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Commercial Loans

12 Months Ended

Dec. 31, 2021

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 in the New York metropolitan area, including New Jersey and Connecticut, and in Florida. The loans are principally secured by collateral consisting of real estate and 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, 2021 and 2020, the total amounts of $49,267,892 and $43,719,304, respectively, have been lent, offset by collections received from borrowers, under the commercial loans in the amount of $41,650,498 and $39,136,019, 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 $2,850,000. 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) $3 million. The Company’s loans typically have a maximum initial term of 12 months and bear interest at a fixed rate of 8% to 14% per year. In addition, the Company usually receives origination fees, or “points,” ranging from 0% to 2% 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, 2021, the Company was committed to $7,214,286 in construction loans that can be drawn by the borrowers when certain conditions are met.

At December 31, 2021 and 2020, 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, the Company reevaluates the underlying collateral.

Credit Risk

Credit risk profile based on loan activity as of December 31, 2021 and 2020:

Schedule of Credit Risk

Performing loans

Developers-

Residential

Developers-

Commercial

Developers-

Mixed Use

Total outstanding loans

December 31, 2021

57,432,364

5,819,000

2,464,000

65,715,364

December 31, 2020

55,119,107

1,564,863

1,414,000

58,097,970

At December 31, 2021, the Company’s loans receivable consisted of loans in the amount of $367,500, $1,052,400, $170,000, $2,536,883, $5,800,250 and $16,087,931, originally due in 2016, 2017, 2018, 2019, 2020 and 2021, respectively. At December 31, 2020, the Company’s loans receivable consisted of loans in the amount of $367,500, $1,594,463, $1,520,000, $5,026,571 and $15,099,018, originally due in 2016, 2017, 2018, 2019 and 2020, 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, 2021, no loan impairments exist and there are no provisions for impairments of loans or recoveries thereof.

Subsequent to the balance sheet date, $7,985,500 of the loans receivable at December 31, 2021 were paid off, including $3,134,000 originally due in or before 2021.