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Commercial Loans

12 Months Ended

Dec. 31, 2017

4. Commercial Loans

Loans Receivable

The Company offers short-term secured non–banking loans to real estate investors (also known as hard money) to fund their acquisition and construction of properties located around the New York Metropolitan area. The loans are principally secured by collateral consisting of real estate and, generally, accompanied by personal guarantees from the principals of the borrowers. The loans are generally for a term of one year. The short term loans are initially recorded, and carried thereafter, in the financial statements at cost. Most of the loans provide for receipt of interest only during the term of the loan and a balloon payment at the end of the term.

For the years ended December 31, 2017 and 2016, the total amounts of $37,871,500 and $36,657,000, respectively, have been lent, offset by collections received from borrowers, under the commercial loans in the amount of $27,502,820 and $32,805,720, respectively. The face amounts of the loans the Company originated in the past seven years have ranged from a minimum of $30,000 to a maximum of $2,000,000. The Company’s board of directors established a policy limiting the maximum amount of any loan to the lower of (i) 9.9% of the aggregate amount of our loan portfolio (not including the loan under consideration) and (ii) $2 million. The Company’s loans typically have a maximum initial term of 12 months and bear interest at a fixed rate of 11% to 14% per year. In addition, the Company usually receives origination fees, or “points,” ranging from 0% to 3% of the original principal amount of the loan as well as other fees relating to underwriting, funding and managing the loan. Interest is always payable monthly, in arrears. In the case of acquisition financing, the principal amount of the loan usually does not exceed 75% of the value of the property (as determined by an independent appraiser), and in the case of construction financing, up to 80% of construction costs.

At December 31, 2017, the Company was committed to an additional $5,280,500 in construction loans that can be drawn by the borrowers when certain conditions are met.

At December 31, 2017 and 2016, no one entity has loans outstanding representing more than 10% of the total balance of the loans outstanding.

The Company generally grants loans for a term of one year. When a performing loan reaches its maturity and the borrower requests an extension, the Company may extend the term of the loan beyond one year. Prior to granting an extension of any loan, we reevaluates the underlying collateral.

Credit Risk

Credit risk profile based on loan activity as of December 31, 2017 and 2016:

Performing loans	Developers-Residential	Developers-Commercial	Developers-Mixed Used	Total outstanding loans
December 31, 2017	$ 41,739,000	$ 900,000	$ 2,485,000	$ 45,124,000
December 31, 2016	$ 31,865,320	$ 500,000	$ 2,390,000	$ 34,755,320

At December 31, 2017, the Company’s loans receivable consisted of loans in the amount of $80,000, $400,000, $2,940,000 and $13,187,500, originally due in 2014, 2015, 2016 and 2017, respectively. At December 31, 2016, the Company’s loans receivable consisted of loans in the amount of $225,000, $475,000, $1,477,320 and $6,102,500, originally due in 2013, 2014, 2015 and 2016, respectively. In all instances the borrowers are currently paying their interest and, generally, the Company receives a fee in connection with the extension of the loans. Accordingly, at December 31, 2017 and 2016, no loan impairments exist and there are no provisions for impairments of loans or recoveries thereof included in operations for the years then ended.

Subsequent to the balance sheet date, $7,567,500 of the loans receivable at December 31, 2017 were paid off, including $5,257,500 originally due in or before 2017.