and services which are
also dependent on third parties (multiple law firms, banks, settlement and title entities) and their technology, and to prevent their
occurrence and recurrence where practical through changes, updates and enhancements to our internal processes and tools; however, we
remain potentially vulnerable to known or unknown threats.

 We
aim to incorporate industry best practices throughout our cybersecurity program. Our cybersecurity strategy focuses on implementing effective
and efficient controls, technologies, and other processes to assess, identify, and manage material cybersecurity risks. Our cybersecurity
program is designed to be aligned with applicable industry standards and is assessed periodically by independent subject matter expert
third parties who hold industry leading certifications such as Certified Information Systems Security Professional (CISSP), GIAC Certified
Intrusion Analyst (GCIA), and GIAC Certified Incident Handler (GCIH).

 We
have processes in place to identify, access, and address material cybersecurity threats and incidents with the help of the above noted
expert third parties as needed. We monitor issues that are internally discovered or externally reported that may affect our business
and have processes to assess those issues for potential cybersecurity impact or risk.

to our Audit Committee Charter, our Audit Committee is responsible for reviewing and assessing our risk assessment and risk management
policies, including oversight of cybersecurity risk. Our risk assessment policy is utilized in making decisions with respect to company
priorities, resource allocations, and oversight structures. Our Board of Managers, with the assistance of our Audit Committee and Technology
Committee, regularly reviews our cybersecurity program with management and reports to the Board of Managers. Cybersecurity reviews generally
occur at least annually, or more frequently as determined to be necessary or advisable. We have an escalation process in place to inform
senior management and the Board of Managers of material issues.

 ITEM
2. PROPERTIES

 As
of December 31, 2023, we operate an office in Jacksonville, Florida, which we own. We entered into a mortgage on our office building
for $660,000 in January 2018 after a majority of the construction was completed. As of December 31, 2023, our mortgage payable balance
was $571,000.

 ITEM
3. LEGAL PROCEEDINGS

 (a)

 As
 of the date of this filing, we are not aware that we or our members are a party to any pending or threatened legal proceeding or
 proceeding by a governmental authority that would have a material adverse effect on our business.

 (b)

 None.

 ITEM
4. MINE SAFETY DISCLOSURES

 Not
applicable.

 PART
II

 ITEM
5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCK HOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES

 (All
dollar [$] amounts shown in thousands.)

 (a)

 Common

 As
of December 31, 2023, we had 20,000 Class A common membership units ("Class A Common Units") outstanding, held by our ten
members. There is no established public trading market for our Class A Common Units. As of December 31, 2023, 78.15% of our outstanding
Class A Common Units are beneficially owned by our CEO (who is also on our board of managers), Daniel M. Wallach, and his wife, Joyce
S. Wallach.

 On
October 1, 2023, the Company entered into restricted unit agreements with Mark Reynolds, the Executive Vice President of Sales, and Catherine
Loftin, the Chief Financial Officer, pursuant to which the Company issued 200 restricted common units to each of Mark Reynolds and Catherine
Loftin. Vesting of the restricted common units commences from the grant date and occur thereafter on the first day of each subsequent
calendar month subject to the Company satisfying monthly earnings goals, measured two months in arrears in accordance with the vesting
schedule.

 As
of December 31, 2023 and 2022, 14 and 0 restricted common units vested and 386 and 0 restricted common units were outstanding, respectively.
In addition, stock compensation expense was $7 and $0 as of December 31, 2023 and 2022, respectively.

 Preferred

B Preferred Units

 We
previously entered into an agreement with the Hoskins Group (consisting of Benjamin Marcus Homes, LLC, Investor's Mark Acquisitions,
LLC, and Mark L. Hoskins) pursuant to which we sell the Hoskins Group 0.1 Series B cumulative preferred units ("Series B Preferred
Units") upon the closing of certain lots.

 There
is no established public trading market for our Series B Preferred Units. The Series B Preferred Units are redeemable by the Company
at any time. The Series B Preferred Units have a fixed value which is their purchase price, and preferred liquidation and distribution
rights. Yearly distributions of 10% of the Series B Preferred Units' value (provided profits are available) are generally made
quarterly. The Hoskins Group's Series B Preferred Units are also used as collateral for that group's loans to the Company.

March 2023, the Company redeemed 100% of the outstanding Series B Preferred Units. As of December 31, 2023, we had no Series B Preferred
Units outstanding.

 The
transactions in Series B Preferred Units described above were effected in private transactions exempt from the registration requirements
of the Securities Act under Section 4(a)(2) of the Securities Act. The transactions described above did not involve any public offering,
were made without general solicitation or advertising, and the buyer represented to us that it is an "accredited investor''
within the meaning of Rule 501 of Regulation D promulgated under the Securities Act, with access to all relevant information necessary
to evaluate the investment in the Series B Preferred Units.

C Preferred Units

 As
of December 31, 2023, we had 47.73 Series C cumulative preferred units ("Series C Preferred Units") outstanding or 13 investments,
held by 10 investors. There is no established public trading market for our Series C Preferred Units. As of December 31, 2023, 25.2%
of our outstanding Series C Preferred Units are beneficially owned by our CEO (who is also on our board of managers), Daniel M. Wallach,
and his wife, Joyce S. Wallach.

 Investors
in the Series C Preferred Units may elect to reinvest their distributions in additional Series C Preferred Units (the "Series C
Reinvestment Program"). Pursuant to the Series C Reinvestment Program, we issued the following Series C Preferred Units during
the quarter ended December 31, 2023:

 Recipient

 Units Issued

 Distribution

 Daniel M. Wallach and Joyce S. Wallach

 0.3535590

 $
 35,355.90

 Gregory L. Sheldon and Madeline M. Sheldon

 0.2357712

 23,577.12

 Schultz Family Revocable Living Trust

 0.0542329

 5,423.29

 Fernando Ascencio and Lorraine Carol Ascencio

 0.1014700

 10,147.00

 Mark and Tris Ann Garboski

 0.2042058

 20,420.28

 Total

 0.9492359

 $
 94,923.59

 The
proceeds received from the sales of the Series C Preferred Units discussed above were used for the funding of construction loans. The
transactions in Series C Preferred Units described above were effected in private transactions exempt from the registration requirements
of the Securities Act under Section 4(a)(2) of the Securities Act. The transactions described above did not involve any public offering,
were made without general solicitation or advertising, and the buyer represented to us that they were an "accredited investor"
within the meaning of Rule 501 of Regulation D promulgated under the Securities Act, with access to all relevant information necessary
to evaluate the investment in the Series C Preferred Units.

 (b)

 Notes
 Program

 We
registered up to $70,000 in Fixed Rate Subordinated Notes ("Notes") in our current public offering, which is our fourth public
offering of Notes (SEC File No. 333-263759, effective September 16, 2022). As of December 31, 2023, we had issued $13,901 in Notes pursuant
to our current public offering. As of December 31, 2023, we incurred expenses of $268 in connection with the issuance and distribution
of the Notes in our current public offering, which were paid to third parties. These expenses were not for underwriters or discounts,
but were for advertising, printing, and professional services. Net offering proceeds as of December 31, 2023 were $13,633 all of which
was used to increase loan balances.

 (c)

 None.

 ITEM
6. [RESERVED]

 ITEM
7. 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 consolidated financial statements and the notes thereto contained elsewhere in this report. See also "Cautionary Note Regarding
Forward-Looking Statements" preceding Part I.

 Overview

 We
were organized in the Commonwealth of Pennsylvania in 2007 under the name 84 RE Partners, LLC and changed our name to Shepherd's
Finance, LLC on December 2, 2011. We converted to a Delaware limited liability company on March 29, 2012. Our business is focused on
commercial lending to participants in the residential construction and development industry. We believe this market is underserved because
of the lack of traditional lenders currently participating in the market. We are located in Jacksonville, Florida. Our operations are
governed pursuant to our limited liability company agreement.

 The
commercial loans we extend are secured by mortgages on the underlying real estate. We extend and service commercial loans to small-to-medium
sized homebuilders for the purchase of lots and/or the construction of homes thereon. In some circumstances, the lot is purchased with
an older home on the lot which is then either removed or rehabilitated. If the home is rehabilitated, the loan is referred to as a "rehab"
loan. We also extend and service loans for the purchase of lots and undeveloped land and the development of that land into residential
building lots. In addition, we may, depending on our cash position and the opportunities available to us, do none, any or all of the
following: purchase defaulted unsecured debt from suppliers to homebuilders at a discount (and then secure that debt with real estate
or other collateral), purchase defaulted secured debt from financial institutions at a discount, and purchase real estate in which we
will operate our business.

 Economic
and Industry Dynamics

2023, the Company continued to focus on the reduction of non-interest earning assets. As of December 31, 2023, loans classified as non-accrual
were 17 or $5,912 compared to 14 or $7,177 as of December 31, 2022. In addition, as of December 31, 2023 and 2022 we had 1 foreclosed
asset or $130 and 3 or $1,582, respectively.

 The
Company continues to lose interest income on assets that do not accrue interest. During the year ended December 31, 2023 the estimated
loss on interest income related to impaired and foreclosed assets was $846. Looking ahead, we expect to continue to lose interest income on nonearning
assets, however we expect credit losses to decrease in 2024 as compared to 2023

 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 2024:

 1.

 Continue
 to manage the balance of non-interest-bearing assets, which includes foreclosed real estate and non-accrual assets.

 2.

 Maintain
 sales - we will increase our focus on fix and flips as a percentage of sales.

 3.

 Lower
 SG&A expenses.

 4.

 Slightly
 increase margin, as compared to our current spread.

 5.

 Maintain
 liquidity at a level sufficient for loan originations.

 6.

 Reduce
 credit loss and impairment expense.

2024, the housing market in most of the areas in which we do business will likely increase as compared to the same period of time in
2023 due to the already reduced long term mortgage interest rates, and an anticipated continuing reduction of those rates as a result
of short-term interest rate cuts by the Federal Reserve Bank. We should experience no further losses from our COVID-19 loans, as the
final balances of those loans were either paid off or written off in 2023, so we expect total credit losses for 2024 to be lower than
2023. There is a risk if mortgage rates continue to drop that many homeowners in existing low-rate mortgages will decide to "move
up" and sell their low mortgage rate home, flooding the market with homes. Offsetting that risk is the fact that they will also
increase demand for homes as they will need one to live in. Rents may become less affordable vs. owing a home, which helps our customer.
While we don't anticipate the market flooding to negatively impact us, there is little history to go by and this might cause housing
prices to drop steeply, which will hurt our existing loans and also reduce new loan production.

 Perceived
Challenges and Anticipated Responses

 The
following is not intended to represent a comprehensive list or description of the risks or challenges facing the Company. Currently,
our management is most focused on the following challenges along with the corresponding actions to address those challenges:

 Perceived
 Challenges and Risks

 Anticipated
 Management Actions/Response

 Potential
 loan value-to-collateral value issues (i.e., being underwater on particular loans)

 We
 manage this challenge by risk-rating both the geographic region and the builder, and then adjusting the loan-to-value (i.e., the
 loan amount versus the value of the collateral) based on risk assessments. Additionally, we collect a deposit up-front for construction
 loans. Despite these efforts, if values in a particular area of the country drop by 60%, we will have loaned more than the value
 of the collateral. We have found that the best solution to this risk is a speedy resolution of the loan, and helping the builder
 finish the home rapidly rather than foreclosing on the partially built home. Our experience in this area will help us limit, but
 not eliminate, the negative effects in the event of another economic downturn.

 Concentration
 of loan portfolio (i.e., how many of the loans are of or with any particular type, customer, or geography)

 As
 of December 31, 2023 and 2022, 29% and 27%, respectively, of our outstanding loan commitments consist of loans to one borrower, and
 the collateral is in one real estate market, Pittsburgh, Pennsylvania. Accordingly, the ultimate collectability of a significant
 portion of these loans is susceptible to changes in market conditions in that area. As of December 31, 2023, our next two largest
 customers make up 7% and 6% of our loan commitments, with loans in Cape Coral and Palm Bay, Florida, respectively. As of December
 31, 2022, our next two largest customers made up 9% and 7% of our loan commitments, with loans in Cape Coral and Orlando, Florida,
 respectively. In the upcoming years, we plan on continuing to increase our geographic and builder diversity while continuing to focus
 on our residential homebuilder customers.

 Not
 having funds available to us to service the commitments we have

 As
 of December 31, 2023, our typical construction loan had about 64% of its loan amount outstanding on average. That means that on average,
 about 36% of the commitment is not loaned, usually because the house is not complete. As of December 31, 2023, unfunded commitments
 were $25,263, which we will fund along with our purchase and sale agreement participants. However, if we are short on cash, we could
 do the following:

 raise interest rates on the Notes we offer to our investors to attract new Note investments;

 sell more secured interests on our loans; or

 draw down on our lines of credit from our affiliates.

 Non-payment
 of interest by our customers

 Most
 of our customers pay interest on a monthly basis, and these funds are used to, among other things, pay interest on our debt monthly.
 While we have the liquidity to withstand some non-payment of interest, if a high percentage of our customers were not paying interest,
 it will impede our ability to pay our debts on time.

 Nonperforming
 assets

 As
 of December 31, 2023, nonperforming assets were approximately $5,605 (defined as impaired loans, net and/or loans on non-accrual
 plus foreclosed assets net of reserves).

 Critical
Accounting Estimates

 To
assist in evaluating our 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.

for Credit Losses

 Based
on the Company's size, complexity and historical data the aggregate method or loss-rate method was selected to estimate 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 and C and Unsecured for both construction and development loans where A
and C defines the highest and lowest scores, respectively. Unsecured loans in our portfolio do not hold underlying 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

 Average
 cash should be 2% of the borrower's total approval limit =.83 POINTS

 cash balance should be 1% of their total approval limit =.83 POINTS

 Bank
statements received from the borrower are entered into LAS 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

 or higher credit score = 1.66

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

 Meets
 minimum experience requirement according to the application matrix = 1.66

 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:

 Score of 4+ = A

 Score of 2.49 – 3.9 = B

 Score below 2.49 = C

 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:

 1.
 value which is obtained when the loan originates;

 2.
 Historical
 Originations by Ranking Bucket which is the sum of the Commitment Value obtained when the
 loan is closed; and

 3.
 Losses
 by Ranking Bucket which are losses expensed for loans not within foreclosure since 2018.

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

 Other
Significant Accounting Policies

 Other
significant accounting policies, not involving the same level of measurement uncertainties as those discussed above, are nevertheless
important to an understanding of the consolidated financial statements. Policies related to credit quality information, fair value measurements,
offsetting assets and liabilities, related party transactions and revenue recognition require difficult judgments on complex matters
that are often subject to multiple and recent changes in the authoritative guidance. Certain of these matters are among topics currently
under re-examination or have recently been addressed by accounting standard setters and regulators. Specific conclusions have not been
reached by these standard setters, and outcomes cannot be predicted with confidence. Also, see Note 2 of our consolidated financial statements,
as they discuss accounting policies that we have selected from acceptable alternatives.

Results of Operations

 Key
financial and operating data for the years ended December 31, 2023 and 2022 are set forth below. For a more complete understanding of
our industry, the drivers of our business, and our current period results, this discussion should be read in conjunction with our consolidated
financial statements, including the related notes and the other information contained in this document.

 Accounting
principles generally accepted in the United States of America (U.S. GAAP) require that we report financial and descriptive information
about reportable segments and how these segments were determined. Our management determines the allocation and performance of resources
based on operating income, net income and operating cash flows. Segments are identified and aggregated based on the products sold or
services provided and the market(s) they serve. Based on these factors, management has determined that our ongoing operations are in
one segment, commercial lending.

 Below
is a summary of our statements of operations for the years ended December 31, 2023 and 2022:

 (in thousands of dollars)

 2023

 2022

 Net Interest Income

 Interest and fee income on loans

 $
 11,554

 $
 10,220

 Interest expense:

 Interest related to secured borrowings

 2,263

 2,134

 Interest related to unsecured borrowings

 3,261

 2,972

 Interest expense

 $
 5,524

 $
 5,106

 Net interest income

 6,030

 5,114

 Less: Credit loss provision

 Net interest income after credit loss provision

 5,293

 4,184

 Non-Interest Income

 Gain on sale of foreclosed assets

 $

 $

 Gain on sale of real estate investments

 –

 Dividend income

 -

 Other income

 Total non-interest income

 $

 $

 5,391

 4,501

 Non-Interest Expense

 Selling, general and administrative

 $
 2,696

 $
 2,683

 Depreciation and amortization

 Loss on the sale of foreclosed assets

 -

 Impairment loss on foreclosed assets

 Total non – Interest expense

 2,813

 2,741

 Net income

 $
 2,578

 $
 1,760

 Net income attributable to preferred equity holders

 Net income attributable to common equity holders

 $
 1,991

 $

 Net
income for the year ended December 31, 2023 increased $818 to $2,578 when compared to the same period of 2022.

 We
had $58,130 and $56,650 in loan assets, net as of December 31, 2023 and 2022, respectively. As of December 31, 2023, we had 225 construction
loans in 20 states with 62 borrowers and 11 development loans in six states with nine borrowers.

Spread

 The
following table displays a comparison of our interest income, expense, fees and spread for the years ended December 31, 2023 and 2022:

 2023

 2022

 Interest Income

 *

 *

 Estimated interest income

 $
 9,094

 %

 $
 7,994

 %

 Estimated unearned interest income due to COVID-19

 (379
)

 (1
)%

 (467
)

 (1
)%

 Interest income on loans

 8,715

 %

 7,527

 %

 Fee income on loans

 3,457

 %

 3,355

 %

 Deferred loan fees

 (618
)

 (1
)%

 (662
)

 (1
)%

 Fee income on loans, net

 2,839

 %

 2,693

 %

 Interest and fee income on loans

 11,554

 %

 10,220

 %

 Interest expense – secured

 2,263

 %

 2,134

 %

 Interest expense – unsecured

 3,026

 %

 2,745

 %

 Offering costs amortization

 -
 %

 -
 %

 Interest expense

 5,524

 %

 5,106

 %

 Net interest income (spread)

 6,030

 %

 5,114

 %

 Weighted average outstanding loan asset balance

 $
 63,586

 $
 56,893

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

 There
are three main components that can impact our interest spread:

 Difference between the interest rate received (on our loan assets) and the interest rate paid (on our borrowings). The
loans we have originated have interest rates which are based on our cost of funds, with a minimum cost of funds of 10.25%. For most loans,
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 (our equity).

income on loans was 14% and 13% for the years ended December 31, 2023 and 2022, respectively. Estimated interest not earned during the
year ended December 31, 2023 and 2022 due to loans impaired as a result of COVID-19 was $379 and $467, respectively.

 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%, which may increase because some customers run past the standard repayment time and pay a higher rate of
5% starting in 2023.

 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 the termination of the loan. In 2022,
we started charging an annual fee on most of our development loans which varies.

 Fee
income on loans before deferred loan fee adjustments decreased 1% to 5% for the year ended December 31, 2023 compared to 6% for the same
period of 2022. The decrease primarily related to modification charged on certain loans during 2022.

 Amount of nonperforming assets. Generally, we can have two types of nonperforming assets that negatively affect interest
spread: loans not paying interest and foreclosed assets.

 As
of December 31, 2023 and 2022, we had 17 impaired loans in the aggregate amount of $5,475 and 14 impaired loans in the aggregate amount
of $7,177 that were not paying interest, respectively.

assets do not provide a monthly interest return. As of December 31, 2023 and 2022, foreclosed assets were $130 and $1,582, respectively,
which resulted in a negative impact on our interest spread in both years.

Loss Provision

loss provision (expense throughout the year) was $737 and $930 for the years ended December 31, 2023 and 2022, respectively.

 The
allowance for credit losses at December 31, 2023 was $695 which primarily consisted of $258 for loans without specific reserves and $437
for loans with specific reserves.

 The
allowance for credit losses at December 31, 2022 was $2,527 which primarily consisted of $294 for loans without specific reserves, $246
for loans with specific reserves and $1,987 for specific reserves due to the impact of COVID-19.

 Non-Interest

 Gain
on Sale of Foreclosed Assets

the years ended December 31, 2023 and 2022, we recognized $8 and $101, respectively, as a gain on the sale of foreclosed assets which
related to the sale of one and two foreclosed assets during 2023 and 2022, respectively.

 Gain
on Sale of Real Estate Investments

the year ended December 31, 2023, the Company sold two real estate investment assets and recognized a gain on the sale of $10.

 Dividend

January 2021, we invested $500 in Series A Preferred Units in Benjamin Marcus Homes, LLC. During March 2023, we redeemed 100% of our
ownership in the Series A Preferred Units at Benjamin Marcus Homes, LLC. During the year ended December 31, 2023 and 2022, $0 and $62
of dividend income was recognized related to the Series A Preferred Units investment, respectively.

 Other

the year ended December 31, 2023 and 2022, we consulted for one and two of our construction and development loan customers, respectively,
which included accounting guidance and recognized $80 and $154 in other income. We anticipate to continue our consulting services to
our customers on an as needed basis during 2024.

 Non-Interest
Expense

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

 The
following table displays our SG&A expenses for the years ended December 31, 2023 and 2022:

 2023

 2022

 Selling, general and administrative expenses

 Legal and accounting

 $

 $

 Salaries and related expenses

 1,708

 1,611

 Board related expenses

 Advertising

 Rent and utilities

 Loan and foreclosed asset expenses

 Travel

 Other

 Total SG&A

 $
 2,696

 $
 2,683

 SG&A
expenses increased $13 to $2,696 for the year ended December 31, 2023 compared to $2,683 for the same period of 2022 due primarily to
salaries and related expense.

Loss on Foreclosed Assets

both years ended December 31, 2023 and 2022, we recognized $2 for losses on impairment of foreclosed assets.

 Loss
on the Sale of Foreclosed Assets

December 31, 2023 the loss on the sale of one foreclosed asset was $34. No loss on the sale of foreclosed assets was recognized in 2022.

Financial Position

 Cash,
Cash Equivalents and Restricted Cash

 We
try to avoid borrowing on our lines of credit from affiliates. To accomplish this, we must carry some cash for liquidity. This amount
generally grows as our Company grows. As of December 31, 2023 and 2022, our cash was $3,522 and $2,996, respectively, and our restricted
cash was $0 and $1,200, respectively.

 Loans
Receivable, net

Loans – Construction Loan Portfolio Summary

 We
anticipate the aggregate balance of our construction loan portfolio will increase as built homes take longer to sell.

 The
following is a summary of our loan portfolio to builders for home construction loans as of December 31, 2023:

 State

 of

 of
 Loans

 Gross

 Value

 Loan Fee

 Arizona

 $
 2,148

 $
 1,504

 $

 %

 %

 California

 2,551

 1,530

 1,511

 %

 %

 1,039

 %

 %

 36,644

 19,279

 14,093

 %

 %

 2,963

 1,831

 1,229

 %

 %

 Illinois

 1,600

 %

 %

 Indiana

 %

 %

 Louisiana

 %

 %

 Maryland

 %

 %

 Missouri

 %

 %

 1,985

 1,563

 %

 %

 10,637

 6,681

 2,994

 %

 %

 Ohio

 3,776

 2,601

 1,686

 %

 %

 21,301

 16,763

 13,205

 %

 %

 20,029

 12,624

 6,694

 %

 %

 1,554

 1,047

 %

 %

 Texas

 1,970

 1,773

 1,693

 %

 %

 Utah

 2,918

 1,792

 %

 %

 Virginia

 %

 %

 Washington

 2,789

 2,427

 2,376

 %

 %

 Total

 $
 117,169

 $
 75,300

 $
 51,788

 %(3)

 %

 (1)

 The

 (2)

 The
 loan to value ratio is calculated by taking the commitment amount and dividing by the appraised value.

 (3)

 The
following is a summary of our loan portfolio to builders for home construction loans as of December 31, 2022:

 State

 of

 of
 Loans

 Gross

 Value

 Loan Fee

 Arizona

 $

 $

 $

 %

 %

 2,045

 1,463

 1,365

 %

 %

 1,035

 %

 %

 42,605

 30,573

 21,155

 %

 %

 3,116

 1,798

 %

 %

 Illinois

 1,245

 %

 %

 Louisiana

 %

 %

 Maryland

 %

 %

 Michigan

 1,437

 1,003

 %

 %

 3,127

 2,259

 2,769

 %

 %

 New York

 %

 %

 7,067

 4,143

 2,676

 %

 %

 Ohio

 1,178

 %

 %

 Oregon

 %

 %

 20,132

 14,016

 9,831

 %

 %

 7,525

 5,133

 3,582

 %

 %

 1,554

 %

 %

 Texas

 3,118

 2,039

 1,828

 %

 %

 Utah

 %

 %

 Virginia

 %

 %

 Washington

 3,995

 2,732

 2,158

 %

 %

 Total

 $
 104,993

 $
 72,526

 $
 52,796

 %(3)

 %

 (1)

 The

 (2)

 The
 loan to value ratio is calculated by taking the commitment amount and dividing by the appraised value.

 (3)

Loans – Real Estate Development Loan Portfolio Summary

 of

 of

 Loans

 Value
 of Collateral (1)

 Gross

 Outstanding (4)

 Loan
 to

 Value

 Spread (5)

 %

 %

 1,378

 %

 %

 New
 Jersey

 %

 %

 North
 Carolina

 1,110

 %

 %

 19,983

 8,500

 8,365

 %

 South
 Carolina

 1,980

 %

 %

 Total

 $

 23,873

 $

 11,256

 $

 9,505

 % (3)

 %

 (1)

 The
 value is determined by the appraised value adjusted for remaining costs to be paid and third-party mortgage balances. In the event
 of a foreclosure on the property securing these loans, the portion of our collateral that is preferred equity in our Company might
 be difficult to sell, which could impact our ability to eliminate the loan balance.

 (2)

 The
 loan to value ratio is calculated by taking the outstanding amount and dividing by the appraised value calculated as described above.

 (3)

 (4)

 Gross
 Amount Outstanding credit balances are due to deposits on account.

 (5)

 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, 2022:

 of Borrowers

 of
 Loans

 Value of Collateral (1)

 Commitment Amount

 Gross
 Outstanding (4)

 Value Ratio (2)

 Spread (5)

 $

 $

 $

 %

 %

 %

 %

 1,196

 (117
)

 (67
)%

 %

 %

 %

 %

 %

 %

 %

 16,664

 8,500

 6,153

 %

 1,401

 1,386

 1,367

 %

 %

 Texas

 -

 (28
)

 %

 %

 Total

 $
 19,718

 $
 12,110

 $
 8,178

 %(3)

 %

 (1)

 The
 value is determined by the appraised value adjusted for remaining costs to be paid and third-party mortgage balances. Part of this
 collateral is $1,900 of preferred equity in our Company. In the event of a foreclosure on the property securing these loans, the
 portion of our collateral that is preferred equity in our Company might be difficult to sell, which could impact our ability to eliminate
 the loan balance.

 (2)

 The
 loan to value ratio is calculated by taking the outstanding amount and dividing by the appraised value calculated as described above.

 (3)

 (4)

 Gross
 Amount Outstanding credit balances are due to deposits on account.

 (5)

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

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

 2023

 2022

 Beginning balance

 $

 $
 46,943

 Originations and modifications

 58,216

 59,408

 Principal collections

 (57,895
)

 (49,658
)

 Transferred from loans receivables, net

 -

 (556
)

 Transferred to loans receivables, net

 -

 1,017

 Change in builder deposit

 (217
)

 Change in allowance for credit losses

 1,832

 (479
)

 Change in loan fees, net

 (456
)

 (120
)

 Ending balance

 $

 $

Quality Information

 Effective
January 1, 2023, we adopted ASC 326, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,"
 which replaced the incurred loss methodology for determining out provision for credit losses and allowance for credit losses with
current expected credit loss ("CECL") model. Upon the adoption of ASC 326 the total amount of the allowance for credit losses
("ACL") on loans estimated using the CECL methodology increased $178 compared to the total amount of the allowance recorded
using the prior incurred loss model.

 Based
on the Company's size, complexity and historical data the aggregate method or loss-rate method was selected to estimate 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,
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 and C and Unsecured for both construction and development loans where A
and C defines the highest and lowest scores, respectively. Unsecured loans in our portfolio do not hold underlying 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.

 Our
Company construction loans are collateralized by land and real estate while our Company development loans are collateralized by land.
Secured nonaccrual loans individually evaluated are also collateralized by land and real estate. Our Company has one unsecured loan that
is not collateralized; however, it is fully reserved at $86 as of December 31, 2023.

 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, 2023.

 Loans
 Receivable
 Gross

 Value

 ACL

 Construction Loans Collectively Evaluated:

 $
 40,252

 $
 59,075

 $

 5,718

 10,339

 -

 -

 -

 Development Loans Collectively Evaluated:

 $
 8,787

 $
 9,793

 $

 -

 Unsecured Nonaccrual Loans Individually Evaluated

 $

 $

 $

 Secured Nonaccrual loans Individually Evaluated:

 $
 5,826

 $
 6,303

 $

 Total

 $

 $
 86,556

 $

 The
following table presents the amortized cost basis of loans on nonaccrual status and loans past due over 89 days still accruing as of

 Nonaccrual with No Allowance for Credit Loss

 Nonaccrual with Allowance for Credit Loss

 Loans Past Due Over 89 Days Still Accruing

 Unsecured Nonaccrual Loans Individually Evaluated

 $
 -

 $

 $
 -

 Secured Nonaccrual loans Individually Evaluated:

 $
 2,495

 $
 3,331

 $
 -

 Total

 $
 2,495

 $
 3,417

 $
 -

 For
loans greater than 12 months in age that are individually evaluated, appraisals are ordered and prepared if the current appraisal is
greater than 13 months old and construction is greater than 90% complete. If construction is less than 90% complete the Company uses
the latest appraisal on file. At certain times the Company may choose to use a broker's opinions of value ("BOV") as
a replacement for an appraisal if deemed more efficient by management. Appraised values are adjusted down for estimated costs associated
with asset disposal. Broker's opinion of selling price, use currently valid sales contracts on the subject property, or representative
recent actual closings by the builder on similar properties may be used in place of a broker's opinion of value.

 Appraisers
are state certified, and are selected by first attempting to utilize the appraiser who completed the original appraisal report. If that
appraiser is unavailable or unreasonably expensive, we use another appraiser who appraises routinely in that geographic area. BOVs are
created by real estate agents. We try to first select an agent we have worked with, and then, if that fails, we select another agent
who works in that geographic area.

 In
addition, our loan portfolio includes performing, forbearance and non-accrual loans. The Company's policies with respect to placing
loans on non-accrual and individually evaluated if they are past due greater than 90 days unless management deems the loan an exception.
A fair market value analysis is performed and an allowance for credit loss is established based on the results of the analysis.

 The
following is an aging of our gross loan portfolio as of December 31, 2023:

 Gross Loan

 Current

 Past
 Due

 Past Due

 Past Due

 Past Due

 Value

 0 - 59

 60 - 89

 90 - 179

 180 - 269

 >270

 Performing Loans

 $
 49,039

 $
 49,039

 $
 –

 $
 –

 $
 –

 $
 –

 5,890

 5,890

 –

 –

 –

 –

 –

 –

 –

 –

 Forbearance Loans

 –

 –

 –

 –

 –

 –

 –

 –

 –

 –

 –

 –

 Unsecured Nonaccrual Loans Individually Evaluated:

 –

 –

 –

 –

 Secured Nonaccrual Loans Individually Evaluated:

 5,826

 –

 1,497

 1,641

 1,807

 Total

 $

 $

 $

 $
 1,497

 $
 1,641

 $
 1,893

 Below
is an aging schedule of loans receivable as of December 31, 2023, on a recency basis:

 No.
 Loans

 %

 Current loans (current accounts and accounts on which more than 50% of an original contract payment was made in the last 59 days)

 $

 90.4
 %

 60-89 days

 1.4
 %

 90-179 days

 1,497

 2.4
 %

 180-269 days

 1,641

 2.7
 %

 >270 days

 1,893

 3.1
 %

 $

 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

 $

 100.0
 %

 Below
is an aging schedule of loans receivable as of December 31, 2023, on a contractual basis:

 No.
 Loans

 %

 Contractual Terms - All current Direct Loans and Sales Finance Contracts with installments past due less than 60 days from due date.

 $

 90.4
 %

 60-89 days

 1.4
 %

 90-179 days

 1,497

 2.4
 %

 180-269 days

 1,641

 2.7
 %

 >270 days

 1,893

 3.1
 %

 $

 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

 $

 100.0
 %

for Credit Losses on Loans

 The
following table provides a roll forward of the allowance for credit losses:

 Performing Loans

 Nonaccrual loans

 Construction Loans A Credit Risk

 Construction Loans B Credit Risk

 Construction Loans C Credit Risk

 Development Loans A Credit Risk

 Development Loans B Credit Risk

 Development Loans C Credit Risk

 Secured Individually Evaluated

 Unsecured Individually Evaluated

 Total

 ACL December 31, 2022

 $
 (174
)

 (66
)

 (9
)

 (37
)

 (2
)

 (7
)

 (247
)

 (1,986
)

 $
 (2,527
)

 Impact of the adoption of ASC 326

 (33
)

 (1
)

 (12
)

 (30
)

 -

 (139
)

 (178
)

 Charge-offs

 -

 -

 -

 -

 -

 -

 2,610

 2,742

 Reduction in ACL for loan participations

 -

 -

 -

 -

 -

 -

 Credit loss provision

 (13
)

 (3
)

 (0
)

 (236
)

 (566
)

 (737
)

 ACL December 31, 2023

 $
 (215
)

 (32
)

 -

 (5
)

 -

 (11
)

 (351
)

 (81
)

 $
 (695
)

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 $25,263 and $23,662
as of December 31, 2023 and December 31, 2022, respectively.

 Unfunded commitments to extend credit, which have similar collateral, credit
and market risk to our outstanding loans, were $25,263 and $23,662 as of December 31, 2023 and December 31, 2022, respectively. The allowance
for credit losses is calculated at an estimated loss rate and the total commitment value for loans in our portfolio. Both the funded and
unfunded portion of the allowance for credit losses are included in loans receivables, net on the Balance Sheet as of December 31, 2023.
Other than unfunded commitments, we had no off-balance sheet transactions, nor do we currently have any such arrangements or obligations.

 Concentrations

instruments that potentially subject the Company to concentrations 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:

 Percent of

 Percent of

 Loan

 Loan

 City

 City

 Highest concentration risk

 Pittsburgh, PA

 %

 Pittsburgh, PA

 %

 Second highest concentration risk

 Cape Coral, FL

 %

 Orlando, FL

 %

 Third highest concentration risk

 Orlando, FL

 %

 Spokane, WA

 %

 The
following disclosures are presented under GAAP in effect prior to the adoption of CECL. The Company has included these disclosures to
address the applicable prior periods.

Receivables – By risk rating:

 Pass

 $
 49,955

 Special mention

 3,842

 Classified – accruing

 –

 Classified – non-accrual

 7,177

 Total

 $

Receivables – Method of impairment calculation:

 Performing loans evaluated individually

 $
 15,984

 Performing loans evaluated collectively

 37,813

 Non-performing loans without a specific reserve

 1,096

 Non-performing loans with a specific reserve

 6,081

 Total evaluated collectively for credit losses

 $

 The
following is a summary of our impaired non-accrual construction and development loans as of December 31, 2022.

 2022

 Unpaid principal balance (contractual obligation from customer)

 $
 7,628

 Charge-offs and payments applied

 (451
)

 Gross value before related allowance

 7,177

 Related allowance

 (2,233
)

 Value after allowance

 $
 4,944

 Below
is an aging schedule of loans receivable as of December 31, 2022, on a recency basis:

 No.
 Loans

 %

 Current loans (current accounts and accounts on which more than 50% of an original contract payment was made in the last 59 days)

 $
 53,797

 88.2
 %

 60-89 days

 2,570

 4.2
 %

 90-179 days

 –

 –

 –
 %

 180-269 days

 0.9
 %

 >270 days

 4,079

 6.7
 %

 $

 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

 $

 100.0
 %

 Below
is an aging schedule of loans receivable as of December 31, 2022, on a contractual basis:

 No.
 Loans

 %

 Contractual Terms - All current Direct Loans and Sales Finance Contracts with installments past due less than 60 days from due date.

 $
 53,797

 88.2
 %

 60-89 days

 2,570

 4.2
 %

 90-179 days

 –

 –

 –
 %

 180-269 days

 0.9
 %

 >270 days

 4,079

 6.7
 %

 $

 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

 $

 100.0
 %

 Roll
forward of foreclosed assets for the years ended December 31, 2023 and 2022:

 2023

 2022

 Beginning balance

 $
 1,582

 $
 2,724

 Transferred from loans receivables, net

 -

 Transferred to loans receivables, net

 -

 (1,017
)

 Investments in foreclosed assets

 Sale proceeds

 (1,549
)

 (1,096
)

 Loss on sale of foreclosed assets

 (34
)

 -

 Gain on sale of foreclosed assets

 Impairment loss on foreclosed assets

 (2
)

 (2
)

 Ending balance

 $

 $
 1,582

the year ended December 31, 2023 and 2022 we reclassed 0 and 1 loan receivable, net assets to foreclosed assets, respectively.

 Real
Estate Investments

June 2020, we acquired four lots from a borrower in exchange for the transfer of loans secured by those lots. We extinguished the principal
balance for the loans on the lots in the amount of $640 and in addition, paid a $500 management fee for the development of homes on the
lots. The management fee was paid through reducing the principal balance on a current loan receivable with the borrower. Two of the four
homes sold during 2022 and the remaining two sold in 2023.

October 2023, the Company acquired two properties to construct houses on each lot. Once the properties are fully developed and sold the
use of proceeds from the sale will first apply to the land, building, furniture and interest costs to the Company and a portion of the
remaining funds will be distributed as a management fee for the development of the homes.

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

 Beginning balance

 $

 $
 1,651

 Deposits from real estate investments

 -

 (1,570
)

 Gain on sale of real estate investments

 (1,570

 Proceeds from the sale of real estate investments

 (2,131
)

 -

 Additions for construction, land and development

 1,896

 2,226

 Ending balance

 $

 $

Interest Escrow

 The
Pennsylvania Loans call for a funded interest escrow account which was initially funded with proceeds from the Pennsylvania Loans. The
initial funding on that interest escrow was $450. The balance as of December 31, 2023 and 2022 was $12 and $646, respectively. To the
extent the balance is available in the interest escrow, interest due on certain loans is deducted from the interest escrow on the date
due. The interest escrow is increased by 20% of lot payoffs on the same loans, and by interest and/or distributions on a loan in which
we are the borrower and Investor's Mark Acquisitions, LLC is the lender and on the Series B preferred equity. All of these transactions
are noncash to the extent that the total escrow amount does not need additional funding.

 We
had 39 and 18 other loans active as of December 31, 2023 and 2022, respectively, which also had interest escrows. The cumulative balance
of all interest escrows other than the Pennsylvania Loans was $279 and $120 as of December 31, 2023 and 2022, respectively.

 Roll
forward of interest escrow for the years ended December 31, 2023 and 2022:

 2023

 2022

 Beginning balance

 $

 $

 Preferred equity dividends

 Additions from Pennsylvania Loans

 1,218

 Additions from other loans

 Interest, fees, principal or repaid to borrower

 (1,713
)

 (1,412
)

 Ending balance

 $

 $

 Loan
Purchase and Sale Agreements

 We
have two loan purchase and sale agreements where we are the seller of portions of loans we create. The two purchasers are Builder Finance,
Inc. ("Builder Finance") and S.K. Funding, LLC ("S.K. Funding"). Generally, the purchasers buy between 50% and
75% of each loan sold. They receive interest rates ranging from our cost of funds to the interest rate charged to the borrower (interest
rates were between 6% and 11% for both 2023 and 2022). The purchasers generally do not receive any of the loan fees we charge. We have
the right to call some of the loans sold, with some restrictions. Once sold, the purchaser must fund their portion of the loans purchased.
We service the loans. Also, there are limited put options in some cases, whereby the purchaser can cause us to repurchase a loan. The
loan purchase and sale agreements are recorded as secured borrowings.

 In
March 2018, we entered into the Seventh Amendment (the "Seventh Amendment") to our Loan Purchase and Sale Agreement with
S.K. Funding. The purpose of the Seventh Amendment was to allow S.K. Funding to purchase a portion of the Pennsylvania Loans.

 The
timing of the Company's principal and interest payments to S.K. Funding under the Seventh Amendment, and S.K. Funding's obligation
to fund the Pennsylvania Loans, vary depending on the total principal amount of the Pennsylvania Loans outstanding at any time, as follows:

 If
 the total principal amount exceeds $1,000, S.K. Funding must fund the amount between $1,000 and less than or equal to $4,500.

 If
 the total principal amount is less than $4,500, then the Company will also repay S.K. Funding's principal as principal payments
 are received on the Pennsylvania Loans from the underlying borrowers in the amount by which the total principal amount is less than
 $4,500 until S.K. Funding's principal has been repaid in full.

 The
 interest rate accruing to S.K. Funding under the Seventh Amendment is 10.5% calculated on a 365/366-day basis.

 The
Seventh Amendment had a term of 24 months and automatically renews for additional six-month terms unless either party gives written notice
of its intent not to renew at least six months prior to the end of a term. S.K. Funding will have a priority position as compared to
the Company in the case of a default by any of the borrowers.

 In
April 2021, we entered into the Eleventh Amendment (the "Eleventh Amendment") to our Loan Purchase and Sale Agreement with
S.K. Funding. The purpose of the Eleventh Amendment was to allow a principal increase to $2,000 from the original $1,000 in the Tenth
Amendment dated January 2019. In addition, if the collateral value drops then an unsecured portion or $400 may be used until the collateral
is increased back to $2,000.

 The
Eleventh Amendment has a term of 12 months and automatically renews for additional six-month terms unless either party gives written
notice of its intent not to renew at least five months prior to the end of a term. S.K. Funding will have a priority position as compared
to the Company in the case of a default by any of the borrowers.

 In October of 2023, we entered into the Thirteenth Amendment (the "Thirteenth Amendment") to our Loan
Purchase and Sale Agreement with S.K. Funding. The purpose of the Thirteenth Amendment was to sell participating interests in a few of
our loans with our largest customer. These sales are different than all of our other loan participations in that the buyer is not in a
preferred risk position, and as such, the portions of the loans sold are treated as an actual loan sale. The balance of the portion sold
is removed from our balance sheet. The interest on the portion sold is not reflected on our statement of operations, and there is no interest
cost or loan loss related to the sold portion on our statement of operations. The fee we earn on these loans for origination and servicing
is recognized over the expected life of the loan in the same way that all of our loans are.

 Pursuant to the Thirteenth Amendment, the aggregate amount of the S.K. Funding's commitment, either funded
or unfunded, under certain loans purchased by S.K. Funding covered by the Thirteenth Amendment (the "Loans") was increased
to $1,650. As of the effective date of the Thirteenth Amendment, S.K. Funding has funded $1,400 and agreed to fund an additional $250
upon notice from us that such additional amount is desired to fund the Loans. In addition, the amount of the portion of any Loan purchased
by S.K. Funding was adjusted to the lesser of (i) 45% of our approved appraised value or a third-party sales price if the collateral property
is under agreement for sale, as applicable, and (ii) 50% of the maximum principal of the loan after deducing the loan fee. The interest
rate for the Loans is the lessor of the (i) the interest rate on such Loan or (ii) 14%, calculated on a 365/366 day basis. For such amounts
of the Loan amount that are unsecured, the interest rate for such amounts is 9.5%, calculated on a 365/366 day basis. The loan receivables
gross principal balance of the sold portion of the Loans as of December 31, 2023 was $990.

 The term of Thirteenth Amendment and S.K. Funding's participation in the Loans, shall be through the repayment
of the last Loan participated in by S.K. Funding pursuant to the terms of the Thirteenth Amendment.

 Lines
of Credit

 Lines
of Credit with Mr. Wallach and His Affiliates

June 2018, we entered into the First Amendment to the line of credit with our Chief Executive Officer and his wife (the "Wallach
LOC") which modified the interest rate on the Wallach LOC to generally equal the prime rate plus 3%. The interest rate for the
Wallach LOC was 11.50% and 10.50% as of December 31, 2023 and 2022, respectfully. As of December 31, 2023, and 2022, the amount outstanding
pursuant to the Wallach LOC was $160 and $0, respectively. For the years ended December 31, 2023 and 2022, interest expense was $18 and
$0, respectively. The maximum amount outstanding on the Wallach LOC is $1,250 and the loan is a demand loan.

June 2018, we also entered into the First Amendment to the line of credit with the 2007 Daniel M. Wallach Legacy Trust, which is our
CEO's trust (the "Wallach Trust LOC") which modified the interest rate on the Wallach Trust LOC to generally equal
the prime rate plus 3%. The interest rate for this borrowing was 11.50% and 10.50% as of December 31, 2023 and 2022. As of December 31,
2023, and 2022, the amount outstanding pursuant to the Wallach Trust LOC was $166 and $0, respectively. For the years ended December
31, 2023 and 2022, interest expense was $20 and $0, respectively. The maximum amount outstanding on the Wallach Trust LOC is $250 and
the loan is a demand loan.

 Line
of Credit with William Myrick

June 2018, we entered into a line of credit agreement (the "Myrick LOC Agreement") with our Executive Vice President ("EVP"),
William Myrick. Pursuant to the Myrick LOC Agreement, Mr. Myrick provides us with a line of credit (the "Myrick LOC") with
the following terms:

 not to exceed $1,000;

 by a lien against all of our assets;

 Cost
 of funds to us of prime rate plus 3%; and

 Due
 upon demand.

 As
of December 31, 2023 and 2022, the amount outstanding pursuant to the Myrick LOC was $0 and $35, respectively. For the years ended December
31, 2023 and 2022, interest expense was $2 and $24, respectively.

 Line
of Credit with Shuman

July 2017, we entered into a line of credit agreement (the "Shuman LOC Agreement") with Steven K. Shuman, which is now held
by Cindy K. Shuman. Pursuant to the Shuman LOC Agreement, Shuman provides us with a revolving line of credit (the "Shuman LOC")
with the following terms:

 not to exceed $1,325;

 Cost
 of funds to us of 10%; and

 Due
 in July 2024, but will automatically renew for additional 12-month periods, unless either party gives notice to not renew.

 As
of December 31, 2023 and 2022, the amount outstanding pursuant to the Shuman LOC was $125. Interest expense was $13 for both years ended
December 31, 2023 and 2022, respectively.

 Line
of Credit with Judith Swanson

December 2021, the Swanson Line of Credit ("Swanson LOC") was assigned to Judith Swanson ("Judith Swanson LOC"),
as trustee of a trust. Pursuant to the Swanson Modification Agreement, the Judith Swanson LOC provides us with a revolving line of credit
with the following terms:

 not to exceed $7,000;

 Cost
 of funds to us of 6.75%; and

 Due
 in July 2024, but will automatically renew for additional 12-month periods, unless either party gives notice to not renew.

 The
Judith Swanson LOC was fully borrowed on the secured and unsecured portion of the line of credit as of December 31, 2023 and 2022. The
secured balance on the Judith Swanson LOC was $5,164 and $6,473, as of December 31, 2023 and 2022, respectively. Interest expense was
$556 and $500 for the years ended December 31, 2023 and 2022, respectively.

 New
Lines of Credit

2020 and 2019, we entered into one and four line of credit agreements, respectively (the "New LOC Agreements"). Pursuant
to the New LOC Agreements, the lenders provide us with revolving lines of credit with the following terms:

 not to exceed $6,063;

 Cost
 of funds to us between 9.00% and 10.00%; and

 Terms
 generally allow the lenders to give one month notice after which the principal balance of a New LOC Agreement will reduce to a zero
 over the next six months.

 The
total balance of the New LOC Agreements was $3,066 and $2,790 as of December 31, 2023 and 2022, respectively. Interest expense was $230
and $287 for the year ended December 31, 2023 and 2022, respectively.

 Mortgage
Payable

January 2018, we entered into a commercial mortgage on our office building with the following terms:

 not to exceed $660;

 rate was 5.07% per annum until it increased 1.53% to 6.60% in January 2023 and is based on a year of 360 days; and

 Due
 in January 2033.

 The
principal amount of the Company's commercial mortgage was $571 and $587 as of December 31, 2023 and 2022, respectively. For the
years ended December 31, 2023 and 2022, interest expense was $39 and $31 respectively.

 Community
Loan

June 2020, we entered into a business loan agreement with Community Bank ("Community Loan") with the following terms:

 not to exceed $362;

 by certain of our foreclosed assets;

 rate was 3.8% per annum based on a year of 360 days; and

 Due
 in July 2025.

October 2022, we paid off the Community Loan principal of $217, and the loan was terminated. Interest expense for the years ended December
31, 2023 and 2022 was $0 and $10, respectively.

Deferred Financing Costs

 The
Company had secured deferred financing costs of $3 and $4 as of December 31, 2023 and 2022, respectively.

Borrowings Secured by Loan Assets

secured by loan assets

 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

 $
 7,615

 $
 5,770

 $
 8,232

 $
 6,065

 S.K. Funding

 7,358

 6,500

 9,049

 7,100

 Lender

 Shuman

 Jeff Eppinger

 3,496

 1,500

 2,761

 1,500

 R. Scott Summers

 2,177

 1,003

 1,334

 John C. Solomon

 1,172

 Judith Swanson

 10,038

 5,164

 9,571

 6,473

 Total

 $
 31,640

 $
 20,625

 $
 32,843

 $
 22,554

Notes through the Public Offering ("Notes Program")

 The
effective interest rate on borrowings through our Notes Program at December 31, 2023 and December 31, 2022 was 9.01% and 8.60%,
respectively, not including the amortization of deferred financing costs.

 We
generally offer four durations at any given time, ranging from 12 to 48 months from the date of issuance. Our fourth public notes offering,
which was declared effective on September 16, 2022, includes a mandatory early redemption option on all Notes, provided that the proceeds
are reinvested. In our historical offerings, there were limited rights of early redemption. Our 36-month Note sold in our third public
notes offering had a mandatory early redemption option, subject to certain conditions.

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

 2023

 2022

 Gross notes outstanding, beginning of period

 $

 $
 20,636

 Notes issued

 1,353

 7,245

 Note repayments / redemptions

 (2,075
)

 (6,305
)

 Gross notes outstanding, end of period

 Less deferred financing costs, net

 (235
)

 (367
)

 Notes outstanding, net

 $
 20,619

 $
 21,209

 The
following is a roll forward of deferred financing costs:

 2023

 2022

 Deferred financing costs, beginning balance

 $

 $
 1,061

 Disposals

 -

 (449
)

 Deferred financing costs, ending balance

 $

 $

 Less accumulated amortization

 (703
)

 (468
)

 Deferred financing costs, net

 $

 $

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

 2023

 2022

 Accumulated amortization, beginning balance

 $

 $

 Disposals

 -

 (449
)

 Accumulated amortization, ending balance

 $

 $

 Other
Unsecured Debts

 Our
other unsecured debts are detailed below:

 Loan

 Maturity
 Date

 Rate (1)

 2023

 2022

 Unsecured Note with Seven Kings Holdings, Inc. Senior Subordinated

 Demand (2)

 9.5
 %

 $

 $

 Unsecured Line of Credit from Judith Swanson

 October 2023

 10.0
 %

 1,836

 Unsecured Line of Credit from Builder Finance, Inc. Senior Subordinated

 January 2024

 10.0
 %

 April 2024

 10.0
 %

 February 2025

 9.0
 %

 October 2023

 10.0
 %

 -

 March 2024

 9.75
 %

 December 2027

 10.0
 %

 February 2024

 11.0
 %

 January 2025

 10.0
 %

 January 2026

 8.0
 %

 -

 March 2027

 10.0
 %

 -

 November 2026

 9.5
 %

 October 2024

 10.0
 %

 December 2024

 10.0
 %

 April 2025

 10.0
 %

 July 2023

 8.0
 %

 -

 July 2025

 8.0
 %

 -

 September 2023

 7.0
 %

 -

 September 2027

 %

 -

 October 2025

 8.0
 %

 December 2025

 8.0
 %

 Senior Subordinated Promissory Note

 March 2026 (3)

 8.0
 %

 August 2026

 8.0
 %

 July 2026 (4)

 1.0
 %

 Junior Subordinated Promissory Note

 July 2026 (4)

 20.0
 %

 Senior Subordinated Promissory Note

 October 2024 (4)

 1.0
 %

 Junior Subordinated Promissory Note

 October 2024 (4)

 20.0
 %

 March 2029

 10.0
 %

 1,200

 -

 April 2024

 10.0
 %

 May 2027

 10.0
 %

 -

 November 2027

 10.0
 %

 -

 $

 11,167

 $
 8,900

 (1)

 rate per annum, based upon actual days outstanding and a 365/366-day year.

 (2)

 Due
 six months after lender gives notice.

 (3)

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

 (4)

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

 Priority
of Borrowings

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

 Priority
 Rank

 Borrowing Source

 Purchase and sale agreements and other secured borrowings

 $
 21,196

 $
 23,142

 Secured line of credit from affiliates

 Unsecured line of credit (senior)

 1,160

 1,250

 Other unsecured debt (senior subordinated)

 1,094

 1,094

 Unsecured Notes through our public offering, gross

 Other unsecured debt (subordinated)

 8,006

 5,649

 Other unsecured debt (junior subordinated)

 Less deferred financing fees

 (238
)

 (370
)

 Total

 $
 53,305

 $
 53,283

 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 December 31, 2023, and 2022, we had combined loans outstanding of 236 and 250, respectively. Gross loans outstanding were $61,293
and $60,974 as of December 31, 2023 and 2022, respectively.

 Our
net cash provided by operating activities increased $372 to $5,063 as of December 31, 2023 compared to $4,691 for the same period of
2022. The increase was primarily due to higher net income which was $2,578 for the period ended December 31, 2023 compared to $1,760
for the same period of 2022 which was offset by the change in the accrued interest receivable balance which was $(501) as of December
31, 2023 compared to $(72) for the same period of 2022.

 Unfunded
commitments to extend credit, which have similar collateral, credit and market risk to our outstanding loans, were $25,263 and $23,662
as of December 31, 2023 and 2022, respectively. As of December 31, 2023, other than unfunded commitments, we had no off-balance sheet
transactions, nor do we currently have any such arrangements or obligations.

 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

 As of

 Secured debt, net of deferred financing costs

 $
 21,519

 $
 23,173

 Unsecured debt, net of deferred financing costs

 $
 31,786

 $
 30,110

 Equity*

 $
 6,767

 $
 7,805

 Cash, cash equivalents and restricted cash

 $
 3,522

 $
 4,196

 *
Equity includes Members' Capital and Redeemable Preferred Equity.

 As
of December 31, 2023 and 2022, cash, cash equivalents and restricted cash was $3,522 and $4,196, respectively. Secured debt, net of deferred
financing costs decreased $ 1,654 to $21,519 as of December 31, 2023 compared to $23,173 for the same period of 2022. The decrease in
secured debt was due primarily to borrowings pursuant to our loan purchase and sale agreements. However, we anticipate secured debt to
decrease during 2024 as our loan receivable balances decrease.

debt, net of deferred financing costs increased $1,676 to $31,786 as of December 31, 2023 compared to $30,110 for the same period of
2022. The increase in unsecured debt primarily related to unsecured notes sold outside of our Notes Program.

decreased $1,038 to $6,767 as of December 31, 2023 compared to $7,805 for the same period of 2022.

 We
anticipate an increase in both common and preferred equity during the 12 months subsequent to December 31, 2023. If we are not able to
maintain our equity, we will rely more heavily on raising additional funds through the Notes Program.

 The
total amount of our debt maturing through year ending December 31, 2024 is $35,733, which consists of secured borrowings of $20,969 and
unsecured borrowings of $14,763.

borrowings maturing through the year ending December 31, 2024 significantly consists of loan purchase and sale agreements with two loan
purchasers (Builder Finance and S. K. Funding) and six 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 maturing in 2024 with actual maturity
and renewal dates:

 Judith
 Swanson – $5,164 due July 2024 and automatically renews unless notice given;

 Shuman
 – $125 due July 2024 and automatically renews unless notice is given;

 S.
 K. Funding – $4,500 due July 2024 and automatically renews unless notice is given;

 S.
 K. Funding – $2,000 of the total due January 2024;

 Builder
 Finance, Inc – $5,770 with no expiration date;

 New
 LOC Agreements - $3,066 generally one-month notice and six months to reduce principal balance to zero;

 Line
 of credits with affiliates - $326 and due upon demand; and

 Mortgage
 Payable – $18, with payments due monthly.

borrowings due by December 31, 2024 consist of Notes issued pursuant to the Notes Program and other unsecured debt of $8,430 and $6,333,
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. Historically, approximately
73% of our Note holders reinvest upon maturity. The 36 month Note in our Notes program has a mandatory early redemption option, subject
to certain conditions. As of December 31, 2023, the 36-month Notes were $1,789. Our other unsecured debt has historically 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 maturities through investments in our Notes Program.

 Summary

 We
have the funding available to address the loans we have today, including our unfunded commitments. We anticipate our assets to increase
during 2024, however we are prepared for an increase of our assets through the net sources and uses (12-month liquidity) listed above
as well as future capital from debt, redeemable preferred equity, and regular equity. Our expectation to reduce loan asset balances is
subject to changes due demand, the housing market and competition. Although our secured debt is almost entirely listed as currently due
because of the underlying collateral being demand notes, the vast majority of our secured debt is either contractually set to automatically
renew unless notice is given or, in the case of purchase and sale agreements, has no end date as to when the purchasers will not purchase
new loans (although they are never required to purchase additional loans).

 Inflation,
Interest Rates, and Housing Starts

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

 Housing
inflation 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 resulting
in more risk than prior years. In some of our markets, prices of sold homes are dropping. This is both because some homes are selling
for less and because the average home selling is smaller (more affordable). We anticipate declines in home values in many markets over
the next 12 months. Partially offsetting the decline in home value risk, is the decline in our LTV to 65% as of December 31, 2023 compared
to 69% for the same period of the prior year.

rates have several impacts on our business. First, rates affect housing (starts, home size, etc.). High long-term interest rates may
decrease housing starts, having the effects listed above. Higher interest rates will also affect our investors. We believe that there
will be a spread between the rate our Notes yield to our investors and the rates the same investors could get on deposits at FDIC insured
institutions. We also believe that the spread may need to widen if these rates rise. For instance, if we pay 7% above average CD rates
when CDs are paying 0.5%, when CDs are paying 3%, we may have to have a larger than 7% difference. This may cause our lending rates,
which are based on our cost of funds, to be uncompetitive. High interest rates may also increase builder defaults, as interest payments
may become a higher portion of operating costs for the builder. 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 Short-term interest rates have risen significantly
and long-term interest rates have risen and then fallen; meanwhile, they are low historically.

 Housing
prices are also generally correlated with housing starts, so that increases in housing starts usually coincide with increases in housing
values, and the reverse is generally true. Below is a graph showing single family housing starts from 2000 through today.

 (Source:
U.S. Census Bureau)

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

 Recent
Accounting Pronouncements

 See
Note 2 to our consolidated financial statements for a description of new or recent accounting pronouncements.

 Subsequent
Events

 See
Note 14 to our consolidated financial statements for subsequent events.

 ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 We
are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information
under this item.

 ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 The
consolidated financial statements and supplementary data filed as part of this annual report are set forth beginning on page F-1 of this
report.

 ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

 None.

 ITEM
9A. CONTROLS AND PROCEDURES

 Disclosure
Controls and Procedures

 As
of the end of the period covered by this report, management including our CEO (our principal executive officer) and CFO (our principal
financial officer) evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Based upon, and
as of the date of, the evaluation, our CEO (our principal executive officer) and CFO (our principal financial officer) concluded that
the disclosure controls and procedures were effective as of the end of the period covered by this report to ensure that information required
to be disclosed in the reports we file and submit under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
is recorded, processed, summarized and reported as and when required. Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information required to be disclosed by us in the reports we file and submit under the
Exchange Act is accumulated and communicated to our management, including our CEO (our principal executive officer) and CFO (our principal
financial officer), as appropriate to allow timely decisions regarding required disclosure.

 Internal
Control over Financial Reporting

 Our
management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for us. Management evaluated, as of December 31, 2023, the effectiveness of our internal control over
financial reporting. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of
the Treadway Commission ("COSO") in Internal Control—Integrated Framework (2013). Based on this evaluation, management
concluded that our internal control over financial reporting was effective as of December 31, 2023.

 There
has been no change in our internal control over financial reporting during the quarter ended December 31, 2023, that has materially affected,
or is reasonably likely to materially affect, our internal control over financial reporting.

 ITEM
9B. OTHER INFORMATION

the fourth quarter of 2023, there was no information required to be disclosed in a report on Form 8-K which was not disclosed in a report
on Form 8-K.

 ITEM
9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

 Not
applicable.

 PART
III

 ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 Managers
and Executive Officers

 Included
below is certain information about our managers and executive officers. Mr. Wallach was initially elected to a three-year term that expired
in March 2016 and his current three-year term expires in March 2025 Mr. Summers was initially elected to a two-year term that expired
in March 2014 and his current three-year term expires in March 2023, Mr. Rauscher was initially elected to a three-year term that expired
in March 2018 and his current three-year term expires in March 2024, and Mr. Sheldon was initially elected to a one-year term that expired
in March 2020 and his current three-year term expires in March 2023.

M. Wallach, age 56, is our CEO and a manager. He has been our CEO since our Company was founded and, prior to the addition of two
independent managers in March 2012, he was our sole manager. Mr. Wallach has over 30 years of experience in finance and real estate.
Prior to his time with us, most recently, from May 2011 to July 2011, Mr. Wallach was an Executive Vice President for ProBuild Holdings,
a building material supplier to homebuilders. Before that, from 1985 to 1989, and 1990 to April 2011, Mr. Wallach held various positions
with 84 Lumber Company and affiliates, including Chief Financial Officer and Director. 84 Lumber is a building material supplier to homebuilders
and was, at that time, one of our affiliates. At 84 Lumber, Mr. Wallach oversaw the company's financial and accounting function,
including all aspects related to financial reporting, debt financing, customer financing, customer credit and management information
systems. Mr. Wallach was also intimately involved with the creation of 84 FINANCIAL, L.P., a finance company affiliated with and owned
by 84 Lumber, which had investment objectives similar to ours. Mr. Wallach has also held operational and finance positions with a mortgage
brokerage firm and a building contractor. He graduated from Washington and Jefferson College in Washington, Pennsylvania with a B.A.
in Business Administration.

 Barbara
L. Harshman, age 48, is our Executive Vice President of Operations, a position to which she was appointed in July 2015. She was hired
in August 2012 as Vice President of Operations. Prior to joining the Company, from 2005 to 2012, Ms. Harshman worked in various positions
in 84 Lumber Company's lending operations, including Vice President of Lending. Ms. Harshman also worked as a credit manager for
84 Lumber during 2004 and 2005, where she managed a portfolio of $35,000,000 of unsecured debt owed by builders. Ms. Harshman graduated
from Baylor University with a B.A. in Anthropology.

 Mark
Reynolds, age 49, was appointed Executive Vice President of Sales in April 2021. Mr. Reynolds, has over 19 years of experience in
the construction finance industry. He was previously our Regional Sales Manager from May 2016 until April 2021 and was also the National
Real Estate Owned ("REO") Manager from January 2020 until April 2021. Previously, Mr. Reynolds held various positions with
84 Lumber Company, including REO Specialist, where he worked with counsel to negotiate liens, finish building houses, and relieve as
much debt as possible while controlling losses (from 2008 through 2014), National Finance Manager, in residential financing (from 2006
through 2008), and Regional Finance Manager, in commercial financing, where he helped finance projects such as hotels, apartments, restaurants,
and casinos (from 2000 through 2004). Mr. Reynolds attended Indiana University at South Bend, where he studied Business Management.

 Catherine
Loftin, age 45, is our Chief Financial Officer, to which she was appointed in April 2021. Ms. Loftin previously served as Acting
Chief Financial Officer from July 2019 to April 2021 and as Chief Financial Officer from January 2018 to May 2019 and continued to serve
as our employee since May 2019. Ms. Loftin previously served as our Controller from November 2017 until her appointment as Chief Financial
Officer. Prior to joining the Company, Ms. Loftin was the Corporate Controller for Lucas Group from November 2017 to June 2018, Division
Controller for Pulte Group from July 2014 through November 2017 and Director of Financial Reporting for DS Services Holdings, Inc. from
November 2013 to April 2014. Ms. Loftin spent a majority of her career with Simmons Bedding Company as Manager of Financial Reporting
from 2006 to 2013. Ms. Loftin started her accounting career with PricewaterhouseCoopers with an internship in 1999 and an associate in
2001. Ms. Loftin received her Bachelors of Business of Administration from the Terry College of Business School at the University of
Georgia in 2000, and her Masters of Accounting from Kennesaw State University's Cole's College of Business in 2001.

 William
Myrick, age 62, is our Executive Vice President, to which he was appointed on April 20, 2021. Mr. Myrick previously served as Executive
Vice President of Sales since March 2018. Mr. Myrick was one of our independent managers from March 2012 to March 2018. He has been involved
in lumber and building materials for over 35 years. From July 2012 through December 2017, Mr. Myrick was the CEO of American Builders
Supply, a building material supplier to homebuilders, where he was responsible for all aspects of the management of that business. From
January 2007 to July 2011, he held various executive officer positions with ProBuild Holdings, including, most recently, CEO, and was
responsible for all aspects of the management of ProBuild's business. From 1982 to January 2007, Mr. Myrick was with 84 Lumber
Company, where he held positions including, most recently, Chief Operating Officer. Mr. Myrick served as a director of ProBuild from
July 2010 to July 2011, and currently serves as a director of American Builders Supply, a position he has held since July 2012. He is
a graduate of the Advanced Management Program from Harvard Business School.

R. Summers, age 77, is one of the independent managers, to which he was elected in March 2012. Mr. Summers retired from United Bank,
Inc. of Morgantown, West Virginia in December 2019. Prior to retirement, he had been an Executive Vice President for United Bank since
2001. In that role he was responsible for the expansion and recognition of the bank's franchise in north central West Virginia.
Mr. Summers has over 30 years of experience as a community bank executive. He graduated from the University of Charleston with a B.S.
in Accounting and Management.

 Eric
A. Rauscher, age 58, is one of the independent managers, to which he was elected in March 2015. Mr. Rauscher is a licensed insurance
sales person and has worked in that industry since 1999. Prior to that, he spent over ten years as a field sales engineer. He graduated
from Case Western Reserve University with a B.S. in Electrical Engineering and Applied Physics, with a minor in Economics.

L. Sheldon, age 65, has been one of our independent managers since March 2019. Mr. Sheldon brings 41 years of business experience
building global corporations and integrating acquisitions across finance, supply chain, manufacturing, and the corporate functions. Since
March 2021 he has served as the Interim CIO for TherapeuticsMD, an innovative pharmaceutical company exclusively committed to advancing
women's health. His previous roles include Global Chief Information Officer for Mylan, Inc., from October 2008 to March 2013, the
CIO for Duquesne Light Company from August 2013 to March 2015, and, from October 2018 until December 2019, as the Interim CIO for MiMedx
Group, Inc. Since July 2014, Mr. Sheldon has been an owner of two companies which invest in land acquisition, development, and the construction
of residential homes: White Column Investments, LLC, where he is the President and Managing Member, and Sheldon Investments, LLC. Since
2017, he has served as a non-compensated advisor to Mark Hoskins, who owns Benjamin Marcus Homes, LLC and Investor's Mark Acquisitions,
LLC, which are companies that design, develop, and build single family homes, and which are also two of our customers. Mr. Sheldon has
been the owner of Greg Sheldon and Associates, LLC, a consultant, and strategic advisor to clients in the life sciences, consumer products,
technology, and manufacturing industries since April 2015. Mr. Sheldon has held multiple leadership positions with leading, global companies
including Kraft General Foods, Georgia-Pacific, and Pfizer Inc., and the start-up of The Georgia Lottery. He graduated from Georgia State
University with a Master of Science in Management and from Georgia Institute of Technology with a Bachelor of Science in Industrial Management.

 Code
of Ethics

 Our
board of managers adopted an amended Code of Ethics and Business Conduct on August 6, 2020 (the "Code of Ethics"), which
contains general guidelines applicable to our employees, executive officers and the members of our board of managers with the purpose
of promoting the following: (1) honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest
between personal and professional relationships; (2) full, fair, accurate, timely and understandable disclosure in reports and documents
that we file with, or submit to, the SEC and in other public communications made by us; (3) compliance with applicable laws and governmental
rules and regulations; (4) the prompt internal reporting of violations of the Code of Ethics to an appropriate person or persons identified
in the Code of Ethics; and (5) accountability for adherence to the Code of Ethics. A copy of the Code of Ethics is posted on our website
at www.shepherdsfinance.com.

 Audit
Committee

 Our
board of managers has established a separately-designated audit committee, whose charter was adopted on August 9, 2012 and last amended
on August 6, 2020. The purpose of the audit committee is to oversee the Company's accounting and financial reporting processes
and the audit of the Company's consolidated financial statements. Our audit committee consists of Messrs. Rauscher, Summers, and
Sheldon, our three independent managers. We have no "audit committee financial expert" (as such term is defined in Item 407(d)(5)(ii)
of Regulation S-K). We believe the cost to retain a financial expert at this time is prohibitive. However, our board of managers believes
that each member of the audit committee has sufficient knowledge and relevant background experience to serve on the audit committee.

 ITEM
11. EXECUTIVE COMPENSATION

 Executive
Officer Compensation

 This
discussion describes our compensation philosophy and policies for our executive officers, which currently includes our CEO, EVP, EVP
of Operations, EVP of Sales and CFO.

 Objectives
of Executive Officer Compensation Program

 The
objectives of our executive compensation program are to attract, retain, and motivate highly talented executives and to align each executive's
incentives with our short-term and long-term objectives, while maintaining a healthy and stable financial position. Specifically, our
executive compensation program is designed to accomplish the following goals and objectives:

 maintain
 a compensation program that is equitable in our marketplace;

 provide
 opportunities that integrate pay with the short-term and long-term performance goals;

 encourage
 and reward achievement of strategic objectives, while properly balancing a controlled risk-taking behavior; and

 maintain
 an appropriate balance between base salary and short-term and long-term incentive opportunity.

 Determining
Executive Officer Compensation

 The
compensation committee of our board of managers is responsible for determining all aspects of our executive compensation program. The
determination and assessment of executive compensation are primarily driven by the following three factors: (1) market data based on
the compensation levels, programs and practices of other comparable companies for comparable positions, (2) our financial performance,
and (3) executive officer performance. We believe these three factors provide a reasonably measurable assessment of executive performance
in light of building value and creating a healthy financial position for us. We rely upon the judgment of the members of the compensation
committee and not on rigid formulas or short-term changes in business performance in determining the amount and mix of compensation elements
and whether each element provides the appropriate incentive and reward for performance that sustains and enhances our long-term growth.

 Executive
Officer Compensation Components

 Base
Salary

 We
provide each of our paid executive officers with a base salary to compensate such officer for services rendered throughout the year.
Salaries are established annually based on the individual's position, experience, performance, past and potential contribution
to us, and level of responsibility, as well as our overall financial performance. No specific weighting is applied to any one factor
considered, and the independent managers use their judgment and expertise in determining appropriate salaries within the parameters of
the compensation philosophy.

 Bonus

 We
pay each of our executive officers with the exception of our VP of Sales a team bonus mostly based on our overall profitability, which
rewarded each of them $3,000 and $500 in 2023 and 2022, respectively. In addition, we rewarded an annual bonus of $1,800 for both 2023
and 2022, which is extended to compensate vacation expenses. Finally, each executive officer is eligible for a portion of net income
earned, or profit share.

 We
pay our EVP of Sales a monthly bonus based on a percentage of all new sales and construction loan payoffs.

 Membership
Interests

 As
the beneficial owner of 78.2% (as of March 1, 2024) of our outstanding common membership interests, Mr. Wallach's interests are
closely aligned with our success. Our Executive Vice President owns 14.9% of our outstanding common membership interests and our Executive
Vice President of Sales owns 1.0% of our outstanding common membership interests.

 On
October 1, 2023, we entered into restricted unit agreements with Mark Reynolds, our Executive Vice President of Sales, and Catherine
Loftin, our Chief Financial Officer, pursuant to which we issued 200 restricted common units to each of Mark Reynolds and Catherine Loftin.
Vesting of the restricted common units commences from the grant date and occur thereafter on the first day of each subsequent calendar
month subject to our satisfying monthly earnings goals, measured two months in arrears in accordance with the vesting schedule.

 As
we hire additional executive officers, we may use membership interests in some fashion as part of their compensation.

 Summary
Compensation Table

 The
following table provides a summary of the compensation received by our named executive officers for the last two completed fiscal years

 Name
 and Position

 Year

 Salary

 Bonus(1)

 Stock
 Awards

 Option
 Awards

 Non-Equity
 Incentive Plan Compensation

 Non-Qualified
 Deferred Compensation Earnings

 All
 Other Compensation (2)

 Total

 Mr.
 Wallach

 2023

 $
 77,828

 $
 4,800

 –

 –

 –

 –

 20,657

 $
 103,285

 2022

 $
 73,740

 –

 –

 –

 –

 4,637

 $
 78,877

 Mr.
 Myrick

 2023

 $
 157,782

 3,000

 –

 –

 –

 –

 40,196

 $
 200,978

 2022

 $
 156,281

 –

 –

 –

 –

 39,195

 $
 195,976

 Mr.
 Reynolds

 2023

 $
 98,893

 67,868

 3,150

 –

 –

 –

 40,903

 $
 210,814

 2022

 $
 96,900

 63,688

 –

 –

 –

 –

 11,001

 $
 171,589

 (1)
 Amounts in the Bonus column represent amounts earned in the period.

 (2)
 Qualified Retirement Plan Contributions are shown here when funds are earned.

 Changes
for 2024

 Mr.
Wallach will receive a base salary of $77,940, Mr. Myrick, our Executive Vice President, will receive a base salary of $157,782 and Mr.
Reynolds, our EVP of Sales, will receive a base salary of $98,600. In addition, Mr. Reynolds will receive a monthly bonus based on a
percentage of all sales and construction loan payoffs.

 Mr.
Wallach, Mr. Myrick and Mr. Reynolds will receive the annual vacation bonus of $1,800. Mr. Wallach and Mr. Myrick will receive the team
bonus which will reward between $0 and $3,600 based on Company performance for 2024.

 Board
of Managers Compensation

 The
following table provides a summary of the compensation received by our managers for the year ended December 31, 2023:

 Name

 Fees
 Earned or Paid in Cash

 Stock
 Awards

 Option
 Awards

 Non-Equity
 Incentive Plan Compensation

 in Pension Value and Nonqualified Deferred Compensation

 All
 Other Compensation

 Total

 M. Wallach

 $
 –

 $
 –

 $
 –

 $
 –

 $
 –

 $
 –

 $
 –

 R. Summers

 –

 –

 –

 –

 –

 Eric
 A. Rauscher

 –

 –

 –

 –

 –

 L. Sheldon

 –

 –

 –

 –

 –

 We
paid each of the independent managers a retainer of $36,000 and $34,500 during 2023 and 2022, respectively. Our independent managers
also receive fees of $2,000 for the first day and $1,200 for any additional days for meetings of the board of managers and committees
attended in person, all or a portion of which may be allocated as reimbursement of expenses incurred in connection with attendance at
meetings. The independent managers do not receive separate reimbursement of out-of-pocket expenses incurred in connection with attendance
at meetings. Mr. Wallach receives no compensation for his services as a manager.

 ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 The
following table sets forth the ownership of certain of our outstanding membership interests as of December 31, 2023:

 Title of Class

 Name and Address of Owner (1)

 Number of Units

 Percent of Class

 Dollar Value

 Percentage of Total Equity

 Daniel M. Wallach and Joyce S. Wallach

 161.80

 0.8
 %

 $
 17,539.92

 0.3
 %

 2007 Daniel M. Wallach Legacy Trust

 15,469.20

 77.4
 %

 1,676,904.63

 24.8
 %

 Kenneth R. Summers

 1.0
 %

 21,680.55

 0.3
 %

 Eric A. Rauscher

 1.0
 %

 21,680.55

 0.3
 %

 William Myrick

 2,969.00

 14.8
 %

 321,847.23

 4.8
 %

 Barbara Harshman

 400.00

 2.0
 %

 43,361.12

 0.6
 %

 Gregory Sheldon

 1.0
 %

 21,680.55

 0.3
 %

 Catherine Loftin

 1.0
 %

 6,687.78

 0.1
 %

 Mark Reynolds

 1.0
 %

 6,687.78

 0.1
 %

 Repurchase of Class A Common Units

 (143,713.85
)

 (2.1
)%

 Subtotal of Common Voting Equity

 20,000.00

 100.0
 %

 $
 1,994,356.26

 29.5
 %

 Series C Preferred Units

 Daniel M. Wallach and Joyce S. Wallach

 12.02

 25.19
 %

 1,202,178.92

 17.8
 %

 Series C Preferred Units

 Gregory L. Sheldon and Madeline M. Sheldon

 8.02

 16.80
 %

 801,674.37

 11.8
 %

 Series C Preferred Units

 Other Holders of Series C Preferred Units

 27.69

 58.01
 %

 $
 2,769,405.25

 40.9
 %

 Subtotal of Series C Preferred Units

 47.73

 100.0
 %

 $
 4,773,258.54

 70.5
 %

 Total Members' Capital and Redeemable Preferred Equity

 20,033.73

 $
 6,767,614.80

 100.0
 %

 (1)

 The
 addresses of each Class A Common Unit owners named above are:

 and Joyce Wallach, the 2007 Daniel M. Wallach Legacy Trust, William Myrick, Barbara Harshman, Catherine Loftin and Mark Reynolds
 are 13241 Bartram Park Blvd., Suite 2401, Jacksonville, FL 32258;

 R. Summers is PO Box 995, Morgantown, WV 26507; and

 Eric
 A. Rauscher is 2706 South Park Rd, Bethel Park, PA 15102.

 The
 address of each Series C Preferred Unit owners named above are:

 and Joyce Wallach, and the 2007 Daniel M. Wallach Legacy is 13241 Bartram Park Blvd, Suite 2401, Jacksonville, FL 32258; and

 L. Sheldon and Madeline M. Sheldon is 104 Windsor Ct, Venetia, PA 15367.

 ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 Transactions
with Affiliates

 The
Company has two loan agreements with Daniel M. Wallach, our CEO, and his wife, pursuant to which they provide the Company with the Wallach
LOC and the Wallach Trust LOC. The agreements lay out the terms under which those members can lend money to us, providing that we desire
the funds and the members wish to lend. The interest rate on both the Wallach LOC and the Wallach Trust LOC generally equals prime plus
3%, as more fully described in Note 7.

 The
Company has a loan agreement with William Myrick, our EVP (the "Myrick LOC Agreement"), pursuant to which Mr. Myrick provides
us with the Myrick LOC. The Myrick LOC Agreement lays out the terms under which Mr. Myrick can lend money to us, providing that we desire
the funds and Mr. Myrick wish to lend. The rate on the Myrick LOC generally equals prime plus 3%, as more fully described in Note 7.

 Two
of our managers, Catherine Loftin, our CFO, and Mark Reynolds, our EVP, of Sales each own 1% of our Class A common units. Barbara L.
Harshman, our EVP of Operations, owns 2% of our Class A common units. Mr. Myrick owns 15.3% of our Class A common units.

 Mr.
Wallach and his wife's parents own 33.29 and 5.42 of our Series C Preferred Units, respectively. One of our managers, Gregory L.
Sheldon, owns 23.58 of our Series C Preferred Units.

 The
Company has a Senior Subordinated Promissory Note with the parents of Mr. Wallach for $374,000 The interest rate on the promissory note
is 10% and the lender may require us to repay $20,000 of principal and all unpaid interest with 10 days' notice, as more fully described
in Note 7.

 A
son of one of our Managers' is a minor participant in the Shuman LOC, which is more fully described in Note 7. In addition, Mr.
Summers' son is a lender to the Company pursuant to a New LOC Agreement, with principal not to exceed $2,000,000.

2021, Mr. Myrick purchased two loans from the Company for approximately $141,000 and both loans were serviced by the company as of December
31, 2021. One loan paid off during 2022 and the second loan paid off in 2023.

2021, one of our managers purchased one loans from the Company for $405,000. The loan paid off during 2022 and the proceeds were used
to purchase another loan for $417,000. The loan was serviced by the company and paid off in 2023.

 The
Hoskins Group had a preferred equity interest in the Company as of December 31, 2022 which was paid off in 2023. The Series B Preferred
Units to the Hoskins Group, as more fully described in Note 9 – Members' Capital.

 The
Company has accepted investments under the Notes Program from employees, managers, members, and relatives of managers and members, with
$5,454 outstanding at December 31, 2023. For the years ended December 31, 2023 and 2022 our investments from affiliates which exceed
$120 through our Notes Program and other unsecured debt are detailed below:

 (All
$ in Thousands)

 Relationship
 to

 invested as of

 Weighted
 average
 interest
 rate
 as
 of

 earned
 during
 the
 year ended

 31,

 31,

 31,

 Investor

 2023

 2022

 2023

 2023

 2022

 Eric
 A. Rauscher

 $

 $

 10.00
 %

 $

 $

 Wallach
 Educational Trust

 -

 -
 %

 -

 David
 Wallach Living Trust

 Father
 of Member

 8.94
 %

 L. Sheldon

 9.60
 %

 Joseph
 Rauscher

 7.00
 %

 Summers

 6.29
 %

 Schultz
 Family Revocable Living Trust

 Trustee
 is Mother -in-Law of Member

 8.56
 %

 Barbara
 Harshman

 -

 8.87
 %

 -

 Lamar
 Sheldon

 10.0
 %

 and Joyce Wallach

 -

 %

 -

 Scott
 Summers

 Son

 8.00
 %

 Madison
 Trust Company FBO Bruce Eppinger

 5%

 1,825

 -

 10.5
 %

 -

 Miguel
 Ascencio

 5%

 -

 10.0
 %

 -

 Paula
 Eppinger

 of 5% Member

 -

 10.0
 %

 -

 Hoskins
Group's Series B Preferred Equity

 The
Series B Preferred Units were issued to the Hoskins Group through a reduction in a loan issued by the Hoskins Group to the Company. In
December 2015, the Hoskins Group agreed to purchase 0.1 Series B Preferred Units for $10,000 at each closing of a lot to a third party
in the land securing certain development loans.

March 2023, the Company redeemed 100% of the outstanding Series B Preferred Units constituting 19 units, at a redemption price of $1,900,000.
As of December 31, 2023 and 2022, the Hoskins Group owned a total of 0 and 19.0 Series B Preferred Units, which were issued for a total
of $0 and $1,900,000, respectively.

C Preferred Equity

 Investors
in the Series C cumulative preferred units ("Series C Preferred Units") may elect to reinvest their distributions in additional
Series C Preferred Units (the "Series C Reinvestment Program").

 The
Series C Preferred Units have a fixed value which is their purchase price and preferred liquidation and distribution rights. Yearly distributions
of 12% of the Series C Preferred Units' value (provided profits are available) will be made on a quarterly basis. This rate can
increase if any interest rate on our public Notes offering rises above 12%. Dividends can be reinvested monthly into additional Series
C Preferred Units. The Series C Preferred Units have the same preferential rights as the Series B Preferred Units as more fully described
above.

March 2023, the Company redeemed 11.78109 of
the Series C Preferred Units, held by our CEO and his wife, at a redemption price of $ 1,178,000,
all of which was reinvested in Common Units.

 Sale
of Commercial Loans

2021, Mr. Myrick purchased two loans from the Company for approximately $141,000 and both loans were serviced by the company as of December
31, 2021. One loan paid off during 2022 and the second loan paid off in 2023.

2021, one of our managers purchased one loans from the Company for $405,000. The loan paid off during 2022 and the proceeds were used
to purchase another loan for $417,000. The loan was serviced by the company and paid off in 2023.

 Affiliate
Transaction Policy

 Our
limited liability company agreement provides that any future transaction involving the Company and an affiliate must be approved by a
majority vote of independent managers not otherwise interested in the transaction upon a determination of such independent managers that
the transaction is on terms no less favorable to the Company than could be obtained from an independent third party. An approval pursuant
to this policy shall be set forth in the minutes of the Company and shall include a description of the transaction approved. The responsibility
for reviewing and approving affiliate transactions has been delegated to the nominating and corporate governance committee of our board
of managers, which is comprised entirely of independent managers.

to our limited liability company agreement, we must provide the independent managers with access, at our expense, to our legal counsel
or independent legal counsel, as needed.

 Board
of Managers Independence

 We
have no securities listed for trading on a national securities exchange or in an automated inter-dealer quotation system of a national
securities association, which has requirements that a majority of our board of managers be independent. For purposes of complying with
the disclosure requirements of the Securities and Exchange Commission, we have adopted the definition of independence used by the New
York Stock Exchange (NYSE). Under the NYSE's definition of independence, Messrs. Summers, Rauscher, and Sheldon each meet the definition
of "independent."

 ITEM
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

the year ended December 31, 2022, Warren Averett, LLC ("Warren Averett") served as our independent registered accounting
firm and provided certain other services. Warren Averett began serving as our independent registered accounting firm in 2019.

 On
January 20, 2023, the Company dismissed Warren Averett as their independent registered public accounting firm. The dismissal of Warren
Averett was approved by the Audit Committee of the Company's Board of Managers (the "Audit Committee"). Warren Averett's
audit report on the financial statements of the Company for the fiscal years ended December 31, 2022 and 2021 did not contain an adverse
opinion or disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope, or accounting principles. Subsequent
to the dismissal of Warren Averett, the Audit Committee engaged HORNE as its independent registered public accounting firm on January
20, 2023.

 Our
Audit Committee reviewed the audit services performed by HORNE and Warren Averett for 2023 and 2022. The aggregate agreed-upon and billed
fees for professional accounting services provided by HORNE and Warren Averett, including the audit of our annual consolidated financial
statements, for the years ended December 31, 2023 and 2022, are set forth in the table below.

 Warren
 Averett
 2023

 HORNE
 2023

 Warren
 Averett
 2022

 Audit
 Fees

 $
 -

 $
 134,500

 $
 201,475

 Audit-Related
 Fees

 $
 7,492

 2,000

 $
 -

 For
purposes of the preceding table, the professional fees are classified as follows:

 Audit
 Fees - These are fees for professional services performed for the audit of our annual
 financial statements and the required review of our quarterly financial statements and other
 procedures performed by the independent auditors to be able to form an opinion on our consolidated
 financial statements. These fees also cover services that are normally provided by independent
 auditors in connection with statutory and regulatory filings or engagements, and services
 that generally only an independent auditor reasonably can provide, such as services associated
 with filing registration statements, periodic reports, and other filings with the SEC.

 Audit-Related
 Fees - Audit-related fees are assurance related services that traditionally are performed
 by the independent accountant, not included in the Audit Fees category above, including statutory
 audits.

 Pre-Approval
Policies

 The
Audit Committee charter imposes a duty on the Audit Committee to pre-approve all auditing services performed for us by our independent
auditors, as well as all permitted non-audit services (including the fees and terms thereof) in order to ensure that the provision of
such services does not impair the auditor's independence. In determining whether or not to pre-approve services, the Audit Committee
considers whether the service is permissible under applicable SEC rules. The Audit Committee may, in its discretion, delegate one or
more of its members the authority to pre-approve any services to be performed by our independent registered public accounting firm, provided
such pre-approval is presented to the full audit committee at its next scheduled meeting.

 All
services rendered by HORNE and Warren Averett for the year ended December 31, 2023 and 2022, respectively, were pre-approved in accordance
with the policies set forth above.

 PART
IV

 ITEM
15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

 (a)

 List
 of Documents Filed.

 1.

 The
 list of the financial statements contained herein is set forth on page F-1 hereof.

 2.

 All
 schedules for which provision is made in the applicable accounting regulations of the SEC are not required under the related instructions
 or are not applicable and therefore have been omitted.

 3.

 The
 Exhibits filed in response to Item 601 of Regulation S-K are listed on the Exhibit Index below.

 (b)

 See
 (a)3 above.

 (c)

 See
 (a)2 above.

 ITEM
16. FORM 10-K SUMMARY

 None.

 EXHIBIT

 The
following exhibits are included in this Annual Report on Form 10-K for the year ended December 31, 2023 (and are numbered in accordance
with Item 601 of Regulation S-K).

 Exhibit
 No.

 Name
 of Exhibit

 3.1

 Certificate
 of Conversion, incorporated by reference to Exhibit 3.1 to the Registrant's Registration Statement on Form S-1, filed on May
 11, 2012, Commission File No. 333-181360

 3.2

 Certificate
 of Formation, incorporated by reference to Exhibit 3.2 to the Registrant's Registration Statement on Form S-1, filed on May
 11, 2012, Commission File No. 333-181360

 3.3

 Second
 Amended and Restated Limited Liability Company Agreement, incorporated by reference to Exhibit 3.1 to the Registrant's Current
 Report on Form 8-k, filed on November 13, 2017, Commission File No. 333-203707

 3.4

 Amendment
 No. 1 to Second Amended and Restated Limited Liability Company Agreement of the Registrant, incorporated by reference to Exhibit
 3.4 to the Registrant's Quarterly Report on Form 10-Q, filed on May 9, 2019, Commission File No. 333-203707

 3.5

 Amendment
 No. 2 to Second Amended and Restated Limited Liability Company Agreement of the Registrant, incorporated by reference to Exhibit
 3.1 to the Registrant's Current Report on Form 8-k, filed March 31, 2020, Commission File No. 333-224557

 3.6*

 Amendment No. 3 to Second Amended and Restated Limited Liability Company Agreement of the Registrant.

 4.1

 Indenture
 Agreement (including Form of Note) dated September 16, 2022, incorporated by reference to Exhibit 4.1 to the Registrant's Post-Effective
 Amendment No. 1, filed on September 16, 2022, Commission File No. 333-263759

 10.1

 Amended,
 Restated and Consolidated Credit Agreement dated January 27, 2022 by and between Shepherd's Finance, LLC, Benjamin Marcus Homes,
 L.L.C., Investor's Mark Acquisitions, LLC and Mark L. Hoskins, incorporated by reference to Exhibit 10.1 to the Registrant's
 Annual Report on Form 10-K for the Year Ended December 31, 2021, filed on March 10, 2022, Commission File No. 333-224557

 10.2

 Open-End
 Mortgage dated December 30, 2011 between Benjamin Marcus Homes, L.L.C. and Shepherd's Finance, LLC, related to the Hamlets
 of Springdale, incorporated by reference to Exhibit 10.4 to the Registrant's Registration Statement on Form S-1, filed on May
 11, 2012, Commission File No. 333-181360

 10.3

 Open-End
 Mortgage dated December 30, 2011 between Investor's Mark Acquisitions, LLC and Shepherd's Finance, LLC, related to the
 Tuscany Subdivision, incorporated by reference to Exhibit 10.5 to the Registrant's Registration Statement on Form S-1, filed
 on May 11, 2012, Commission File No. 333-181360

 10.4

 Guaranty dated December 30, 2011 by Mark L. Hoskins, Investor's Mark Acquisitions, LLC, and Benjamin Marcus Homes, L.L.C. in
 favor of Shepherd's Finance, LLC, incorporated by reference to Exhibit 10.6 to the Registrant's Registration Statement
 on Form S-1, filed on May 11, 2012, Commission File No. 333-181360

 10.5

 Amended
 and Restated Commercial Pledge Agreement dated December 30, 2011 by Investor's Mark Acquisitions, LLC and Benjamin Marcus Homes,
 L.L.C. in favor of Shepherd's Finance, LLC, incorporated by reference to Exhibit 10.7 to the Registrant's Registration
 Statement on Form S-1, filed on May 11, 2012, Commission File No. 333-181360

 10.6

 Assignment,
 Assumption, Amendment, and Restatement of Mortgage dated December 30, 2011 between 84 Financial, L.P., Shepherd's Finance,
 LLC, and Investor's Mark Acquisitions, LLC, incorporated by reference to Exhibit 10.8 to the Registrant's Registration
 Statement on Form S-1, filed on May 11, 2012, Commission File No. 333-181360

 10.7

 Promissory
 Note dated December 30, 2011 from Shepherd's Finance, LLC to 2007 Daniel M. Wallach Legacy Trust, incorporated by reference
 to Exhibit 10.10 to the Registrant's Registration Statement on Form S-1, filed on May 11, 2012, Commission File No. 333-181360

 10.8

 Promissory
 Note dated December 30, 2011 from Shepherd's Finance, LLC to Daniel M. Wallach and Joyce S. Wallach, incorporated by reference
 to Exhibit 10.11 to the Registrant's Registration Statement on Form S-1, filed on May 11, 2012, Commission File No. 333-181360

 10.9

 Pledge Agreement dated December 30, 2011 by Shepherd's Finance, LLC in favor of 2007 Daniel M. Wallach Legacy Trust and Daniel
 M. Wallach and Joyce S. Wallach, incorporated by reference to Exhibit 10.12 to the Registrant's Registration Statement on Form
 S-1, filed on May 11, 2012, Commission File No. 333-181360

 10.10

 Subordination
 of Mortgage dated September 27, 2013 between Benjamin Marcus Homes, LLC, Shepherd's Finance, LLC, and United Bank, Inc., incorporated
 by reference to Exhibit 10.16 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2013, filed on
 February 26, 2014, Commission File No. 333-181360

 10.11

 B Cumulative Redeemable Preferred Unit Purchase Agreement dated December 31, 2014 between Shepherd's Finance, LLC and Investor's
 Mark Acquisitions, LLC, incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K, filed on
 January 6, 2015, Commission File No. 333-181360

 10.12

 Loan
 Purchase and Sale Agreement dated as of April 28, 2015 between Shepherd's Finance, LLC and Seven Kings Holdings, Inc., incorporated
 by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K, filed on May 5, 2015, Commission File No. 333-181360

 10.13

 First
 Amendment to the Loan Purchase and Sale Agreement by and between Shepherd's Finance, LLC and S.K. Funding, Inc., dated November
 19, 2015, incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K, filed on November 24, 2015,
 Commission File No. 333-203707

 10.14

 B Cumulative Preferred Unit Purchase Agreement by and between Shepherd's Finance, LLC and Investor's Mark Acquisitions,
 LLC, dated December 28, 2015, incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K, filed
 on December 31, 2015, Commission File No. 333-203707

 10.15

 Second
 Amendment to the Loan Purchase and Sale Agreement by and between Shepherd's Finance, LLC and S.K. Funding, LLC, dated as of
 February 19, 2016, incorporated by reference to Exhibit 10.4 to the Registrant's Current Report on Form 8-K, filed on February
 25, 2016, Commission File No. 333-203707

 10.16

 Assignment
 of Mortgage from Shepherd's Finance, LLC to S.K. Funding, LLC, dated June 30, 2016, incorporated by reference to Exhibit 10.3
 to the Registrant's Current Report on Form 8-K, filed on July 7, 2016, Commission File No. 333-203707

 10.17

 Loan
 Purchase and Sale Agreement between Shepherd's Finance, LLC and Builder Finance, Inc., dated as of February 6, 2017, incorporated
 by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K, filed on February 10, 2017, Commission File No.
 333-203707

 10.18

 Confirmation
 Agreement between Shepherd's Finance, LLC, 1st Financial Bank USA, and Builder Finance, Inc., dated as of February 6, 2017,
 incorporated by reference to Exhibit 10.2 to the Registrant's Current Report on Form 8-K, filed on February 10, 2017, Commission
 File No. 333-203707

 10.19

 Sixth
 Amendment to the Loan Purchase and Sale Agreement between Shepherd's Finance, LLC and S.K. Funding, LLC, dated as of July 24,
 2017, incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K, filed on July 27, 2017, Commission
 File No. 333-203707

 10.20

 Line
 of Credit Agreement between Shepherd's Finance, LLC and Paul Swanson, dated as of October 23, 2017, incorporated by reference
 to Exhibit 10.1 to the Registrant's Current Report on Form 8-K, filed on October 27, 2017, Commission File No. 333-203707

 10.21

 Collateral
 Assignment of Notes and Documents from Shepherd's Finance, LLC to Paul Swanson, dated as of October 23, 2017, incorporated
 by reference to Exhibit 10.4 to the Registrant's Current Report on Form 8-K, filed on October 27, 2017, Commission File No.
 333-203707

 10.22

 Master
 Loan Modification Agreement between Shepherd's Finance, LLC and Paul Swanson effective as of April 11, 2018, incorporated by
 reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K, filed on April 18, 2018, Commission File No. 333-203707

 10.23

 Promissory Note from Shepherd's Finance, LLC to Paul Swanson dated as of October 23, 2017 and April 12, 2018, incorporated
 by reference to Exhibit 10.3 to the Registrant's Current Report on Form 8-K, filed on April 18, 2018, Commission File No. 333-203707

 10.24

 First
 Amendment to Promissory Note by and among Shepherd's Finance, LLC and Daniel M. Wallach and Joyce S. Wallach, dated June 14,
 2018, incorporated by reference to Exhibit 10.7 to the Registrant's Quarterly Report on Form 10-Q for the Quarterly Period
 Ended June 30, 2018, filed on August 9, 2018, Commission File No. 333-203707

 10.25

 First
 Amendment to Promissory Note by and among Shepherd's Finance, LLC and 2007 Daniel M. Wallach Legacy Trust, dated June 14, 2018,
 incorporated by reference to Exhibit 10.8 to the Registrant's Quarterly Report on Form 10-Q for the Quarterly Period Ended
 June 30, 2018, filed on August 9, 2018, Commission File No. 333-203707

 10.26

 Loan
 Modification Agreement by and between Shepherd's Finance, LLC and Paul Swanson, dated as of December 27, 2018, incorporated
 by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K, filed on January 2, 2019, Commission File No.
 333-203707

 10.27

 Loan
 Agreement by and between Shepherd's Finance, LLC and LCA Bank Corporation, dated May 5, 2020, incorporated by reference to
 Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the Quarterly Period Ended March 31, 2020, filed on May
 11, 2020, Commission File No. 333-224557

 10.28

 Note
 from Shepherd's Finance, LLC in favor of LCA Bank Corporation, dated May 5, 2020, incorporated by reference to Exhibit 10.2
 to the Registrant's Quarterly Report on Form 10-Q for the Quarterly Period Ended March 31, 2020, filed on May 11, 2020, Commission
 File No. 333-224557

 10.29

 Loan
 Agreement dated February 5, 2021 by and between the Registrant and LCA Bank Corporation, incorporated by reference to Exhibit 10.1
 to the Registrant's Current Report on Form 8-K, filed on February 11, 2021, Commission File No. 333-224557

 10.30

 Promissory
 Note dated February 5, 2021 from the Company in favor of LCA Bank Corporation, incorporated by reference to Exhibit 10.2 to the Registrant's
 Current Report on Form 8-K, filed on February 11, 2021, Commission File No. 333-224557

 21.1

 Subsidiaries
 of Shepherd's Finance, LLC, incorporated by reference to Exhibit 21.1 to the Registrant's Annual Report on Form 10-K
 for the Year Ended December 31, 2021, filed on March 10, 2022, Commission File No. 333-224557

 31.1*

 Certification of Principal Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 31.2*

 Certification of Principal Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 32.1*

 Certification of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002

 32.2*

 Certification of Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002

 101.INS**

 101.SCH**

 101.CAL**

 101.DEF**

 101.LAB**

 101.PRE**

 *
Filed herewith.

 **
Pursuant to Regulation 406T of Regulation S-T, these Interactive data files are deemed not filed or part of a registration statement
or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, or Section 18 of the Securities Exchange Act
of 1934, as amended, and are otherwise not subject to liability.

 SIGNATURES

to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.

 SHEPHERD'S
 FINANCE, LLC

 (Registrant)

 Dated:
 March 15, 2024

 By:

 /s/
 Daniel M. Wallach

 M. Wallach

 CEO
 and Manager

to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:

 Signature

 Title

 Date

 /s/
 Daniel M. Wallach

 Chief
 Executive Officer and Manager

 March

 M. Wallach

 (Principal
 Executive Officer)

 /s/
 Catherine Loftin

 Chief
 Financial Officer

 March

 Catherine
 Loftin

 (Principal
 Financial Officer and Principal Accounting Officer)

 /s/
 Kenneth R. Summers

 March

 R. Summers

 /s/
 Eric A. Rauscher

 March

 Eric
 A. Rauscher

 /s/
 Gregory L. Sheldon

 March

 L. Sheldon

 Supplemental
Information to be Furnished with Reports Filed Pursuant to Section 15(d) of the Act by Registrants Which Have Not Registered Securities
Pursuant to Section 12 of the Act

 No
annual report relating to the fiscal year ended December 31, 2023 or proxy statement with respect to any annual or other meeting of security
holders has been sent to security holders.

TO FINANCIAL STATEMENTS

 Audited
 Consolidated Financial Statements as of and for the years ended December 31, 2023 and 2022:

 Report of Independent Registered Public Accounting Firm on Financial Statements (PCAOB ID: 171)

 Report of Independent Registered Public Accounting Firm on Financial Statements (PCAOB ID: 2226)

 Consolidated Balance Sheets as of December 31, 2023 and 2022

 Consolidated Statements of Operations for the Years Ended December 31, 2023 and 2022

 Consolidated Statements of Changes in Members' Capital for the Years Ended December 31, 2023 and 2022

 Consolidated Statements of Cash Flows for the Years Ended December 31, 2023 and 2022

 Notes to Consolidated Financial Statements

 F- 1

 REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 To
the Members and the Board of Managers of Shepherd's Finance, LLC

 Opinion
on the Financial Statements

 We
have audited the accompanying consolidated balance sheet of Shepherd's Finance, LLC (the "Company") as of December 31, 2023,
the related consolidated statement of operations for the year then ended, and the related notes to the consolidated financial statements
(collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial
position of the Company as of December 31, 2023, and the results of its operations and its cash flows for the year then ended in conformity
with accounting principles generally accepted in the United States of America.

 Adoption
of New Accounting Standard

 As
discussed in Note 2 to the financial statements, the Company has changed its method of accounting for credit losses effective January
1, 2023 due to the adoption of Accounting Standards Codification ASC 326: Financial Instruments – Credit Losses. The Company adopted
the new credit loss standard using the modified retrospective approach such that prior period amounts are not adjusted and continue to
be reported in accordance with previously applicable generally accepted accounting principles. Our opinion is not modified with respect
to this matter.

 Basis
for Opinion

 These
financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's
financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 We
conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit,
we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion
on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

 Our
audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or
fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides
a reasonable basis for our opinion.

 /s/
 HORNE LLP

 We
have served as the Company's auditor since 2023.

 Brentwood,

 March

 F- 2

 REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 To
the Board of Managers and

 Members
of Shepherd's Finance, LLC

 Jacksonville,

 Opinion
on the Financial Statements

 We
have audited the accompanying consolidated balance sheet of Shepherd's Finance, LLC as of December 31, 2022 and the related consolidated
statements of operations, changes in members' capital, and cash flows for the year then ended, and the related notes (collectively
referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material
respects, the financial position of Shepherd's Finance, LLC as of December 31, 2022, and the results of its operations
and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

 Basis
for Opinion

 These
consolidated financial statements are the responsibility of Shepherd's Finance, LLC's management. Our responsibility is to
express an opinion on Shepherd's Finance, LLC's consolidated financial statements based on our audit. We are a public accounting
firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect
to Shepherd's Finance, LLC in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.

 We
conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part
of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing
an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

 Our
audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due
to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that our audit provide a reasonable basis for our opinion.

 /s/
 Warren Averett, LLC

 We
had served as Shepherd's Finance, LLC's auditor since 2018.

 PCAOB
# 2226

 Birmingham,
Alabama

 March
15, 2023

 F- 3

Balance Sheets

 As
of December 31, 2023, and 2022

 (in
 thousands of dollars)

 2023

 2022

 Cash
 and cash equivalents

 $
 3,522

 $
 2,996

 Restricted
 cash

 -

 1,200

 interest receivable

 1,171

 Loans
 receivable, net

 Real
 estate investments

 assets, net

 1,582

 Premises
 and equipment

 Other
 assets

 Total
 assets

 $
 64,834

 $
 65,472

 Liabilities,
 Redeemable Preferred Equity, and Members' Capital

 interest escrow

 $

 $

 Accounts
 payable and accrued expenses

 interest payable

 3,861

 2,921

 Notes
 payable secured, net of deferred financing costs

 21,519

 23,173

 Notes
 payable unsecured, net of deferred financing costs

 31,786

 30,110

 Due
 to preferred equity member

 -

 Total
 liabilities

 $
 58,067

 $
 57,667

 and Contingencies (Note 10)

 -

 -

 Redeemable
 Preferred Equity

 C preferred equity

 $
 4,773

 $
 5,725

 Members'
 Capital

 B preferred equity

 -

 1,900

 Class
 A common equity

 1,994

 Members'
 capital

 $
 1,994

 $
 2,080

 Total
 liabilities, redeemable preferred equity and members' capital

 $
 64,834

 $
 65,472

 The
accompanying notes are an integral part of these consolidated financial statements.

 F- 4

Statements of Operations

 For
the years ended December 31, 2023 and 2022

 (in
 thousands of dollars)

 2023

 2022

 Net
 Interest Income

 and fee income on loans

 $
 11,554

 $
 10,220

 expense:

 related to secured borrowings

 2,263

 2,134

 related to unsecured borrowings

 3,261

 2,972

 expense

 $
 5,524

 $
 5,106

 Net
 interest income

 6,030

 5,114

 Less:
 Credit loss provision

 Net
 interest income after credit loss provision

 5,293

 4,184

 Non-Interest

 Gain

 $

 $

 Gain
 on sale of real estate investments

 –

 Dividend

 –

 Other

 Total
 non-interest income

 $

 $

 5,391

 4,501

 Non-Interest
 Expense

 Selling,
 general and administrative

 $
 2,696

 $
 2,683

 Depreciation
 and amortization

 Loss
 on the sale of foreclosed assets

 –

 loss on foreclosed assets

 Total
 non – Interest expense

 2,813

 2,741

 Net

 $
 2,578

 $
 1,760

 Net
 income attributable to preferred equity holders

 Net
 income attributable to common equity holders

 $
 1,994

 $

 The
accompanying notes are an integral part of these consolidated financial statements.

 F- 5

Statements of Changes in Members' Capital

 For
the years ended December 31, 2023 and 2022

 (in thousands of dollars)

 Series B

 Preferred

 Class A

 Common

 Total

 Members'

 Capital

 January 1, 2022

 $
 1,720

 $
 ( 130
)

 $
 1,590

 Net Income attributable to Series B and Common A equity

 1,118

 Contributions of Series B equity

 -

 Distributions to Series B equity

 ( 184
)

 ( 624
)

 ( 808
)

 $
 1,900

 $

 $
 2,080

 Balance

 $
 1,900

 $

 $
 2,080

 Net Income attributable to Common A equity

 $
 -

 $
 1,991

 $
 1,991

 Contributions of Common A equity

 -

 1,460

 1,460

 Distributions to Class A equity

 -

 ( 1,286
)

 ( 1,286
)

 Distributions to Series B equity

 ( 1,900
)

 -

 ( 1,900
)

 Cumulative effect of CECL adoption as of January 1, 2023

 -

 ( 178
)

 ( 178
)

 Repurchase of Common A equity units

 -

 ( 180
)

 ( 180
)

 Stock compensation expense

 -

 $
 -

 $
 1,994

 $
 1,994

 Balance

 $
 -

 $
 1,994

 $
 1,994

 The
accompanying notes are an integral part of these consolidated financial statements.

 F- 6

Statements of Cash Flows

 For
the years ended December 31, 2023 and 2022

 (in
 thousands of dollars)

 2023

 2022

 Cash
 flows from operations

 Net

 $
 2,578

 $
 1,760

 Adjustments
 to reconcile net income to net cash provided by operating activities

 Amortization
 of deferred financing costs

 Provision
 for credit losses

 in loan origination fees, net

 Depreciation
 and amortization

 of foreclosed assets, net

 Gain
 on sale of foreclosed assets, net

 ( 8
)

 ( 101
)

 Loss

 -

 Gain
 on sale of real estate investments

 ( 10
)

 -

 Net
 change in operating assets and liabilities:

 Other
 assets

 interest receivable

 ( 501
)

 ( 72
)

 interest escrow

 ( 521
)

 interest payable

 1,834

 1,114

 Accounts
 payable and accrued expenses

 ( 41
)

 Net
 cash provided by operating activities

 5,063

 4,691

 Cash
 flows from investing activities

 Loan
 originations and principal collections, net

 ( 2,851
)

 ( 10,296
)

 Investment
 in foreclosed assets

 ( 125
)

 ( 316
)

 for construction in real estate investments

 ( 1,896
)

 ( 2,226
)

 Deposits
 for construction in real estate investments

 -

 1,570

 from sale of real estate investments

 2,131

 1,647

 from sale of foreclosed assets

 1,549

 1,096

 Net
 cash used in investing activities

 ( 1,192
)

 ( 8,525
)

 Cash
 flows from financing activities

 Contributions
 from Common A equity holders

 1,460

 -

 Contributions
 from preferred B equity holders

 -

 Contributions
 from preferred C equity holders

 -

 Distributions
 to preferred B equity holders

 ( 1,900
)

 -

 Distributions
 to redeemable C equity holders

 ( 1,539
)

 ( 131
)

 Distributions
 to common equity holders

 ( 1,286
)

 ( 624
)

 from secured note payable

 13,630

 14,624

 Repayments
 of secured note payable

 ( 14,542
)

 ( 11,103
)

 from unsecured notes payable

 3,315

 10,680

 Redemptions/repayments
 of unsecured notes payable

 ( 3,406
)

 ( 9,308
)

 Repurchase
 of common A equity units

 ( 180
)

 -

 Stock
 compensation expense

 -

 financing costs paid

 ( 104
)

 ( 223
)

 Net
 cash (used in) provided by financing activities

 ( 4,545
)

 4,295

 Net
 change in cash, cash equivalents and restricted cash

 ( 674
)

 Cash,
 cash equivalents and restricted cash

 of period

 4,196

 3,735

 End
 of period

 $
 3,522

 $
 4,196

 Supplemental
 disclosure of cash flow information

 Cash
 paid for interest

 $
 6,464

 $
 5,814

 Non-cash
 investing and financing activities

 Earned
 by Series B preferred equity holders but not distributed to customer interest escrow

 $
 -

 $

 Earned
 by Series B preferred equity holders and distributed to customer interest escrow

 $

 $

 assets transferred from loans receivable, net

 $
 -

 $

 assets transferred to loans receivable, net

 $
 -

 $
 1,017

 and unsecured notes payable transfers

 $

 $

 interest payable transferred to unsecured notes payable

 $

 $

 Construction
 loans funded through the reduction of Secured LOC from affiliates

 $
 -

 $

 The
accompanying notes are an integral part of these consolidated financial statements.

 F- 7

 Notes
to Consolidated Financial Statements

 Information
presented throughout these notes to the consolidated financial statements is in thousands of dollars.

 1.
 Description of Business

Finance, LLC and subsidiary (the "Company", "we", or "our") was originally formed as a Pennsylvania
limited liability company on May 10, 2007. We are the sole member of one consolidating subsidiary, Shepherd's Stable Investments,
LLC. The Company operates pursuant to its Second Amended and Restated Limited Liability Company Agreement by and among Daniel M. Wallach
and the other members of the Company effective as of March 16, 2017, and as subsequently amended.

 The
Company extends commercial loans to residential homebuilders (in 20 states as of December 31, 2023) to:

 construct
 single family homes,

 develop
 undeveloped land into residential building lots, and

 purchase
 and improve for sale older homes.

 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

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 operating income, net income and operating cash flows.
Segments are identified and aggregated based on products sold or services provided. Based on these factors, we have determined that the
Company's operations are in one segment, commercial lending.

 Revenue
Recognition

income generally is recognized on an accrual basis. The accrual of interest is generally discontinued on all loans past due 90 days or
more. All interest accrued but not collected for loans that are placed on nonaccrual or charged off is reversed against interest income,
unless management believes that the accrued interest is recoverable through liquidation of collateral. Interest received on nonaccrual
loans is applied against principal. Interest on accruing impaired loans is recognized as long as 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.

 F- 8

 The
Company records revenue when control of the promised services is transferred to the customer, in an amount that reflects the consideration
we expect to be entitled to receive in exchange for those products or services. Our performance obligations to customers are primarily
satisfied over time as the services are performed and provided to the customer.

 Advertising

 Advertising
costs are expensed as incurred and are included in selling, general and administrative. Advertising expenses were $ 40 and $ 134 for the
years ended December 31, 2023 and 2022, 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 account.

 Restricted
Cash

 Restricted
cash is deposits received on sold real estate assets which is deemed restricted until construction is complete.

 Fair
Value Measurements

 The
Company follows the guidance of FASB ASC 825, Financial Instruments (ASC 825), and FASB ASC 820, Fair Value Measurements (ASC
820). ASC 825 permits entities to measure many financial instruments and certain other items at fair value. The objective is to improve
financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related
assets and liabilities differently without having to apply complex hedge accounting provisions. ASC 820 clarifies that 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. Under this guidance, fair value measurements are not adjusted for transaction costs. This guidance establishes
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 (1) the net unrecognized portion
of direct costs and non-refundable loan fees associated with lending, and (2) deposits made by the borrowers used as collateral for a
loan and due back to the builder at or prior to loan payoff. 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.

 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. 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 on accrual status if it is in the process of collection or well-secured (i.e., the loan has sufficient collateral value).
Loans are restored to accrual status when the obligation is brought current or has performed in accordance with the contractual terms
for a reasonable period of time and the ultimate collectability of the total contractual principal and interest is no longer in doubt.

 A
loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect
the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Impaired 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.

 F- 9

for Credit Losses

 Based
on the Company's size, complexity and historical data the aggregate method or loss-rate method was selected to estimate 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 and C and Unsecured for both construction and development loans where A
and C defines the highest and lowest scores, respectively. Unsecured loans in our portfolio do not hold underlying 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

 Average
 cash should be 2% of the borrower's total approval limit =.83 POINTS

 cash balance should be 1% of their total approval limit =.83 POINTS

 Bank
statements received from the borrower are entered into LAS 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

 or higher credit score = 1.66

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

 Meets
 minimum experience requirement according to the application matrix = 1.66

 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.

 F- 10

 POINTS

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

 Score of 4+ = A

 Score of 2.49 – 3.9 = B

 Score below 2.49 = C

 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:

 1.
 value which is obtained when the loan originates;

 2.
 Historical
 Originations by Ranking Bucket which is the sum of the Commitment Value obtained when the
 loan is closed; and

 3.
 Losses
 by Ranking Bucket which are losses expensed for loans not within foreclosure since 2018.

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

 Impaired
Loans

 A
loan is considered to be impaired when it is probable the Company will be unable to collect all principal and interest payments due in
accordance with the contractual terms of the loan agreement.

 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. The gain or loss is recorded on our consolidated statement of operations as non-interest income or expense.
If the fair value of the asset declines, a write-down is recorded through non-interest expense. While the initial valuation is done on
an as-is basis, subsequent values are based on our plan for 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.

Financing Costs, Net

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 as a reduction in the unsecured notes
offering liability.

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 in the course of 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.
With few exceptions, the Company is no longer subject to income tax examinations for years prior to 2014.

 F- 11

 The
Company's policy is to record interest and penalties related to taxes in interest expense on the consolidated statements of operations.
There have been no significant interest or penalties assessed or paid.

 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. At December 31,
2023, 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.

 Concentrations

instruments that potentially subject the Company to concentrations 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

 Percent
 of

 Percent
 of

 Loan

 Loan

 City

 City

 Highest
 concentration risk

 Pittsburgh,
 PA

 %

 Pittsburgh,
 PA

 %

 Second
 highest concentration risk

 Cape
 Coral, FL

 %

 Orlando,
 FL

 %

 Third
 highest concentration risk

 Orlando,
 FL

 %

 Spokane,
 WA

 %

 Recent
Accounting Pronouncements

 In
June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13,
"Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13").
This update to Accounting Standards Codification Topic ("ASC") 326, Financial Instruments - Credit Losses ("ASC 326"),
significantly changed the way entities recognize impairment on many financial assets by requiring immediate recognition of estimated
credit losses expected to occur over the asset's remaining life. FASB describes this impairment recognition model as the current
expected credit loss ("CECL") model and believes the CECL model will result in more timely recognition of credit losses since
the CECL model incorporates expected credit losses versus incurred credit losses. The scope of FASB's CECL model includes loans,
held-to-maturity debt instruments, lease receivables, loan commitments and financial guarantees that are not accounted for at fair value.

 In
the remainder of these Notes to the Consolidated Financial Statements, references to CECL or to ASC 326 shall mean the accounting
standards and principles set forth in ASC 326 after giving effect to ASU 2016-13. The new guidance was effective for fiscal years, and
interim periods within those fiscal years, beginning after December 15, 2022.

 The
Company adopted ASU 2016-13 on January 1, 2023 and recorded a one-time cumulative-effect adjustment of $ 178 as disclosed in the Statement
of Changes in Members' Capital.

 F- 12

 3.
 Fair Value

 Utilizing
ASC 820, the Company has established a framework for measuring fair value under U.S. GAAP using a hierarchy, which requires the Company
to maximize the use of observable inputs and minimize the use of unobservable inputs. 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.
Three levels of inputs are used to measure fair value, as follows:

 Level
 1 –

 quoted
 prices in active markets for identical assets or liabilities;

 Level
 2 –

 quoted
 prices in active markets for similar assets and liabilities and inputs that are observable for the asset or liability; or

 Level
 3 –

 unobservable
 inputs, such as discounted cash flow models or valuations.

 A
financial instrument's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair
value measurement.

 Fair
Value Measurements of Non-Financial Instruments on a Recurring Basis

 The
Company has no non-financial instruments measured at fair value on a recurring basis.

 Fair
Value Measurements of Non-Financial Instruments on a Non-recurring Basis

 Certain
assets are measured at fair value on a non-recurring basis when there is evidence of impairment. The fair values of impaired loans with
specific allocations of the allowance for credit losses are generally based on recent real estate appraisals of the collateral less estimated
cost to sell. Declines in the fair values of other real estate owned subsequent to their initial acquisitions are also based on recent
real estate appraisals less selling costs.

 Impaired
Loans

 The
appraisals used to establish the value of impaired loans are based on similar properties at similar times; however, due to the differences
in time and properties, the impaired loans are classified as Level 3. There were 17 and 14 impaired loan assets as of December 31, 2023
and December 31, 2022, respectively.

assets (upon initial recognition or subsequent impairment) are measured at fair value on a non-recurring basis.

assets, upon initial recognition, are measured and reported at fair value less cost to sell. Each reporting period, the Company remeasures
the fair value of its significant foreclosed assets. Fair value is based upon independent market prices, appraised values of the foreclosed
assets or management's estimates of value, which the Company classifies as a Level 3 evaluation.

 The
following tables present the balances of non-financial instruments measured at fair value on a non-recurring basis as of December 31,
2023 and 2022:

 Schedule of Non-financial Instruments Measured at Fair Value on Non-recurring Basis

 Quoted
 Prices
 in
 Active
 Markets
 for

 Significant
 Other

 Significant

 Identical

 Observable

 Unobservable

 Carrying

 Estimated

 Inputs

 Inputs

 Fair
 Value

 Level

 Level

 Level

 assets, net

 $

 $

 $
 –

 $
 –

 $

 Impaired
 loans due to COVID-19, net

 –

 –

 Other
 impaired loans, net

 5,393

 5,393

 –

 –

 5,393

 Total

 $
 5,605

 $
 5,605

 $
 –

 $
 –

 $
 5,605

 F- 13

 Quoted
 Prices
 in
 Active
 Markets
 for

 Significant
 Other

 Significant

 Identical

 Observable

 Unobservable

 Carrying

 Estimated

 Inputs

 Inputs

 Fair
 Value

 Level

 Level

 Level

 assets, net

 $
 1,582

 $
 1,582

 $
 –

 $
 –

 $
 1,582

 Impaired
 loans due to COVID-19, net

 1,348

 1,348

 –

 –

 1,348

 Other
 impaired loans, net

 3,596

 3,596

 –

 –

 3,596

 Total

 $
 6,526

 $
 6,526

 $
 –

 $
 –

 $
 6,526

 Fair
Value of Financial Instruments

under Credit Facilities

 The
fair value of the Company's borrowings under credit facilities is estimated based on the expected cash flows discounted using the
current rates offered to the Company for debt of the same remaining maturities. As all of the borrowings under credit facilities or the
Notes are either payable on demand or at similar rates to what the Company can borrow funds for today, the fair value of the borrowings
is determined to approximate carrying value at both December 31, 2023 and 2022. The interest on our Notes offering is paid to our Note
holders either monthly or at the end of their investment, compounded on a monthly basis. For the same reasons as the determination for
the principal balances on the Notes, the fair value approximates the carrying value for the interest as well.

 The
table below is a summary of fair value estimates for financial instruments:

 Schedule of Fair Value Estimates for Financial Instruments

 Fair
 Value

 Fair
 Value

 Carrying

 Estimated

 Carrying

 Estimated

 Fair
 Value

 Fair
 Value

 Cash,
 cash equivalents and restricted cash

 $
 3,522

 $
 3,522

 $
 4,196

 $
 4,196

 Loans
 receivable, net

 interest on loans

 1,171

 1,171

 Liabilities

 interest escrow

 Notes
 payable secured, net

 21,519

 21,519

 23,173

 23,173

 Notes
 payable unsecured, net

 31,786

 31,786

 30,110

 30,110

 interest payable

 3,861

 3,861

 4.
 Real Estate Investment Assets

June 2020, we acquired four lots from a borrower in exchange for the transfer of loans secured by those lots. We extinguished the principal
balance for the loans on the lots in the amount of $ 640 and in addition, paid a $ 500 management fee for the development of homes on the
lots. The management fee was paid through reducing the principal balance on a current loan receivable with the borrower. Two of the four
homes sold during 2022 and the remaining two sold in 2023.

October 2023, the Company acquired two properties to construct houses on each lot. Once the properties are fully developed and sold the
use of proceeds from the sale will first apply to the land, building, furniture and interest costs to the Company and a portion of the
remaining funds will be distributed as a management fee for the development of the homes.

 F- 14

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

 Schedule of Roll Forward of Real Estate Investment Assets

 $

 $
 1,651

 Deposits
 from real estate investments

 -

 ( 1,570
)

 Gain
 on sale of real estate investments

 -

 from the sale of real estate investments

 ( 2,131
)

 ( 1,647
)

 for construction, land and development

 1,896

 2,226

 $

 $

 5.
 Loans Receivables, net

 Financing
receivables are comprised of the following as of December 31, 2023 and 2022:

 Schedule of Financing Receivables

 Loans
 receivable, gross

 $

 $

 Less:
 Deferred loan fees

 ( 1,772

)

 ( 1,264

)

 Less:
 Deposits

 ( 1,056

)

 ( 839

)

 Plus:
 Deferred origination costs

 Less:
 Allowance for credit losses

 ( 695

)

 ( 2,527

)

 Loans
 receivable, net

 $

 $

Construction and Development Loans

 Construction
Loan Portfolio Summary

 As
of December 31, 2023, we have 62 borrowers, all of whom borrow money for the purpose of building new homes. The loans typically involve
funding of the lot and a portion of construction costs, for a total of between 50 % and 70 % of the completed value of the new home. As
the home is built during the course of the loan, the loan balance increases. The loans carry an interest rate of 2.5 % above our cost
of funds. In addition, we charge a 5 % loan fee and our cost of funds was 11.53 % as of December 31, 2023.

 Our
loans are demand loans and most have a deposit from the builder during construction to help offset the risk of partially built homes,
and some have an interest escrow to offset payment of monthly interest risk.

 The
following is a summary of the loan portfolio to builders for home construction loans as of December 31, 2023 and 2022:

 Schedule of Commercial Loans - Construction Loan Portfolio Summary

 Year

 of

 of

 of
 Loans

 Value
 of

 Gross

 Loan
 to Value

 Loan
 Fee

 2023

 $
 117,169

 $
 75,300

 $
 51,788

 %(3)

 %

 2022

 $
 104,993

 $
 72,526

 $
 52,796

 %(3)

 %

 (1)

 The

 (2)

 The
 loan to value ratio is calculated by taking the commitment amount and dividing by the appraised value.

 (3)

 F- 15

 Real
Estate Development Loan Portfolio Summary

 The
following is a summary of our loan portfolio to builders for land development as of December 31, 2023 and 2022:

 Schedule of Commercial Loans - Real Estate Development Loan Portfolio Summary

 Year

 of

 of

 of
 Loans

 Gross

 Gross

 Loan
 to Value

 Spread (4)

 2023

 $
 23,873

 $
 11,256

 $
 9,505

 %(3)

 2022

 $
 19,718

 $
 12,110

 $
 8,178

 %(3)

 (1)

 The
 value is determined by the appraised value adjusted for remaining costs to be paid. A portion of this collateral is $ 0 and $ 1,900
 as of December 31, 2023 and 2022, respectively, of preferred equity in our Company. In the event of a foreclosure on the property
 securing these loans, the portion of our collateral that is preferred equity might be difficult to sell, which may impact our ability
 to recover the loan balance. In addition, a portion of the collateral value is estimated based on the selling prices anticipated
 for the homes.

 (2)

 The
 loan to value ratio is calculated by taking the outstanding amount and dividing by the appraised value calculated as described above.

 (3)

 (4)

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

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

 Schedule of Construction and Development Loan Portfolio

 31,
 2023

 31,
 2022

 $

 $
 46,943

 Originations
 and modifications

 58,216

 59,408

 collections

 ( 57,895
)

 ( 49,658
)

 Transferred
 from loans receivables, net

 -

 ( 556
)

 Transferred
 to loans receivables, net

 -

 1,017

 in builder deposit

 ( 217
)

 in allowance for credit losses

 1,832

 ( 479
)

 in loan fees, net

 ( 456
)

 ( 120
)

 $

 $

Quality Information

 Effective
January 1, 2023, we adopted ASC 326, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,"
 which replaced the incurred loss methodology for determining out provision for credit losses and allowance for credit losses with
current expected credit loss ("CECL") model. Upon the adoption of ASC 326 the total amount of the allowance for credit losses
("ACL") on loans estimated using the CECL methodology increased $ 178 compared to the total amount of the allowance recorded
using the prior incurred loss model.

 Based
on the Company's size, complexity and historical data the aggregate method or loss-rate method was selected to estimate 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,
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 and C and Unsecured for both construction and development loans where A
and C defines the highest and lowest scores, respectively. Unsecured loans in our portfolio do not hold underlying collateral.

 F- 16

 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.

 Our
Company construction loans are collateralized by land and real estate while our Company development loans are collateralized by land.
Secured nonaccrual loans individually evaluated are also collateralized by land and real estate. Our Company has one unsecured loan that
is not collateralized; however, it is fully reserved at $ 86 as of December 31, 2023.

 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, 2023.

 Schedule
of Gross Loans Receivable, Commitment Value and ACL Credit Rank Loan Pool Category

 Loans
 Receivable
 Gross

 Value

 ACL

 Construction Loans Collectively Evaluated:

 $
 40,252

 $
 59,075

 $

 5,718

 10,339

 -

 -

 -

 Development Loans Collectively Evaluated:

 $
 8,787

 $
 9,793

 $

 -

 Unsecured Nonaccrual Loans Individually Evaluated

 $

 $

 $

 Secured Nonaccrual loans Individually Evaluated:

 $
 5,826

 $
 6,303

 $

 Total

 $

 $
 86,556

 $

 The
following table presents the amortized cost basis of loans on nonaccrual status and loans past due over 89 days still accruing as of
December 31, 2023:

 Schedule of Amortized Cost Basis of Loans on Nonaccrual Status and Loans

 Nonaccrual
 with No Allowance for Credit Loss

 Nonaccrual
 with Allowance for Credit Loss

 Loans
 Past Due Over 89 Days Still Accruing

 Nonaccrual Loans Individually Evaluated

 $
 -

 $

 $
 -

 Nonaccrual loans Individually Evaluated:

 $
 2,495

 $
 3,331

 $
 -

 Total

 $
 2,495

 $
 3,417

 $
 -

 For
loans greater than 12 months in age that are individually evaluated, appraisals are ordered and prepared if the current appraisal is
greater than 13 months old and construction is greater than 90% complete. If construction is less than 90% complete the Company uses
the latest appraisal on file. At certain times the Company may choose to use a broker's opinions of value ("BOV") as
a replacement for an appraisal if deemed more efficient by management. Appraised values are adjusted down for estimated costs associated
with asset disposal. Broker's opinion of selling price, use currently valid sales contracts on the subject property, or representative
recent actual closings by the builder on similar properties may be used in place of a broker's opinion of value.

 Appraisers
are state certified, and are selected by first attempting to utilize the appraiser who completed the original appraisal report. If that
appraiser is unavailable or unreasonably expensive, we use another appraiser who appraises routinely in that geographic area. BOVs are
created by real estate agents. We try to first select an agent we have worked with, and then, if that fails, we select another agent
who works in that geographic area.

 In
addition, our loan portfolio includes performing, forbearance and non-accrual loans. The Company's policies with respect to placing
loans on non-accrual and individually evaluated if they are past due greater than 90 days unless management deems the loan an exception.
A fair market value analysis is performed and an allowance for credit loss is established based on the results of the analysis.

 The
following is an aging of our gross loan portfolio as of December 31, 2023:

 Schedule of Aging of Gross Loan Portfolio

 Gross
 Loan

 Current

 Past
 Due

 Past
 Due

 Past
 Due

 Past
 Due

 Value

 - 59

 - 89

 - 179

 - 269

 >270

 Performing
 Loans

 A

 $
 49,039

 $
 49,039

 $
 –

 $
 –

 $
 –

 $
 –

 B

 5,890

 5,890

 –

 –

 –

 –

 C

 –

 –

 –

 –

 Performing Loans

 –

 –

 –

 –

 Forbearance
 Loans

 B

 –

 –

 –

 –

 –

 –

 C

 –

 –

 –

 –

 –

 –

 Forbearance Loans

 –

 –

 –

 –

 –

 –

 Nonaccrual loans Individually Evaluated:

 –

 –

 –

 –

 Nonaccrual loans Individually Evaluated:

 5,826

 –

 1,497

 1,641

 1,807

 Total

 $

 $

 $

 $
 1,497

 $
 1,641

 $
 1,893

 F- 17

 Below
is an aging schedule of loans receivable as of December 31, 2023, on a recency basis:

 Summary of Aging Schedule of Loans Receivables on a Recency Basis

 No.
 Loans

 %

 Current
 loans (current accounts and accounts on which more than 50% of an original contract payment was made in the last 59 days)

 $

 90.4
 %

 60-89
 days

 1.4
 %

 90-179
 days

 1,497

 2.4
 %

 180-269
 days

 1,641

 2.7
 %

 >270
 days

 1,893

 3.1
 %

 $

 100.0
 %

 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

 $

 100.0
 %

 Below
is an aging schedule of loans receivable as of December 31, 2023, on a contractual basis:

 Summary of Aging Schedule of Loans Receivables on a Contractual Basis

 No.
 Loans

 %

 Contractual
 Terms - All current Direct Loans and Sales Finance Contracts with installments past due less than 60 days from due date.

 $

 90.4
 %

 60-89
 days

 1.4
 %

 90-179
 days

 1,497

 2.4
 %

 180-269
 days

 1,641

 2.7
 %

 >270
 days

 1,893

 3.1
 %

 $

 100.0
 %

 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

 $

 100.0
 %

 F- 18

for Credit Losses on Loans

 The
following table provides a roll forward of the allowance for credit losses:

 Schedule of Allowance for Credit Losses

 Performing Loans

 Nonaccrual loans

 Construction Loans A Credit Risk

 Construction Loans B Credit Risk

 Construction Loans C Credit Risk

 Development Loans A Credit Risk

 Development Loans B Credit Risk

 Development Loans C Credit Risk

 Secured Individually Evaluated

 Unsecured Individually Evaluated

 Total

 ACL December 31, 2022

 $
 ( 174
)

 ( 66
)

 ( 9
)

 ( 37
)

 ( 2
)

 ( 7
)

 ( 247
)

 ( 1,986
)

 $
 ( 2,527
)

 Impact of the adoption of ASC 326

 ( 33
)

 ( 1
)

 ( 12
)

 ( 30
)

 -

 ( 139
)

 ( 178
)

 Charge-offs

 -

 -

 -

 -

 -

 -

 2,610

 2,742

 Reduction in ACL for loan participations

 -

 -

 -

 -

 -

 -

 Credit loss provision

 ( 13
)

 ( 3
)

 ( 0
)

 ( 236
)

 ( 566
)

 ( 737
)

 ACL December 31, 2023

 $
 ( 215
)

 ( 32
)

 -

 ( 5
)

 -

 ( 11
)

 ( 351
)

 ( 81
)

 $
 ( 695
)

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 $ 25,263 and $ 23,662
as of December 31, 2023 and December 31, 2022, respectively. The allowance for credit losses is calculated at an estimated loss rate
and the total commitment value for loans in our portfolio. Both the funded and unfunded portion of the allowance for credit losses are
included in loans receivables, net on the Balance Sheet as of December 31, 2023. Other than unfunded
commitments, we had no off-balance sheet transactions, nor do we currently have any such arrangements or obligations.

 Concentrations

instruments that potentially subject the Company to concentrations 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

 Percent
 of

 Percent
 of

 Loan

 Loan

 City

 City

 Highest
 concentration risk

 Pittsburgh,
 PA

 %

 Pittsburgh,
 PA

 %

 Second
 highest concentration risk

 Cape
 Coral, FL

 %

 Orlando,
 FL

 %

 Third
 highest concentration risk

 Orlando,
 FL

 %

 Spokane,
 WA

 %

 The
following disclosures are presented under GAAP in effect prior to the adoption of CECL. The Company has included these disclosures to
address the applicable prior periods.

Receivables – By risk rating:

 Summary of Finance Receivables by Classification

 Pass

 $
 49,955

 Special
 mention

 3,842

 Classified
 – accruing

 –

 Classified
 – non-accrual

 7,177

 Total

 $

 F- 19

Receivables – Method of impairment calculation:

 Schedule of Finance Receivables Impairment Calculation Method

 Performing
 loans evaluated individually

 $
 15,984

 Performing
 loans evaluated collectively

 37,813

 Non-performing
 loans without a specific reserve

 1,096

 Non-performing
 loans with a specific reserve

 6,081

 Total
 evaluated collectively for credit losses

 $

 The
following is a summary of our impaired non-accrual construction and development loans as of December 31, 2022.

 Schedule of Impaired Loans

 31,
 2022

 principal balance (contractual obligation from customer)

 $
 7,628

 Charge-offs
 and payments applied

 ( 451
)

 Gross
 value before related allowance

 7,177

 Related
 allowance

 ( 2,233
)

 Value
 after allowance

 $
 4,944

 Below
is an aging schedule of loans receivable as of December 31, 2022, on a recency basis:

 No.
 Loans

 %

 Current
 loans (current accounts and accounts on which more than 50% of an original contract payment was made in the last 59 days)

 $
 53,797

 88.2
 %

 60-89
 days

 2,570

 4.2
 %

 90-179
 days

 –

 –

 – %

 180-269
 days

 0.9
 %

 >270
 days

 4,079

 6.7
 %

 $

 100.0
 %

 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

 $

 100.0
 %

 F- 20

 Below
is an aging schedule of loans receivable as of December 31, 2022, on a contractual basis:

 No.
 Loans

 %

 Contractual
 Terms - All current Direct Loans and Sales Finance Contracts with installments past due less than 60 days from due date.

 $
 53,797

 88.2
 %

 60-89
 days

 2,570

 4.2
 %

 90-179
 days

 –

 –

 – %

 180-269
 days

 0.9
 %

 >270
 days

 4,079

 6.7
 %

 $

 100.0
 %

 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

 $

 100.0
 %

 6.
 Foreclosed Assets

 Roll
forward of foreclosed assets for the years ended December 31, 2023 and 2022:

 Schedule of Roll Forward of Foreclosed Assets

 31,
 2023

 31,
 2022

 $
 1,582

 $
 2,724

 Transferred
 from loans receivables, net

 -

 Transferred
 to loans receivables, net

 -

 ( 1,017
)

 Investments
 in foreclosed assets

 Sale
 proceeds

 ( 1,549
)

 ( 1,096
)

 Loss

 ( 34
)

 -

 Gain

 loss on foreclosed assets

 ( 2
)

 ( 2
)

 $

 $
 1,582

 7.

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

 Schedule of Borrowings

 Priority
 Rank

 Borrowing
 Source

 Purchase
 and sale agreements and other secured borrowings

 $
 21,196

 $
 23,142

 line of credit from affiliates

 line of credit (senior)

 1,160

 1,250

 Other
 unsecured debt (senior subordinated)

 1,094

 1,094

 Notes through our public offering, gross

 Other
 unsecured debt (subordinated)

 8,006

 5,649

 Other
 unsecured debt (junior subordinated)

 Less
 deferred financing fees

 ( 238
)

 ( 370
)

 Total

 $
 53,305

 $
 53,283

 F- 21

 Schedule of Maturity of Debt

 Year
 Maturing

 Total
 Amount Maturing

 Public
 Offering

 Other

 2024

 $
 35,732

 $
 8,430

 $
 6,333

 $
 20,969

 2025

 8,296

 7,079

 1,198

 2026

 3,451

 1,366

 2,065

 2027

 4,371

 3,979

 2028

 -

 -

 2029
 and thereafter

 1,671

 -

 1,200

 Total

 $
 53,543

 $

 $
 11,167

 $
 21,522

 Loan
Purchase and Sale Agreements

 We
have two loan purchase and sale agreements where we are the seller of portions of loans we create. The two purchasers are Builder Finance,
Inc. ("Builder Finance") and S.K. Funding, LLC ("S.K. Funding"). Generally, the purchasers buy between 50 % and
 85 % of each loan sold. They receive interest rates ranging from our cost of funds to the interest rate charged to the borrower. The purchasers
generally do not receive any of the loan fees we charge. We have the right to call some of the loans sold, with some restrictions. Once
sold, the purchaser must fund their portion of the loans purchased. We service the loans. Also, there are limited put options in some
cases, whereby the purchaser can cause us to repurchase a loan. The loan purchase and sale agreements are recorded as secured borrowings.

 In
March 2018, we entered into the Seventh Amendment (the "Seventh Amendment") to our Loan Purchase and Sale Agreement with
S.K. Funding. The purpose of the Seventh Amendment was to allow S.K. Funding to purchase a portion of loans sold to one borrower in Pennsylvania.

 The
timing of the Company's principal and interest payments to S.K. Funding under the Seventh Amendment, and S.K. Funding's obligation
to fund the loans in Pennsylvania, vary depending on the total principal amount outstanding at any time, as follows:

 If
 the total principal amount exceeds $1,000, S.K. Funding must fund the amount between $1,000 and less than or equal to $4,500.

 If
 the total principal amount is less than $4,500, then the Company will also repay S.K. Funding's principal as principal payments
 are received on the Pennsylvania Loans from the underlying borrowers in the amount by which the total principal amount is less than
 $4,500 until S.K. Funding's principal has been repaid in full.

 The
 interest rate accruing to S.K. Funding under the Seventh Amendment is 10.5 % calculated on a 365/366-day basis.

 The
Seventh Amendment had a term of 24 months and automatically renews for additional six-month terms unless either party gives written notice
of its intent not to renew at least six months prior to the end of a term. S.K. Funding will have a priority position as compared to
the Company in the case of a default by any of the borrowers.

 In
April 2021, we entered into the Eleventh Amendment (the "Eleventh Amendment") to our Loan Purchase and Sale Agreement with
S.K. Funding. The purpose of the Eleventh Amendment was to allow a principal increase to $ 2,000 from the original $ 1,000 in the Tenth
Amendment dated January 2019. In addition, if the collateral value drops then an unsecured portion or $ 400 may be used until the collateral
is increased back to $ 2,000.

 The
Eleventh Amendment has a term of 12 months and will automatically renew for an additional six-month term unless either party gives written
notice of its intent not to renew at least five months prior to the end of a term. S.K. Funding will have a priority position as compared
to the Company in the case of a default by any of the borrowers.

 In
October of 2023, we entered into the Thirteenth Amendment (the "Thirteenth Amendment") to our Loan Purchase and Sale Agreement
with S.K. Funding. The purpose of the Thirteenth Amendment was to sell participating interests in a few of our loans with our largest
customer. These sales are different than all of our other loan participations in that the buyer is not in a preferred risk position,
and as such, the portions of the loans sold are treated as an actual loan sale. The balance of the portion sold is removed from our balance
sheet. The interest on the portion sold is not reflected on our statement of operations, and there is no interest cost or loan loss related
to the sold portion on our statement of operations. The fee we earn on these loans for origination and servicing is recognized over the
expected life of the loan in the same way that all of our loans are.

to the Thirteenth Amendment, the aggregate amount of the S.K. Funding's commitment, either funded or unfunded, under certain loans
purchased by S.K. Funding covered by the Thirteenth Amendment (the "Loans") was increased to $1,650. As of the effective
date of the Thirteenth Amendment, S.K. Funding has funded $1,400 and agreed to fund an additional $250 upon notice from us that such
additional amount is desired to fund the Loans. In addition, the amount of the portion of any Loan purchased by S.K. Funding was adjusted
to the lesser of (i) 45% of our approved appraised value or a third-party sales price if the collateral property is under agreement for
sale, as applicable, and (ii) 50% of the maximum principal of the loan after deducing the loan fee. The interest rate for the Loans is
the lessor of the (i) the interest rate on such Loan or (ii) 14%, calculated on a 365/366 day basis. For such amounts of the Loan amount
that are unsecured, the interest rate for such amounts is 9.5%, calculated on a 365/366 day basis. The loan receivables gross principal
balance of the sold portion of the Loans as of December 31, 2023 was $ 990.

 The term of Thirteenth Amendment and S.K.
Funding's participation in the Loans, shall be through the repayment of the last Loan participated in by S.K. Funding pursuant
to the terms of the Thirteenth Amendment.

 F- 22

 Lines
of Credit

 Lines
of Credit with Mr. Wallach and His Affiliates

June 2018, we entered into the First Amendment to the line of credit with our Chief Executive Officer and his wife (the "Wallach
LOC") which modified the interest rate on the Wallach LOC to generally equal the prime rate plus 3 %. The interest rate for the
Wallach LOC was 11.50 % and 10.50 % as of December 31, 2023 and 2022, respectfully. As of December 31, 2023, and 2022, the amount outstanding
pursuant to the Wallach LOC was $ 160 and $ 0, respectively. For the years ended December 31, 2023 and 2022, interest expense was $ 18 and
$ 0, respectively. The maximum amount outstanding on the Wallach LOC is $ 1,250 and the loan is a demand loan.

June 2018, we also entered into the First Amendment to the line of credit with the 2007 Daniel M. Wallach Legacy Trust, which is our
CEO's trust (the "Wallach Trust LOC") which modified the interest rate on the Wallach Trust LOC to generally equal
the prime rate plus 3 %. The interest rate for this borrowing was 11.50 % and 10.50 % as of December 31, 2023 and 2022. As of December 31,
2023, and 2022, the amount outstanding pursuant to the Wallach Trust LOC was $ 166 and $ 0, respectively. For the years ended December
31, 2023 and 2022, interest expense was $ 20 and $ 0, respectively. The maximum amount outstanding on the Wallach Trust LOC is $ 250 and
the loan is a demand loan.

 Line
of Credit with William Myrick

June 2018, we entered into a line of credit agreement (the "Myrick LOC Agreement") with our Executive Vice President ("EVP"),
William Myrick. Pursuant to the Myrick LOC Agreement, Mr. Myrick provides us with a line of credit (the "Myrick LOC") with
the following terms:

 not to exceed $ 1,000;

 by a lien against all of our assets;

 Cost
 of funds to us of prime rate plus 3 %; and

 Due
 upon demand.

 As
of December 31, 2023 and 2022, the amount outstanding pursuant to the Myrick LOC was $ 0 and $ 35, respectively. For the years ended December
31, 2023 and 2022, interest expense was $ 2 and $ 24, respectively.

 Line
of Credit with Shuman

July 2017, we entered into a line of credit agreement (the "Shuman LOC Agreement") with Steven K. Shuman, which is now held
by Cindy K. Shuman. Pursuant to the Shuman LOC Agreement, Shuman provides us with a revolving line of credit (the "Shuman LOC")
with the following terms:

 not to exceed $ 1,325;

 Cost
 of funds to us of 10 %; and

 Due
 in July 2024, but will automatically renew for additional 12-month periods, unless either party gives notice to not renew.

 As
of December 31, 2023 and 2022, the amount outstanding pursuant to the Shuman LOC was $ 125. Interest expense was $ 13 for both years ended
December 31, 2023 and 2022, respectively.

 Line
of Credit with Judith Swanson

December 2021, the Swanson Line of Credit ("Swanson LOC") was assigned to Judith Swanson ("Judith Swanson LOC"),
as trustee of a trust. Pursuant to the Swanson Modification Agreement, the Judith Swanson LOC provides us with a revolving line of credit
with the following terms:

 not to exceed $ 7,000;

 Cost
 of funds to us of 6.75 %; and

 Due
 in July 2024, but will automatically renew for additional 12-month periods, unless either party gives notice to not renew.

 F- 23

 The
Judith Swanson LOC was fully borrowed on the secured and unsecured portion of the line of credit as of December 31, 2023 and 2022. The
secured balance on the Judith Swanson LOC was $ 5,164 and $ 6,473, as of December 31, 2023 and 2022, respectively. Interest
expense was $ 556 and $ 500 for the years ended December 31, 2023 and 2022, respectively.

 New
Lines of Credit

2020 and 2019, we entered into one and four line of credit agreements, respectively (the "New LOC Agreements"). Pursuant
to the New LOC Agreements, the lenders provide us with revolving lines of credit with the following terms:

 not to exceed $ 6,063;

 Cost
 of funds to us between 9.00 % and 10.00 %; and

 Terms
 generally allow the lenders to give one month notice after which the principal balance of a New LOC Agreement will reduce to a zero
 over the next six months.

 The
total balance of the New LOC Agreements was $ 3,066 and $ 2,790 as of December 31, 2023 and 2022, respectively. Interest expense was $ 230
and $ 287 for the year ended December 31, 2023 and 2022, respectively.

 Mortgage
Payable

January 2018, we entered into a commercial mortgage on our office building with the following terms:

 not to exceed $ 660;

 rate was 5.07 % per annum until it increased 1.53 % to 6.60 % in January 2023 and is based on a year of 360 days; and

 Due
 in January 2033.

 The
principal amount of the Company's commercial mortgage was $ 571 and $ 587 as of December 31, 2023 and 2022, respectively. For the
years ended December 31, 2023 and 2022, interest expense was $ 39 and $ 31 respectively.

 Community
Loan

June 2020, we entered into a business loan agreement with Community Bank ("Community Loan") with the following terms:

 not to exceed $ 362;

 by certain of our foreclosed assets;

 rate was 3.8 % per annum based on a year of 360 days; and

 Due
 in July 2025.

October 2022, we paid off the Community Loan principal of $ 217, and the loan was terminated. Interest expense for the years ended December
31, 2023 and 2022 was $ 0 and $ 10, respectively.

Deferred Financing Costs

 The
Company had secured deferred financing costs of $ 3 and $ 4 as of December 31, 2023 and 2022, respectively.

 F- 24

Borrowings Secured by Loan Assets

secured by loan assets are summarized below:

 Schedule of Secured Borrowings

 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

 $
 7,615

 $
 5,770

 $
 8,232

 $
 6,065

 S.K.
 Funding

 7,358

 6,500

 9,049

 7,100

 Lender

 Shuman

 Jeff
 Eppinger

 3,496

 1,500

 2,761

 1,500

 R.
 Scott Summers

 2,177

 1,003

 1,334

 John
 C. Solomon

 1,172

 Judith
 Swanson

 10,038

 5,164

 9,571

 6,473

 Total

 $
 31,640

 $
 20,625

 $
 32,843

 $
 22,554

Notes through the Public Offering ("Notes Program")

 The
effective interest rate on borrowings through our Notes Program at December 31, 2023 and December 31, 2022 was 9.01 % and 8.60 %, respectively,
not including the amortization of deferred financing costs.

 We
generally offer four durations at any given time, ranging from 12 to 48 months from the date of issuance. Our fourth public notes offering,
which was declared effective on September 16, 2022, includes a mandatory early redemption option on all Notes, provided that the proceeds
are reinvested. In our historical offerings, there were limited rights of early redemption. Our 36-month Note sold in our third public
notes offering had a mandatory early redemption option, subject to certain conditions.

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

 Schedule of Roll Forward of Notes Outstanding

 31,
 2023

 31,
 2022

 Gross
 notes outstanding, beginning of period

 $

 $
 20,636

 Notes
 issued

 1,353

 7,245

 Note
 repayments / redemptions

 ( 2,075
)

 ( 6,305
)

 Gross
 notes outstanding, end of period

 Less
 deferred financing costs, net

 ( 235
)

 ( 367
)

 Notes
 outstanding, net

 $
 20,619

 $
 21,209

 The
following is a roll forward of deferred financing costs:

 Schedule of Roll Forward of Deferred Financing Costs

 31,
 2023

 31,
 2022

 financing costs, beginning balance

 $

 $
 1,061

 Disposals

 -

 ( 449
)

 financing costs, ending balance

 $

 $

 Less
 accumulated amortization

 ( 703
)

 ( 468
)

 financing costs, net

 $

 $

 F- 25

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

 Schedule of Roll Forward of Accumulated Amortization of Deferred Financing Costs

 31,
 2023

 31,
 2022

 Accumulated
 amortization, beginning balance

 $

 $

 Disposals

 -

 ( 449
)

 Accumulated
 amortization, ending balance

 $

 $

 Other
Unsecured Debts

 Our
other unsecured debts are detailed below:

 Schedule of Other Unsecured Loans

 Loan

 Maturity
 Date

 Rate (1)

 31,
 2023

 31,
 2022

 Note with Seven Kings Holdings, Inc. Senior Subordinated

 Demand (2)

 9.5
 %

 $

 $

 Line of Credit from Judith Swanson

 2023

 10.0
 %

 1,836

 Line of Credit from Builder Finance, Inc. Senior Subordinated

 January
 2024

 10.0
 %

 April
 2024

 10.0
 %

 February
 2025

 9.0
 %

 2023

 10.0
 %

 -

 March
 2024

 9.75
 %

 2027

 10.0
 %

 February
 2024

 11.0
 %

 January
 2025

 10.0
 %

 January
 2026

 8.0
 %

 -

 March
 2027

 10.0
 %

 -

 November
 2026

 9.5
 %

 2024

 10.0
 %

 2024

 10.0
 %

 April
 2025

 10.0
 %

 July
 2023

 8.0
 %

 -

 July
 2025

 8.0
 %

 -

 September
 2023

 7.0
 %

 -

 September
 2027

 %

 -

 2025

 8.0
 %

 2025

 8.0
 %

 Senior

 March
 2026 (3)

 8.0
 %

 August
 2026

 8.0
 %

 July
 2026 (4)

 1.0
 %

 Junior

 July
 2026 (4)

 20.0
 %

 Senior

 2024 (4)

 1.0
 %

 Junior

 2024 (4)

 20.0
 %

 March
 2029

 10.0
 %

 1,200

 -

 April
 2024

 10.0
 %

 May
 2027

 10.0
 %

 -

 November
 2027

 10.0
 %

 -

 Total Other Unsecured
 Debt

 $
 11,167

 $
 8,900

 (1)

 rate per annum, based upon actual days outstanding and a 365/366-day year.

 (2)

 Due
 six months after lender gives notice.

 (3)

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

 (4)

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

 F- 26

 8.
 Redeemable Preferred Equity

C cumulative preferred units ("Series C Preferred Units") are redeemable by the Company at any time, upon a change of control
or liquidation, or by the investor any time after 6 years from the initial date of purchase. The Series C Preferred Units have a fixed
value which is their purchase price and preferred liquidation and distribution rights. Yearly distributions of 12% of the Series C Preferred
Units' value (provided profits are available) will be made on a quarterly basis. This rate may increase if any interest rate on
our public Notes offering rises above 12%. Dividends may be reinvested monthly into additional Series C Preferred Units. The Series C
Preferred Units have the same preferential rights as the Series B Preferred Units as more fully described in the following note.

 Roll
forward of redeemable preferred equity:

 Schedule of Roll Forward of Redeemable Preferred Equity

 31,
 2023

 31,
 2022

 $
 5,725

 $
 5,014

 from new investment

 -

 Distributions

 ( 1,539
)

 ( 131
)

 from reinvestment

 $
 4,773

 $
 5,725

 The
following table shows the earliest redemption options for investors in Series C Preferred Units as of December 31, 2023:

 Schedule of Redemption Option for Investors

 Year
 Maturing

 Total
 Redeemable

 2024

 $
 2,486

 2025

 2026

 2027

 1,262

 2028

 Total

 $
 4,773

March 2023, the Company redeemed 11.78109 of
the Series C Preferred Units, held by our CEO and his wife, at a redemption price of $ 1,178,
all of which was reinvested in Common Units.

 9.
 Members' Capital

 The
Company has two classes of equity units that it classifies as Members' Capital: Class A common units ("Class A Common Units")
and Series B cumulative preferred units ("Series B Preferred Units"). As of December 31, 2023, the Class A Common Units are
held by 10 members, all of whom have no personal liability. All Class A common members have voting rights in proportion to their capital
account.

March 2023, the Company issued 17,371 Class A Common Units for $ 1,460. As of December 31, 2023 and 2022, Class A Common Units outstanding
were 20,000 and 2,629, respectively.

 The
Series B Preferred Units were issued to the Hoskins Group through a reduction in a loan issued by the Hoskins Group to the Company. In
December 2015, the Hoskins Group agreed to purchase 0.1 Series B Preferred Units for $ 10 at each closing of a lot to a third party in
the land securing certain development loans.

March 2023, the Company redeemed 100 % of the outstanding Series B Preferred Units constituting 19 units, at a redemption price of $ 1,900.
As of December 31, 2023 and 2022, the Hoskins Group owned a total of 0 and 19.0 Series B Preferred Units, which were issued for a total
of $ 0 and $ 1,900, respectively.

 F- 27

 On
October 1, 2023, the Company entered into restricted unit agreements with Mark Reynolds, the Executive Vice President of Sales, and Catherine
Loftin, the Chief Financial Officer, pursuant to which the Company issued 200 restricted common units to each of Mark Reynolds and Catherine
Loftin. Vesting of the restricted common units commences from the grant date and occur thereafter on the first day of each subsequent
calendar month subject to the Company satisfying monthly earnings goals, measured two months in arrears in accordance with the vesting
schedule.

 As
of December 31, 2023 and 2022, 14 and 0 restricted common units vested and 386
and 0
restricted common units were outstanding, respectively. In addition, stock compensation
expense was $ 7
and $ 0
as of December 31, 2023 and 2022, respectively.

 There
are two additional authorized unit classes: Class A preferred units and Class B profit units. Once Class B profit units are issued, the
existing Class A common units will become Class A preferred units. Class A Preferred units will receive preferred treatment in terms
of distributions and liquidation proceeds.

 Both
the Series B Preferred Units and the Series C Preferred Units have the same basic preferential status as compared to the Class A Common
Units, and are pari passu with each other. Both Preferred Unit types include a liquidation preference and a dividend preference, as well
as a 12-month recovery period for a shortfall in earnings.

 10.
 Related Party Transactions

 The
Company has two loan agreements with Daniel M. Wallach, our CEO, and his wife, pursuant to which they provide the Company with the Wallach
LOC and the Wallach Trust LOC. The agreements lay out the terms under which those members can lend money to us, providing that we desire
the funds and the members wish to lend. The interest rate on both the Wallach LOC and the Wallach Trust LOC generally equals prime plus
 3 %, as more fully described in Note 7.

 The
Company has a loan agreement with William Myrick, our EVP (the "Myrick LOC Agreement"), pursuant to which Mr. Myrick provides
us with the Myrick LOC. The Myrick LOC Agreement lays out the terms under which Mr. Myrick can lend money to us, providing that we desire
the funds and Mr. Myrick wish to lend. The rate on the Myrick LOC generally equals prime plus 3 %, as more fully described in Note 7.

 Two
of our managers, Catherine Loftin our CFO and Mark Reynolds our EVP of Sales each own 1 % of our Class A common units. Barbara L. Harshman,
our EVP of Operations, owns 2 % of our Class A common units. Mr. Myrick owns 15.3 % of our Class A common units.

 Mr.
Wallach and his wife's parents own 33.29 and 5.42 of our Series C Preferred Units, respectively. One of our managers, Gregory L.
Sheldon, owns 23.58 of our Series C Preferred Units.

 The
Company has a Senior Subordinated Promissory Note with the parents of Mr. Wallach for $ 375. The interest rate on the promissory note
is 10 % and the lender may require us to repay $ 20 of principal and all unpaid interest with 10 days' notice, as more fully described
in Note 7.

 A
son of one of our Managers' is a minor participant in the Shuman LOC, which is more fully described in Note 7. In addition, Mr.
Summers' son is a lender to the Company pursuant to a New LOC Agreement, with principal not to exceed $ 2,000.

2021, Mr. Myrick purchased two loans from the Company for approximately $ 141 and both loans were serviced by the company as of December
31, 2021. One loan paid off during 2022 and the second loan paid off in 2023.

2021, one of our managers purchased one loans from the Company for $ 405. The loan paid off during 2022 and the proceeds were used to
purchase another loan for $ 417. The loan was serviced by the company and paid off in 2023.

 The
Hoskins Group had a preferred equity interest in the Company as of December 31, 2022 which was paid off in 2023. The Series B Preferred
Units to the Hoskins Group, as more fully described in Note 9 – Members' Capital.

 F- 28

 The
Company has accepted investments under the Notes Program from employees, managers, members, and relatives of managers and members, with
$ 5,454 outstanding at December 31, 2023. For the years ended December 31, 2023 and 2022 our investments from affiliates which exceed
$ 120 through our Notes Program and other unsecured debt are detailed below:

 Schedule of Related Party Transactions

 Relationship
 to

 invested as of

 Weighted
 average
 interest
 rate
 as
 of

 earned
 during
 the
 year ended

 31,

 31,

 31,

 Investor

 2023

 2022

 2023

 2023

 2022

 Eric
 A. Rauscher

 $

 $

 10.00
 %

 $

 $

 Wallach
 Educational Trust

 -

 -
 %

 -

 David
 Wallach Living Trust

 Father
 of Member

 8.94
 %

 L. Sheldon

 9.60
 %

 Joseph
 Rauscher

 7.00
 %

 Summers

 6.29
 %

 Schultz
 Family Revocable Living Trust

 Trustee
 is Mother -in-Law of Member

 8.56
 %

 Barbara
 Harshman

 -

 8.87
 %

 -

 Lamar
 Sheldon

 10.0
 %

 and Joyce Wallach

 -

 %

 -

 Scott
 Summers

 Son

 8.00
 %

 Madison
 Trust Company FBO Bruce Eppinger

 5%

 1,825

 -

 10.5
 %

 -

 Miguel
 Ascencio

 5%

 -

 10.0
 %

 -

 Paula
 Eppinger

 of 5% Member

 -

 10.0
 %

 -

 F- 29

 11.
 Commitments and Contingencies

 In
the normal course of business there may be outstanding commitments to extend credit that are not included in the consolidated financial
statements. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established
in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since
many of the commitments are expected to expire without being drawn upon and some of the funding may come from the earlier repayment of
the same loan (in the case of revolving lines), the total commitment amounts do not necessarily represent future cash requirements. The
financial instruments involve, to varying degrees, elements of credit and interest rate risk in excess of amounts recognized in the consolidated
financial statements. The Company evaluates each customer's creditworthiness on a case-by-case basis. Unfunded commitments to extend
credit, which have similar collateral, credit risk and market risk to our outstanding loans, were $ 25,263 and $ 23,662 at December 31,
2023 and 2022, respectively.

 12.
 Selected Quarterly Condensed Consolidated Financial Data (Unaudited)

 Summarized
unaudited quarterly condensed consolidated financial data for the quarters of 2023 and 2022 are as follows:

 Schedule of Unaudited Quarterly Condensed Consolidated Financial Data

 2023

 2023

 2023

 2023

 2022

 2022

 2022

 2022

 Net
 interest and fee income

 $
 1,606

 $
 1,464

 $
 1,509

 $
 1,451

 $
 1,407

 $
 1,424

 $
 1,242

 $
 1,041

 loss provision

 Net
 interest income after credit loss provision

 1,163

 1,333

 1,466

 1,331

 1,153

 1,108

 Gain

 -

 -

 -

 -

 -

 -

 Gain
 on the sale of real estate assets

 -

 -

 -

 -

 -

 -

 Dividend
 or other income

 SG&A
 expense

 Depreciation
 and amortization

 Loss

 -

 -

 -

 -

 -

 -

 -

 (gain) loss on foreclosed assets

 -

 ( 9
)

 ( 33
)

 -

 -

 Net

 $

 $

 $

 $

 $

 $

 $

 $

 13.
 Non-Interest Expense Detail

 The
following table displays our selling, general and administrative expenses for the years ended December 31, 2023 and 2022:

 Schedule of Selling General and Administrative Expenses

 2023

 2022

 Selling,
 general and administrative expenses

 Legal
 and accounting

 $

 $

 Salaries
 and related expenses

 1,708

 1,611

 Board
 related expenses

 Advertising

 Rent
 and utilities

 Loan
 and foreclosed asset expenses

 Travel

 Other

 Total
 SG&A

 $
 2,696

 $
 2,683

 F- 30

 14.
 Subsequent Events

 Management
of the Company has evaluated subsequent events through March 15, 2024, the date these consolidated financial statements were issued.

 On
February 15, 2024, the Company entered into a certain Membership Interest Purchase Agreement (the "Agreement") with Mark
L. Hoskins and Barrett Hoskins, pursuant to which Mark L. Hoskins and Barrett Hoskins agreed to sell to the Company and the Company agreed
to purchase from Mark L. Hoskins and Barrett Hoskins 100 % of the membership interests (the "Acquisition") in 339 Justabout
Land Co., LLC ("339"), a land development company, for a purchase price of approximately $ 3,892 (the "Purchase Price").
339 was formed in 2022 and, in 2022, purchased a large tract of land in Peters Township, Washington County, Pennsylvania, a suburb of
Pittsburgh. The property has since been subdivided into two parcels. One parcel is being developed into 37 lots which should be available
for construction of homes starting in the summer of 2024, of which one lot was purchased and is currently owned by Benjamin Marcus Homes,
LLC ("BMH"), and the other parcel will be developed into 24 lots, which should be available for construction later this year
or early next year (36 lots owned by 339 which should be available for construction, together with 24 lots owned by 339 which should
be available for construction, the "60 Lots"). The total expected selling price of the lots is $ 17,800. The Purchase Price
was then deposited by Mark L. Hoskins and BMH, which they also own, as equity. BMH immediately repaid an intercompany debt to 339 of
$ 892, which in turn was returned to the Company, leaving the net investment at $ 3,000. 339 was purchased subject to the debt owed by
339, which included a first position development loan from the Company, and two subordinate financings from lenders outside of the Company.
After the Acquisition, the Company will have approximately $ 9,100 invested in 339 and 339 will have an additional approximately $ 1,900
in debt. The Company anticipates further expenditures of $ 2,700 for development, not including capitalized interest.

 On
February 15, 2024, the Company completed the Acquisition of 339. In connection with the Acquisition, the Company caused 339 to enter
into an agreement with BMH which gives BMH the option to purchase certain 37 lots owned by 339 for a period of one year at specified
prices (the "Option Agreement"). BMH may exercise two additional one-year extensions 60 days prior to the expiration of the
current option period or extension period subject to certain conditions. BMH incurred an option fee of $ 890 for the first year of the
option agreement. The Company is also working with BMH to sell some lots to a third party. The Company also caused 339 to enter into
a management services agreement (the "Management Services Agreement") with BMH to manage the development of 60 Lots for a
period of three years. The Management Services Agreement only pays BMH if all of the 60 Lots are sold within three years. If that is
achieved, BMH will receive 67% of the profit from the sale of the 60 Lots.

 As
a result of the Acquisition, the Company has lowered the amount it is lending to BMH, its largest customer, which is owned by Mark Hoskins,
and anticipates having direct sales contracts with third party builders for some of the lots, further reducing its exposure to its largest
customer.

 F- 31