Shepherd’s Finance Notes Review 2026: Rates, Rank and Pittsburgh

What the Notes pay, and what you can do with the money

Shepherd’s Finance is not a crowdfunding platform in the usual sense. You buy a note issued by the lender itself, registered with the SEC on Form S-1, so any U.S. resident can buy it with no accreditation. The company sets the rate for each maturity inside a published range and changes it through rate supplements filed with the SEC. The latest one on EDGAR (October 31, 2026) is dated June 9, 2026.

Worked example (our arithmetic). If you put $10,000 in a 36-month Note at 8.50% and leave interest to compound, the supplement’s 28.93% yield to maturity implies about $12,893 at maturity. If you elect monthly payments instead, interest is about $70.83 a month ($850 a year) and the principal comes back at maturity. The same $10,000 at 10.00% for 48 months implies about $14,894 with compounding.

The terms that matter besides the rate, all from the April 30, 2026 prospectus:

• Size of ticket: $500 minimum; $1,000,000 maximum per Note and per investor unless the company approves more.
• Early exit is the company’s call. After 180 days you may ask to redeem, but the company can decline for any reason, and if it agrees you lose 180 days of interest. A holder of a 36-month Note has a stronger right to require redemption, subject to certain restrictions. The company may also redeem any Note early on 30 to 60 days’ notice.
• No market, no cushion: the Notes are not listed and there will be no public trading market; there is no sinking fund; proceeds are not held in escrow, so the company can use your money immediately.
• No FDIC insurance: the 10-K says the company does not offer FDIC insurance to its unsecured notes investors.
• Offering progress: about $1.69 million of the $70 million had been issued as of August 12, 2026, after about $107.5 million across earlier offerings (prospectus, April 13, 2026).

The Notes Program is only part of the funding. At June 30, 2026 the company reported gross Notes of $22,085 thousand, an effective rate on the Notes Program of 8.95% (8.90% at December 31, 2025), and said about 88% of Notes Program holders had reinvested at maturity over the last twelve months (10-K: about 74% historically).

What the Notes rank behind

The prospectus states that the Notes are "general unsecured obligations" and are "subordinated in right of payment to all of our present and future senior debt." The 10-K spells out the order:

Three points follow from the filings:

1. The senior layer is growing faster than the Notes. Secured notes payable rose 52% in six months (our arithmetic) and now exceed the gross Notes by about $5.9 million, as the company funds a larger loan book with loan sales and credit lines rather than Notes. The company said it expected secured debt to rise in 2026.
2. There is no limit on more senior debt. The 10-K says the indenture places no restriction on how much senior debt or other debt the company may incur, and that it has no financial covenants such as a minimum amount of equity. It also says there is currently no limit on distributions to equity owners.
3. Equity under the Notes is thin by design. The company aims for equity of 15% of loans and reported 13.9% at December 31, 2025; at June 30, 2026 members’ capital of $8,884 thousand over net loans of $73,831 thousand is about 12.0% (our arithmetic).

For how this structure differs from a bankruptcy-remote, loan-by-loan vehicle, see our bankruptcy-remote crowdfunding platforms page. The Notes here are claims on the company as a whole, not on any one loan.

Concentration: Pittsburgh and the Hoskins Group

The 10-K states: "As of December 31, 2025 and 2024, 36% and 20%, respectively, of our outstanding loan commitments consist of loans to one borrower," with collateral in Pittsburgh, Pennsylvania. In its risk factors the company names the borrower group, which it calls the Hoskins Group (two companies owned by one family: Benjamin Marcus Homes, LLC and 339 Justabout Land Co. LLC), at 35% of commitments, and says it is "reliant upon a single developer and homebuilder who is concentrated in a single city."

Several facts shape how to read this:

• The drop from 36% to 30% happened while the book grew. Total commitments rose from $85,240 thousand to $110,687 thousand in six months (our reading of the 10-Q tables). The 10-Q gives percentages but no Pennsylvania dollar figure, so we cannot say whether Pennsylvania commitments fell or the base simply grew.
• A related sale. On August 6, 2025 the company sold the land-development business it had acquired in 2024 (339 Justabout Land Co. LLC) to the principal owners of its largest customer for $9,876 thousand, and now lends against that development instead of owning it.
• A conflict the company discloses. One of its independent managers also lends money to the Hoskins Group, and the company says that manager may face conflicts of interest in advising on it.
• Other states are small, but not all conservative. Florida had 50 loans and $10,984 thousand outstanding across 11 borrowers, South Carolina 26 loans and $4,808 thousand; one California construction loan had a loan-to-value of 137% (commitment $1,750 thousand on collateral of $1,285 thousand).
• Most loans are speculative. About 84% of 2025 construction loans were spec homes (built before a buyer is under contract), 16% were contracts. The average home construction loan was $445,000; the stated loan rate is the company’s cost of funds plus 2.5% with a 7.75% minimum, plus a 5% fee on the commitment.

Delinquent and impaired loans

The company reports loans three ways: by days past due, as "individually evaluated" (loans where it is probable that not all contractual amounts will be collected), and as non-accrual. Read together:

What the table says, and what it does not:

• The year-end 2024 overhang was cleaned up in 2025. Loans over 270 days past due fell from $3,913 thousand to $134 thousand, and foreclosed assets were sold ($1,657 thousand of sale proceeds in 2025, per the 10-Q roll-forward comparative).
• The 2026 picture is mixed. Impaired loans fell, but the oldest delinquencies rose again: seven loans were 180 days or more past due at June 30, 2026 and the allowance almost doubled. The first-half provision of $994 thousand compares with $120 thousand a year earlier. The company said slower payoffs, soft home sales, declining home values in some regions and borrowers unwilling to lower prices are behind the slowdown.
• The company calls this normal. The 10-K risk factors say loans not paying interest are typically around 10% of the balance, and the company estimated lost interest income on non-earning assets at $645 thousand in 2025 ($886 thousand in 2024). Its own risk factor models a 35% fall in collateral values as a $6,468 thousand loss on $59,223 thousand of net loans.
• No default on the Notes is reported, but that is not a track record. Item 3 of the 10-Q (defaults upon senior securities) says none. The filings we read do not give a Note repayment record, and we do not infer one.

Going concern, auditor change, controls and legal

• Going concern: we searched the 2025 Form 10-K and the June 30, 2026 Form 10-Q for "going concern" and "substantial doubt" and found neither phrase. The audit report on the 2025 statements (BDO USA, P.C., April 6, 2026) states the statements "present fairly, in all material respects" the company’s position. This is the main contrast with Groundfloor’s Notes, where the parent and issuer both carry going-concern paragraphs.
• Auditor change: on August 10, 2026 the company notified BDO it would no longer retain it and engaged Schneider Downs & Co., Inc. for the 2026 audit. The Form 8-K says BDO’s reports for 2025 and 2024 were not adverse, qualified or modified, and reports no disagreements or reportable events. A Form 8-K/A on August 14, 2026 corrected a scrivener’s error in BDO’s Exhibit 16.1 letter. A change after a clean opinion is not evidence of a problem, but it means the 2026 audit will be a first-year audit by a new firm.
• Late 10-K and a CFO change: the company filed a notice of late filing on March 31, 2026 and filed the 10-K on April 6, 2026. Its chief financial officer resigned on March 2, 2026 and the board named a replacement on March 4, 2026 (Form 8-K, March 6, 2026).
• Controls: management concluded internal control over financial reporting was effective at December 31, 2025.
• Legal: the 10-K and the 10-Q report no pending or threatened proceeding that would have a material adverse effect, We did not search court dockets or SEC enforcement records.

Related parties and who is paid first

• Control: the chief executive, who also chairs the board, beneficially owned 91.78% of common equity at December 31, 2025; each of three independent managers owns 1.17%.
• Credit lines ahead of the Notes: two lines of credit from the chief executive and affiliates (up to $1,500 thousand in 2025 filings; total affiliate limits $2,500 thousand in the 10-Q) are collateralized by a lien on all company assets and rank ahead of the Notes. $6 thousand was drawn at June 30, 2026 ($26 thousand at December 31, 2025).
• Insiders hold Notes too: employees, managers, members and relatives held $7,378 thousand of Notes at December 31, 2025, and $10,673 thousand of Notes and other unsecured debt. The company warns this could influence decisions on when to redeem.
• Distributions: no limit in the indenture on payouts to owners; the filing notes the company is taxed as a partnership so owners are motivated to take distributions.

Results and trend

Net income is small relative to the balance sheet (a 2025 profit of $1,413 thousand on $68.5 million of assets), most of it goes to preferred holders ($988 thousand in 2025), and the loan book is growing quickly. Unfunded commitments of $33,254 thousand compare with cash and restricted cash of $5,316 thousand at June 30, 2026; the 10-K says these are funded with loan sales, credit lines and Note proceeds, so growth depends on those sources staying open.

What a reader can do with this

This is a way to check the company against its own filings, not a recommendation.

1. Read the order of payment first. Decide whether being behind $28.0 million of secured debt, and an unlimited ability to add more, fits what you want from an unsecured note.
2. Size it against one fact: concentration. A third of commitments sits with one borrower group in one city. A downturn in Pittsburgh would reach the Notes through the company, not through a loan assigned to you.
3. Compare with alternatives that disclose differently. See real estate notes investing and best real estate debt investments, and the other retail note programs we have read: Groundfloor Notes and Worthy Bonds.
4. Check the next filing. The Form 10-Q for the quarter ended September 30, 2026 is due around mid-November 2026. Watch Pittsburgh’s share, loans 180 days or more past due, secured debt against Notes, and the new auditor’s first interim work.
5. Borrowers, not investors: if you are a builder reading this to see how the lender behaves, our ground-up construction loan guide covers the product. Shepherd’s Finance itself says its loans cost its cost of funds plus 2.5% (7.75% minimum) and a 5% fee on the commitment.

Related reading:

• Groundfloor Notes review: a different retail note issuer with going-concern paragraphs
• Worthy Bonds review
• Real estate notes investing
• Ground-up construction loan guide

Sources: Shepherd’s Finance, LLC (CIK 0001544190) Form 10-K for 2025 (accession 0001493152-26-015327, filed April 6, 2026), Form 10-Q for June 30, 2026 (0001493152-26-036797, filed August 10, 2026), prospectus 424B3 of April 30, 2026 (0001493152-26-020593), rate supplements of May 6, 2026 (0001493152-26-021479) and June 9, 2026 (0001493152-26-027950), Supplement No. 1 (0001493152-26-026287) and No. 2 (0001493152-26-038970, August 18, 2026), Forms 8-K of March 6, 2026 (0001493152-26-009104) and August 12, 2026 (0001493152-26-037454), Form 8-K/A of August 14, 2026 (0001493152-26-038415) and Form NT 10-K of March 31, 2026 (0001493152-26-014282). Dollar amounts "in thousands" are as stated in the filings. Arithmetic marked "our arithmetic" is ours. This is analysis of public documents, not investment, legal or tax advice.