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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)


☒		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024


☐		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: 000-55601

REDWOOD MORTGAGE INVESTORS IX, LLC

(Exact name of registrant as specified in its charter)

    Delaware

    26-3541068

    (State or other jurisdiction of
incorporation or organization)

    (I.R.S. Employer
Identification Number)


155 Bovet Road, Suite 302, San Mateo, CA		94402
(Address of principal executive offices)		(Zip Code)

(650) 365-5341

(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

Indicate 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

Indicate 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

Indicate 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. ☐

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

REDWOOD MORTGAGE INVESTORS IX, LLC

Table of Contents


		Page
PART I.	FINANCIAL INFORMATION	3
Item 1.	Financial Statements	3
	Balance Sheets	3
	Statements of Income	4
	Statements of Changes in Members’ and Manager's Capital	5
	Statements of Cash Flows	7
	Notes to Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41
Item 4.	Controls and Procedures	41
PART II.	OTHER INFORMATION	43
Item 1.	Legal Proceedings	43
Item 1A.	Risk Factors	43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43
Item 3.	Defaults Upon Senior Securities	43
Item 4.	Mine Safety Disclosures	43
Item 5.	Other Information	43
Item 6.	Exhibits	44
Signatures		45

Part I – FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

REDWOOD MORTGAGE INVESTORS IX, LLC

Balance Sheets

September 30, 2024 (unaudited) and December 31, 2023

($ in thousands)


	September 30,			December 31,
ASSETS	2024			2023
Cash, in banks	$	3,169		$	1,712
Loan payments in trust		68			28
Loans
Principal		70,011			62,916
Advances		50			2
Accrued interest		801			572
Prepaid interest		(82	)		(107	)
Loan balances secured by deeds of trust		70,780			63,383
Allowance for credit losses		(120	)		(120	)
Loan balances secured by deeds of trust, net		70,660			63,263
Debt issuance costs, net		49			7
Prepaid expenses		9			—
Promissory note from related mortgage fund (Note 3)		—			2,800
Other receivable		4			—
Total assets	$	73,959		$	67,810

LIABILITIES AND MEMBERS’ CAPITAL

Liabilities
Accounts payable and accrued liabilities	$	225		$	111
Payable to related mortgage fund (Note 3)		—			18
Payable to manager (Note 3)		44			57
Distribution and redemptions to members (Note 3)		—			15
Line of credit		10,000			2,153
Total liabilities		10,269			2,354

Commitments and contingencies (Note 6)

Members’ and manager’s capital, net		66,436			68,358
Receivable from manager (formation loan)		(2,746	)		(2,902	)
Members’ and manager’s capital, net of formation loan		63,690			65,456
Total liabilities and members’ capital	$	73,959		$	67,810

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

REDWOOD MORTGAGE INVESTORS IX, LLC

Statements of Income

For the Three and Nine Months Ended September 30, 2024 and 2023 (unaudited)

($ in thousands)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2024			2023			2024			2023
Revenue
Interest income	$	1,972		$	1,673		$	5,077		$	5,035
Interest expense		(254	)		(159	)		(471	)		(530	)
Net interest income		1,718			1,514			4,606			4,505
Late fees		6			7			13			18
Gain on sale, loans		—			8			24			8
Total revenue, net		1,724			1,529			4,643			4,531

Provision for credit losses		—			—			—			—

Operations expense
Mortgage servicing fees to Redwood Mortgage Corp.		47			44			128			135
Asset management fees to Redwood Mortgage Corp.		118			127			353			382
Costs from Redwood Mortgage Corp., net (Note 3)		78			98			240			267
Professional services		373			340			1,299			885
Other		1			2			23			8
Total operations expense		617			611			2,043			1,677
Net income	$	1,107		$	918		$	2,600		$	2,854

Net income
Members (99%)	$	1,096		$	909		$	2,574		$	2,826
Manager (1%)		11			9			26			28
	$	1,107		$	918		$	2,600		$	2,854

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

REDWOOD MORTGAGE INVESTORS IX, LLC

Statements of Changes in Members’ and Manager’s Capital

For the Three Months Ended September 30, 2024 (unaudited)

($ in thousands)


	Members’ Capital			Manager’s Capital			Unallocated Organization and Offering Expenses			Members’ and Manager’s Capital, net
Balance at June 30, 2024	$	67,485		$	82		$	(603	)	$	66,964
Net income		1,096			11			—			1,107
Earnings distributed		(773	)		(11	)		—			(784	)
Redemptions		(859	)		—			—			(859	)
Organization and offering expenses allocated		(60	)		—			60			—
Organization and offering expenses repaid by RMC		—			—			8			8
Balance at September 30, 2024	$	66,889		$	82		$	(535	)	$	66,436

For the Nine Months Ended September 30, 2024 (unaudited)

($ in thousands)


	Members’ Capital			Manager’s Capital			Unallocated Organization and Offering Expenses			Members’ and Manager’s Capital, net
Balance at December 31, 2023	$	69,018		$	82		$	(742	)	$	68,358
Net income		2,574			26			—			2,600
Earnings distributed		(2,358	)		(26	)		—			(2,384	)
Earnings distributed/reinvested in DRIP		443			—			—			443
Redemptions		(2,606	)		—			—			(2,606	)
Organization and offering expenses allocated		(182	)		—			182			—
Organization and offering expenses repaid by RMC		—			—			25			25
Balance at September 30, 2024	$	66,889		$	82		$	(535	)	$	66,436

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

REDWOOD MORTGAGE INVESTORS IX, LLC

Statements of Changes in Members’ and Manager’s Capital

For the Three Months Ended September 30, 2023 (unaudited)

($ in thousands)


	Members’ Capital			Manager’s Capital			Unallocated Organization and Offering Expenses			Members’ and Manager’s Capital, net
Balance at June 30, 2023	$	70,601		$	81		$	(887	)	$	69,795
Net income		909			9			—			918
Earnings distributed		(866	)		(9	)		—			(875	)
Earnings distributed/reinvested (DRIP)		356			—			—			356
Redemptions		(1,317	)		—			—			(1,317	)
Organization and offering expenses allocated		(63	)		—			63			—
Organization and offering expenses repaid by RMC		—			—			11			11
Balance at September 30, 2023	$	69,620		$	81		$	(813	)	$	68,888

For the Nine Months Ended September 30, 2023 (unaudited)

($ in thousands)


	Members’ Capital			Manager’s Capital			Unallocated Organization and Offering Expenses			Members’ and Manager’s Capital, net
Balance at December 31, 2022	$	71,730		$	82		$	(1,045	)	$	70,767
Adoption of ASC 326		(6	)		(1	)		—			(7	)
Balance at January 1, 2023		71,724			81			(1,045	)		70,760
Net income		2,826			28			—			2,854
Earnings distributed		(2,638	)		(28	)		—			(2,666	)
Earnings distributed/reinvested (DRIP)		1,169			—			—			1,169
Redemptions		(3,268	)		—			—			(3,268	)
Organization and offering expenses allocated		(193	)		—			193			—
Organization and offering expenses repaid by RMC		—			—			39			39
Balance at September 30, 2023	$	69,620		$	81		$	(813	)	$	68,888

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

REDWOOD MORTGAGE INVESTORS IX, LLC

Statements of Cash Flows

For the Nine Months Ended September 30, 2024 and 2023 (unaudited)

($ in thousands)


	Nine Months Ended September 30,
	2024			2023
Operations
Interest income received	$	4,798		$	4,948
Interest expense paid		(409	)		(528	)
Late fees and other loan income		(26	)		60
Operations expense		(2,011	)		(1,892	)
Total cash provided by operations		2,352			2,588
Investing
Loans funded		(36,501	)		(22,983	)
Principal collected		25,386			28,033
Loans transferred from related mortgage funds		—			(3,393	)
Loans transferred to related mortgage fund		—			1,142
Proceeds from loans sold to non-affiliate, net		4,068			1,011
Advances made		(48	)		—
Promissory note funded to related mortgage fund		—			(3,300	)
Promissory note repaid by related mortgage fund		2,800			500
Total cash (used in) investing		(4,295	)		1,010
Financing
Members’ and manager's capital
Distributions to members and manager
Earnings distributed, net of DRIP		(1,942	)		(1,500	)
Redemptions, net of early withdrawal penalties (Note 3)		(2,620	)		(3,267	)
Total distributions to members and manager		(4,562	)		(4,767	)
Organization and offering expenses repaid by RMC, net		25			38
Early withdrawal penalties		—			(1	)
Cash (used in) members’ and manager’s capital		(4,537	)		(4,730	)
Promissory note received from related parties		940			—
Promissory note repaid to related parties		(940	)		—
Promissory note received from third party		1,500			—
Promissory note repaid to third party		(1,500	)		—
Line of credit
Advances		23,250			2,466
Repayments		(15,403	)		(6,409	)
Debt issuance costs		(66	)		—
Cash provided by (used in) line of credit		7,781			(3,943	)
Unsecured borrowings received from manager and related mortgage funds		2,550			—
Unsecured borrowings repaid to manager and related mortgage funds		(2,550	)		—
Formation loan collected		156			156
Total cash provided by (used in) financing		3,400			(8,517	)
Net increase (decrease) in cash		1,457			(4,919	)
Cash, beginning of period		1,712			5,055
Cash, end of period	$	3,169		$	136

Non-cash investing activities for the nine months ended September 30, 2024 and 2023 include four loans transferred to held for sale of approximately $4.0 million and one loan transferred to held for sale of approximately $500 thousand, respectively. The four loans transferred in 2024 were sold to an unaffiliated bank on May 31, 2024 for the amount owed on the related note plus a premium, resulting in a gain of approximately $24 thousand. The loan transferred in 2023 was sold to an unaffiliated bank on October 20, 2023 for the amount owed on the related note plus a premium, resulting in a gain of approximately $1 thousand.

Non-cash financing activities for the nine months ended September 30, 2024 and 2023 include earnings distributed to the dividend reinvestment plan of $443 thousand and $1.2 million, respectively.

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

REDWOOD MORTGAGE INVESTORS IX, LLC

Statements of Cash Flows

For the Nine Months Ended September 30, 2024 and 2023 (unaudited)

($ in thousands)


	Nine Months Ended September 30,
Reconciliation of net income to total cash provided by operations	2024			2023
Net income	$	2,600		$	2,854
Adjustments to reconcile net income to total cash provided by operations
Gain on sale, loans		(24	)		(8	)
Amortization of debt issuance costs		23			21
Change in operating assets and liabilities
Loan payments in trust		(39	)		42
Accrued interest		(254	)		(22	)
Prepaid interest		(25	)		(65	)
Prepaid expenses		(9	)		(6	)
Other receivable		(4	)		—
Accounts payable and accrued liabilities		115			(28	)
Payable to related parties		(31	)		(200	)
Total adjustments		(248	)		(266	)
Total cash provided by operations	$	2,352		$	2,588

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

REDWOOD MORTGAGE INVESTORS IX, LLC

Notes to Financial Statements

September 30, 2024 (unaudited)

NOTE 1 – ORGANIZATION AND GENERAL

Redwood Mortgage Investors IX, LLC (“RMI IX” or “the company”) is a Delaware limited liability company formed in October 2008 to engage in business as a mortgage lender and investor by making and holding-for-investment mortgage loans secured by California real estate, primarily through first and second deeds of trust.

The company is externally managed by Redwood Mortgage Corp. (“RMC” or “the manager”).

•

RMC is solely responsible for managing the business and affairs of RMI IX, subject to the voting rights of the members on specified matters. The manager acting alone has the power and authority to act for and bind the company.

•

RMC provides personnel and services necessary for RMI IX to conduct its business as the company has no employees of its own.

•

The mortgage loans the company funds and invests in are arranged and generally are serviced by RMC.

In the opinion of management of RMC, the accompanying unaudited financial statements contain all adjustments, consisting of normal, recurring adjustments, necessary to present fairly and accurately the financial information included therein. These unaudited financial statements should be read in conjunction with the audited financial statements included in the company’s Form 10-K for the year ended December 31, 2023, filed with the U.S. Securities and Exchange Commission ("SEC"). The results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the operating results to be expected for the full year.

The rights, duties and powers of the members and manager are governed by the Ninth Amended and Restated Limited Liability Company Operating Agreement of RMI IX (the “Operating Agreement”), as amended, the Delaware Limited Liability Company Act and the California Revised Uniform Limited Liability Company Act.

Members representing a majority of the outstanding units may, without the concurrence of the manager, vote to: (i) dissolve the company, (ii) amend the Operating Agreement, subject to certain limitations, (iii) approve or disapprove the sale of all or substantially all of the assets of the company or (iv) remove or replace one or all of the managers. Where there is only one manager, a majority in interest of the members is required to elect a new manager to continue the company business after a manager ceases to be a manager due to its withdrawal.

The following is a summary of certain provisions of the Operating Agreement and is qualified in its entirety by the terms of the Operating Agreement. Members should refer to the Operating Agreement for complete disclosure of its provisions.

The manager is solely responsible for managing the business and affairs of the company, subject to the voting rights of the members on specified matters. The manager acting alone has the power and authority to act for and bind the company. RMC is entitled to one percent (1%) of the profits and losses of the company and to fees and reimbursements of qualifying costs as specified in the Operating Agreement.

The company’s primary investment objectives are to:

•

yield a favorable rate of return from the company’s business of making and/or investing in loans;

•

preserve and protect the company’s capital by making and/or investing in loans secured by California real estate, preferably income-producing properties geographically situated in the San Francisco Bay Area and the coastal metropolitan regions of Southern California; and

•

generate and distribute cash flow from these mortgage lending and investing activities.

Net income (or loss) is allocated among the members according to their respective capital accounts after one percent (1%) of the net income (or loss) is allocated to the manager. The monthly results are subject to subsequent adjustment as a result of quarterly and year-end accounting and reporting.

The company’s net income, cash available for distribution, and net-distribution rate fluctuate depending on:

•

loan origination volume and the balance of capital available to lend;

•

the current and future interest rates negotiated with borrowers;

•

line of credit advances, repayments and the interest rate thereon;

•

loan sales to unaffiliated third parties, and any gains received thereon;

•

the amount of fees and cost reimbursements to RMC;

•

the timing and amount of other operating expenses, including expenses for professional services;

•

the timing and amount of payments from RMC on the formation loan; and

•

fee and/or cost reimbursements waived, if any, from RMC.

Federal and state income taxes are the obligation of the members, other than the annual California franchise tax and the California LLC gross receipts tax. The tax basis in the net assets differs from book basis by the amount of the allowance for credit losses.

REDWOOD MORTGAGE INVESTORS IX, LLC

Notes to Financial Statements

September 30, 2024 (unaudited)

The ongoing sources of funds for loans are the proceeds (net of redemption of members’ capital and operating expenses) from:

•

loan payoffs;

•

borrowers’ monthly principal and interest payments;

•

line of credit advances;

•

loan sales to unaffiliated third parties; and

•

payments from RMC on the outstanding balance of the formation loan.

The company intends to hold until maturity the loans in which it invests and does not presently intend to invest in mortgage loans primarily for the purpose of reselling such loans in the ordinary course of business; however, the company may sell mortgage loans (or fractional interests therein) when the manager determines that it appears to be advantageous for the company to do so, based upon then current interest rates, the length of time that the loan has been held by the company, the company’s credit risk and concentration risk and the overall investment objectives of the company. Loans sold to third parties may be sold for par, at a premium or, in the case of non-performing or under performing loans, at a discount. Company loans may be sold to third parties or to the manager or its related mortgage funds; however, any loan sold to the manager or a related mortgage fund will be sold for a purchase price equal to the greater of (i) the par value of the loan or (ii) the fair market value of the loan. The manager will not receive commissions or broker fees with respect to loan sales conducted for the company; however, selling loans will increase members’ capital available for investing in new loans for which the manager will earn brokerage fees and other forms of compensation.

The company’s business is neither dependent on any one, nor concentrated with a few, major borrowers, investors, or lenders.

Distribution policy

Cash available for distribution at the end of each calendar month is allocated ninety-nine percent (99%) to the members and one percent (1%) to the manager. Cash available for distribution means cash flow from operations (excluding repayments for loan principal and other capital transaction proceeds) less amounts set aside for creation or restoration of reserves. The manager may withhold from cash otherwise distributable to the members with respect to any period the respective amounts of organization and offering expenses (“O&O expenses”) allocated to the members’ accounts for the applicable period pursuant to the company’s reimbursement to RMC and allocation to members’ accounts of O&O expenses. The amount otherwise distributable, less the respective amounts of O&O expenses allocated to members, is the net distribution. Pursuant to the terms of the Operating Agreement, cash available for distribution to the members is allocated among the members in proportion to their percentage interests (except with respect to differences in the amounts of O&O expenses allocated to the respective members during the applicable period) and in proportion to the number of days during the applicable month that they owned such percentage interests. (See Note 3 (Manager and Other Related Parties) to the financial statements for a detailed discussion on the allocation of O&O expenses to members’ accounts.)

Cash available for distributions is disbursed at the end of each calendar month. The manager’s allocable share of cash available for distribution is also distributed not more frequently than cash distributions to members.

Distribution reinvestment plan (DRIP), closed July 2024

The distribution reinvestment plan (“DRIP”) provision of the Operating Agreement permitted members to elect to have all or a portion of their monthly distributions reinvested in the purchase of additional units. Cash available for distributions allocable to members who had elected to participate in the DRIP was distributed and reinvested in units at each month end. In July 2024, members who had elected to participate in the DRIP were notified by a letter included with their June 2024 monthly statements that the DRIP was closed. As a result of this plan closure, members that previously did not receive quarterly income distributions because of their enrollment in the DRIP received income distribution checks for the quarter ended September 30, 2024 and will continue to receive quarterly income distributions thereafter to the extent of cash available for distribution.

Liquidity and unit redemption program

There are substantial restrictions on transferability of units, and there is no established public trading and/or secondary market for the units and none is expected to develop. In order to provide liquidity to members, the Operating Agreement includes a unit redemption program, whereby a member may redeem all or part of their units, subject to certain limitations. The price paid for redeemed units is based on the lesser of the purchase price paid by the redeeming member or the member’s capital account balance as of the date of each redemption payment. The company redeems units quarterly, subject to certain limitations as provided for in the Operating Agreement. The maximum number of units which may be redeemed per quarter per individual member shall not exceed the greater of (i) 100 thousand units, or (ii) 25% of the member’s total outstanding units.

REDWOOD MORTGAGE INVESTORS IX, LLC

Notes to Financial Statements

September 30, 2024 (unaudited)

Pursuant to the Operating Agreement, eligible redemption requests are to be honored in the following order of priority:

•

first, to redemptions upon the death of a member, subject to a cap of $100 thousand per quarter for each deceased member’s account; and

•

next, to all other eligible redemption requests on a pro rata basis.

Pursuant to the Operating Agreement, the company will not, in any calendar year, redeem more than five percent (5%) and in any calendar quarter one and one-quarter percent (1.25%) of the weighted average number of units outstanding during the twelve (12) month period immediately prior to the date of the redemption; however, the manager may, but is not required to, waive this limitation if it deems it in the best interest of the company. In the event unit withdrawal requests exceed 5% in any calendar year, and are held by the company, units will be redeemed in the order of priority provided in the Operating Agreement. The manager may, in its sole discretion, waive any applicable holding periods or penalties in the event of the death of a member or other exigent circumstances or if the manager believes such waiver is in the best interests of the company. The manager has no present intention to exercise its discretionary power to waive or modify the enforcement of the redemption limitations in the foreseeable future.

The company has not established a cash reserve from which to fund redemptions. The company’s capacity to redeem units upon request is limited by the availability of cash and the company’s cash flow. The manager also has the right, in its sole discretion, at any time, to reject any request for redemption, or to suspend or terminate the acceptance of new redemption requests without prior notice, or to terminate, suspend or amend the unit redemption program upon 30-day notice.

Manager’s interest

If a manager is removed, withdrawn or terminated, the company will pay to the manager all amounts then accrued and due to the manager. Additionally, the company will terminate the manager’s interest in the company’s profits, losses, distributions and capital by payment of an amount in cash equal to the then-present fair value of such interest.

Term of the company

The term of the company will terminate on December 31, 2038 unless: (i) the term is further extended by RMC with the affirmative consent of a majority interest of the members; or (ii) the company is earlier terminated pursuant to the Operating Agreement or by operation of law.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

Management estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions about the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities, at the dates of the financial statements and the reported amounts of revenues and expenses during the reported periods. Such estimates involve a significant level of uncertainty and have had or are reasonably likely to have a material impact on the company’s financial condition or results of operations. Such estimates relate principally to the determination of the allowance for credit losses (including the fair value of the collateral), and the valuation of real estate owned (“REO”) at acquisition and subsequently (RMI IX has not acquired REO since it commenced operations in 2009). Actual results could differ materially from these estimates.

Fair value estimates

The fair value of real property (as to loan collateral and REO) is determined by exercise of judgment based on RMC’s management’s experience informed by appraisals (by licensed appraisers), brokers’ opinion of values, and publicly available information on in-market transactions. Appraisals of commercial real property generally present three approaches to estimating value: 1) market-comparables or sales approach; 2) cost to replace; and 3) capitalized cash flows or income approach.

These approaches may or may not result in a common, single value. The market-comparables approach may yield different values depending on certain basic assumptions, including the consideration of adjustments made for any attributes specific to the real estate.

REDWOOD MORTGAGE INVESTORS IX, LLC

Notes to Financial Statements

September 30, 2024 (unaudited)

Management has the requisite familiarity with the markets it lends in generally and of the properties lent on specifically to analyze sales-comparables and assess their suitability/applicability. Management is acquainted with market participants – investors, developers, brokers, and lenders – that are useful, relevant secondary sources of data and information regarding valuation and valuation variability. These secondary sources may have familiarity with and perspectives on pending transactions, successful strategies to optimize value, and the history and details of specific properties, both on and off the market, that enhance the process and analysis that is particularly and principally germane to establishing value in distressed markets and/or property types.

GAAP defines fair value as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact and (iv) willing to transact.

Fair values of assets and liabilities are determined based on the fair-value hierarchy established in GAAP. The hierarchy is comprised of three levels of inputs to be used:

•

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the company has the ability to access at the measurement date. An active market is a market in which transactions occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

•

Level 2 inputs are inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly in active markets and quoted prices for identical assets or liabilities that are not active, and inputs other than quoted prices that are observable, or inputs derived from or corroborated by market data.

•

Level 3 inputs are unobservable inputs for the asset or liability. Unobservable inputs reflect the company’s own assumptions about the assumptions market participants would use in pricing the asset or liability (including assumptions about risk). Unobservable inputs are developed based on the best information available in the circumstances and may include the company’s own data.

Cash in banks

Certain of the company’s cash balances in banks exceed federally insured limits. The bank or banks in which funds are deposited are reviewed periodically for their general creditworthiness/investment grade credit rating.

Loans and interest income

Loans are carried at amortized cost, which is generally equal to the unpaid principal balance (principal). Management has discretion to pay amounts (advances) to third parties on behalf of borrowers to protect the company’s interest in the loan. Advances include, but are not limited to, the payment of interest and principal on a senior lien to prevent foreclosure by the senior lien holder, property taxes, insurance premiums and attorney fees. Advances generally are stated at the amounts paid out on the borrower’s behalf and any accrued interest on amounts paid out, until repaid by the borrower. Interest is accrued daily, on principal and advances, if any.

The company may fund a specific loan net of an interest reserve (one to two years) to insure timely interest payments at the inception of the loan. Any interest reserve is amortized over the period that the amount is prepaid. In the event of an early loan payoff, any unapplied interest reserves would be first applied to any accrued but unpaid interest and then as a reduction to the principal.

Payments on loans are applied in the following order: accrued interest, advances, and lastly to principal. Late fees are recognized in the period received. Pursuant to California regulatory requirements, borrower payments are deposited into a trust account established by RMC with an independent bank (and are presented on the balance sheet as “Loan payments in trust”). Funds are disbursed to the company’s bank account as collected, which can range from same day for wire transfers and to two weeks after deposit for checks.

Performing loans that are maturing or have matured may be renewed at then current market rates of interest and terms for new loans. (These loan extensions are not reported as new loans for financial reporting purposes.)

REDWOOD MORTGAGE INVESTORS IX, LLC

Notes to Financial Statements

September 30, 2024 (unaudited)

Loans with a payment in arrears (i.e., non-performing loans) continue to recognize interest income as long as the loan is in the process of collection with the borrower and the loan balance (i.e., the sum of the unpaid principal, advances and accrued interest) is considered to be well-secured. Loans are placed on non-accrual status if management determines that the primary source of repayment will come from the acquisition by foreclosure or acquisition by deed in lieu of foreclosure and subsequent sale of the collateral securing the loan (e.g., a notice of sale is filed and/or when a borrower files for bankruptcy) or when the loan balance is no longer considered well-secured (i.e., the LTV for the loan based on the estimated net realizable value of the collateral and the total principal, advances and accrued interest (at the note rate) is at or greater than eighty percent (80%), seventy-five percent (75%) for lands outside of metropolitan areas) and the borrower has payments in arrears. When a loan is placed on non-accrual status, the accrual of interest is discontinued – beginning with the then current month – for accounting purposes only; previously recorded interest is not reversed. A loan may return to accrual status when all delinquent loan payments are cured and the loan becomes current in accordance with the terms of the loan agreement and the loan balance is considered well collateralized.

Uncollectible loans are charged off directly to the allowance for credit losses once it is determined the full amount is not collectible. Any amounts collected after a charge off is deemed a recovery.

The company funds loans with the intent to hold until maturity. From time to time the company may sell certain loans to unaffiliated third parties. Loans are classified as held-for-sale once a decision has been made to sell loans and the loans to be held-for-sale have been identified. Loans classified as held-for-sale are carried at the lower of amortized cost or fair value.

Allowance for credit losses

Loan balances are analyzed on a periodic basis for ultimate recoverability. In conjunction therewith, collateral fair values are re-assessed periodically and the protective equity for each loan is determined. As used herein, “protective equity” is the dollar amount by which the net realizable value (i.e., fair value less the cost to sell) of the collateral, net of any senior liens, exceeds the loan balance.

The allowance for credit losses is recognized based on current expected credit losses (CECL) at the time a loan is originated or acquired. No loss is expected at origination, given the substantial protective equity (i.e., the low LTVs), the predominance of first lien loans and the short duration of the loans.

The determination of the probability-of-loss for defaulted loans (and thereby the determination of the amount of the allowance for expected forward period credit losses) considers current fair value of collateral and the resultant LTV, current real estate and financial markets, as well as reasonable and supportable forecasts about future economic scenarios and – to a lesser extent - historical loss experience. The forward-looking estimates consider the likelihood that any combination of events would adversely impact economic conditions and real estate markets in California such that the substantial protective equity existing for the loans would no longer be sufficient to collect the recorded amounts of principal, advances and accrued interest due on the loan.

For a loan that is deemed collateral dependent for repayment, a provision for credit losses is recorded to adjust the allowance for credit losses to an amount such that the net carrying amount (the loan balance, net of foregone interest for loans in non-accrual status) is reduced to the lower of the loan balance or the net realizable value of the related collateral, net of any senior liens.

The allowance for credit losses is adjusted each period for changes in expected lifetime credit losses for loans and accrued interest.

Expected credit losses are determined on a collective (pool) basis when similar risk characteristic(s) exist. Loans that do not share risk characteristics with other loans are evaluated for expected credit losses on an individual basis. When determining risk characteristics to include in its pooling assessment, the following are most determinant.

- Loan to value (“LTV”): The ratio of the outstanding loan balance to the fair value of the underlying collateral, and thereby the amount of protective equity of the company’s loans, is the most determinant attribute at inception of the loan and ongoing in estimating incurred and lifetime expected credit losses. Further to reducing the risk of loss, the company’s loans are predominantly first mortgages, but second lien deeds of trust are not infrequent nor insignificant.

- Term: The duration (or expected term) of loan is a determinant attribute as the duration of the company’s loans are less than those of other conventional commercial real estate lenders (e.g., institutions, such as banks, insurance companies, private equity firms), typically in the range of one to three years. The expected duration of the loans (and thereby the forecast period) is shortened further as the loans are written without a prepayment penalty.

- Geographical location: The company’s loans are secured by real estate in coastal California metropolitan areas, typically in the Bay Area (including Silicon Valley) but also elsewhere in northern and southern California.

REDWOOD MORTGAGE INVESTORS IX, LLC

Notes to Financial Statements

September 30, 2024 (unaudited)

The probability-of-default/loss given default is most determinant for the company given the low LTVs at origination, the predominance of first lien loans and the relatively short duration of the loans. When a reporting entity, such as the company uses a measurement technique other than a discounted cash flow (DCF) approach, the allowance ought to reflect the expected credit losses of the amortized cost basis. Therefore, non-DCF methods ought to incorporate the impact of accrued interest (but not future interest /payments that have not yet been accrued) and advances, if any, into the estimate of expected credit losses. No prepayment assumption is factored into the estimate of credit losses as it is not a significant determinant of the amount of reserve.

Given the limited number of loans and the short terms for which the loans are written (and the potentially even shorter duration given that the loans are written without a prepayment penalty), at each reporting date the company performs a risk analysis as to real estate market conditions in the California areas in which loan collateral is located and performs a loan-by-loan analysis to determine the current fair value of the real property collateral and the remaining time to maturity. The results are accumulated and the LTVs in forward periods are forecasted – by lien position – for those loans expected (on a contractual maturity basis) to be then outstanding. No expected extensions, renewals, or modifications are factored in as the company’s loans do not contain renewal options that can be unconditionally exercised by the borrowers. This methodology/analysis determines if there is any future period in the lifetime of the loan in which a real estate market decline in values is expected to occur that would be sufficient to put at risk the full collection of amounts owed, including accrued interest and advances, if any secured by the deeds of trust. In arriving at the determination, the manager consulted a range of banking/industry and academic studies and forecasts.

If foreclosure (or negotiation of a deed in lieu of foreclosure) is concluded to be probable, the loan is considered to be collateral-dependent and the company uses the practical expedient to reduce its recorded investment in the loan to the net realizable value of the real estate and other assets to be acquired, net of the liabilities to be assumed. The determination of whether a loan is determined to be collateral-dependent requires judgment and considers both the current LTV and the financial condition of the borrower, which is monitored by the manager.

Real estate owned (“REO”)

Real estate owned, or REO, is property acquired in full or partial settlement of loan obligations generally through foreclosure and is recorded at acquisition at the property’s fair value less estimated costs to sell, as are other assets acquired and liabilities assumed (or any senior debt the property is taken subject to). The fair value estimates are derived from information available in the real estate markets including similar property, and often require the experience and judgment of third parties such as commercial real estate appraisers and brokers. The estimates figure materially in calculating the value of the property at acquisition, the level of charge to the allowance for credit losses and any subsequent valuation reserves. After acquisition, costs incurred relating to the development and improvement of property are capitalized to the extent they do not cause the recorded value to exceed the net realizable value, whereas costs relating to holding and disposition of the property are expensed as incurred. REO is analyzed periodically for changes in fair values and any subsequent write down is charged to operations expenses. Any recovery in the fair value subsequent to such a write down is recorded and is not to exceed the value recorded at acquisition. Recognition of gains or losses on the sale of real estate is dependent upon the transaction meeting certain criteria related to the nature of the property and the terms of the sale including potential seller financing.

Debt issuance costs

Debt issuance costs are the fees and commissions incurred in the course of obtaining a line of credit for services from banks, law firms and other professionals and are amortized on a straight-line basis as interest expense over the term of the line of credit.

Recent accounting pronouncements not yet adopted

The Financial Accounting Standards Board (FASB) issued an Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which requires enhanced disclosures about significant segment expenses and other segment items and requires public entities to disclose all annual disclosures about segments in interim periods. The new standard also permits entities to disclose more than one measure of segment profit or loss, requires disclosure of the title and position of the Chief Operating Decision Maker, and requires entities with a single reportable segment to provide all disclosures required by Topic 280. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted, and entities are required to apply the ASU retrospectively to all periods presented. The company is currently evaluating the impact, if any, that the adoption of this standard will have on its financial statements and related disclosures.

REDWOOD MORTGAGE INVESTORS IX, LLC

Notes to Financial Statements

September 30, 2024 (unaudited)

NOTE 3 – MANAGER AND OTHER RELATED PARTIES

The Operating Agreement provides for compensation to the manager and for the reimbursement of qualifying costs as detailed below. RMC is entitled to 1% of the net income or loss of the company. RMC – at its sole discretion – collected less than the maximum allowable reimbursement of qualifying costs attributable to RMI IX (Costs from RMC on the Statements of Income), which increased the net income, cash available for distribution, and the net-distribution rate. The cost-reimbursement waivers in the three and nine months ended September 30, 2024 and 2023, by RMC were not made for the purpose of providing RMI IX with sufficient funds to satisfy any required level of distributions, as the Operating Agreement has no such required level of distributions, nor to meet withdrawal requests.

Mortgage servicing fees

The manager is entitled to receive a servicing fee of up to one-quarter of one percent (0.25%) annually of secured loan principal. The mortgage servicing fees are accrued monthly on all loans. Remittance to RMC is made monthly unless the loan has been assigned a specific loss reserve, at which point remittance is deferred until the specific loss reserve is no longer required, or the property securing the loan has been acquired by the company.

Asset Management Fees

The manager is entitled to receive a monthly asset management fee for managing RMI IX’s assets, liabilities, and operations in an amount up to three-quarters of one percent (0.75%) annually of the portion of the capital originally committed to investment in mortgages, not including leverage, and including up to two percent (2%) of working capital reserves.

Costs from RMC

The manager is entitled to request reimbursement for operations expense incurred on behalf of RMI IX, including without limitation, RMC’s personnel and non-personnel costs incurred for qualifying business activities, including investor services, accounting, tax and data processing, postage and out-of-pocket general and administration expenses. Qualifying personnel/compensation costs and consulting fees are tracked by business activity, and then costs of qualifying activities are allocated to RMI IX pro-rata based on the percentage of RMI IX’s members’ capital to the total capital of all related mortgage funds managed by RMC. Certain other non-personnel, qualifying costs such as postage and out-of-pocket general and administrative expenses can be tracked by RMC as specifically attributable to RMI IX; other non-personnel, qualifying costs (e.g., RMC’s accounting and audit fees, legal fees and expenses, occupancy, and insurance premiums) are allocated pro-rata based on the percentage of RMI’s members’ capital to total capital of the related mortgage funds managed by RMC.

The amount of qualifying costs attributable to RMI IX incurred by RMC was approximately $131 thousand and $188 thousand in the three months ended September 30, 2024 and 2023, respectively, and $402 thousand and $606 thousand in the nine months ended September 30, 2024 and 2023, respectively. The reimbursement of costs waived by RMC was approximately $53 thousand and $90 thousand in the three months ended September 30, 2024 and 2023, respectively, and $162 thousand and $339 thousand in the nine months ended September 30, 2024 and 2023, respectively.

Loan administrative fees

The manager is entitled to receive a loan administrative fee of up to one percent (1%) of the principal amount of each new loan funded or acquired for services rendered in connection with the selection and underwriting of loans payable upon the closing or acquisition of each loan. Since August 2015, RMC, in its sole discretion, has waived loan administrative fees on new originations. The total amount of loan administrative fees waived was approximately $13 thousand and $56 thousand in the three months ended September 30, 2024 and 2023, respectively, and $365 thousand and $236 thousand in the nine months ended September 30, 2024 and 2023, respectively.

Formation loan

Commissions for unit sales to new members paid to broker-dealers (“B/D sales commissions”) and premiums paid to certain investors upon the purchase of units were paid by RMC and were not paid directly by RMI IX out of unit-sales proceeds. Instead, RMI IX advanced to RMC amounts sufficient to pay the B/D sales commissions and premiums to be paid to investors. Such advances in total were not to exceed seven percent (7%) of offering proceeds, and when offerings of units to new members ended on April 30, 2019 totaled approximately $5.6 million. The receivable arising from the advances is unsecured and non-interest bearing and is referred to as the “formation loan”.

REDWOOD MORTGAGE INVESTORS IX, LLC

Notes to Financial Statements

September 30, 2024 (unaudited)

Formation loan transactions for the nine months ended September 30 are presented in the following table ($ in thousands).


	2024			2023
Balance, January 1	$	2,902		$	3,110
Payments received from RMC		(156	)		(156	)
Balance, September 30	$	2,746		$	2,954

The formation loan is being repaid in annual installments of approximately $208 thousand to coincide with the term of the company. The installments may be paid by RMC either in full on December 31st of each calendar year during the term of the company or in four equal quarterly installments. The primary source of repayment of the formation loan are the loan brokerage commissions earned by RMC. The formation loan is forgiven if the manager is removed and RMC is no longer receiving payments for services rendered. As such, the formation loan is presented as contra equity.

Redemptions of members’ capital

Redemptions of members’ capital for the three and nine months ended September 30 are presented in the following table ($ in thousands).


	Three Months Ended September 30,				Nine Months Ended September 30,
Redemptions	2024		2023		2024		2023
Without penalty	$	859	$	1,315	$	2,605	$	3,244
With penalty		—		2		1		24
Total	$	859	$	1,317	$	2,606	$	3,268
Early withdrawal penalties	$	—	$	—	$	—	$	1

Pursuant to the Operating Agreement, unless waived by the manager, the company will not redeem in any calendar year more than five percent (5.0%) and in any calendar quarter one and one-quarter percent (1.25%) of the weighted average number of units outstanding in the twelve (12) month period immediately prior to the date of redemption. The manager has no present intention to exercise its discretionary power to waive or modify the enforcement of the redemption limitation in the foreseeable future.

Redemption requests unpaid at September 30, 2024 approximated $20.8 million, of which,

•

$16.6 million were received at or prior to June 30, 2024; and

•

$4.2 million were received in the quarter ended September 30, 2024 (and will be eligible at December 31, 2024).

Pursuant to the Operating Agreement, in the event that redemption requests in excess of the foregoing limitations are received by the manager, eligible redemption requests are to be honored in the following order of priority:

•

first, to redemptions upon the death of a member, subject to a cap of $100 thousand per quarter for each deceased member’s account; and

•

next, to all other eligible redemption requests on a pro rata basis.

Organization and offering expenses

The manager is required to be reimbursed for O&O expenses incurred in connection with the organization of the company and the offering of the units of membership interest including, without limitation, attorneys’ fees, accounting fees, printing costs and other selling expenses (other than sales commissions) in a total amount not exceeding 4.5% of the original purchase price of all units (other than DRIP units) sold in all offerings (hereafter, the “maximum O&O expenses”). RMC paid the O&O expenses in excess of the maximum O&O expenses.

The O&O expenses incurred by RMI IX are allocated to the members as follows – for each of forty (40) calendar quarters or portion thereof after December 31, 2015 that a member holds units (other than DRIP units), the O&O expenses incurred by RMI IX are allocated to and debited from that member’s capital account in an annual amount equal to 0.45% of the member’s original purchase price for those units, in equal quarterly installments of 0.1125% each commencing with the later of the first calendar quarter of 2016 or the first full calendar quarter after a member’s purchase of units, and continuing through forty (40) calendar quarters or the quarter in which such units are redeemed.

REDWOOD MORTGAGE INVESTORS IX, LLC

Notes to Financial Statements

September 30, 2024 (unaudited)

Unallocated O&O transactions for the nine months ended September 30 are summarized in the following table ($ in thousands).


	2024			2023
Balance, January 1	$	742		$	1,045
O&O expenses allocated		(182	)		(193	)
O&O expenses paid by RMC(1)		(25	)		(39	)
Balance, September 30	$	535		$	813

(1)

Per the Operating Agreement, RMC is obligated to repay RMI IX for the amount of unallocated O&O expenses attributed to a member’s capital account if the member redeems prior to the 40 quarterly allocations. RMC estimated its future obligation to repay unallocated O&O expenses on scheduled redemptions as of September 30, 2024, to be approximately $8 thousand.

Other related party transactions

Payable to/receivable from related parties

From time to time, in the normal course of business operations, the company may have payables to and/or receivables from related parties. At September 30, 2024, the payable to related parties balance of approximately $44 thousand consisted of accounts payable of approximately $44 thousand to the manager.

At December 31, 2023, the payable to related party balance of approximately $90 thousand consisted of accounts payable of approximately $57 thousand to the manager and $18 thousand to a related mortgage fund. Also included was member redemptions of approximately $15 thousand.

Loan transactions with related parties

In the ordinary course of business, performing loans may be transferred by executed assignment, in-part or in-full, between the RMC managed mortgage funds at par value, which approximates market value.

In the nine months ended September 30, 2023, related mortgage funds transferred to RMI IX four loans with aggregate principal of approximately $3.4 million in-full at par value, which approximates fair value. RMI IX paid cash for the loans and the related mortgage fund has no continuing obligation or involvement with the loans. No loans were transferred from related mortgage funds in the nine months ended September 30, 2024.

In the nine months ended September 30, 2023, RMI IX transferred to a related mortgage fund three loans with aggregate principal of approximately $1.1 million in-full at par value, which approximates fair value. The related mortgage funds paid cash for the loans and RMI IX has no continuing obligation or involvement with the loans. No loans were transferred to related mortgage funds in the nine months ended September 30, 2024.

- Promissory notes with related parties

In June 2023, RMI IX lent $3.3 million to a related mortgage fund secured by the net cash flow payable on three mortgage loans totaling approximately $7.5 million, which had contractual maturities before October 1, 2023. The promissory note receivable from the related mortgage fund was secured by all proceeds payable to the related mortgage fund upon the payoff or repayment of the pledged mortgage loans, net of any amounts outstanding on a line of credit secured by the pledged mortgage loans. The note balance, including interest, was paid in full in February 2024.

In May 2024, RMI IX borrowed a total of $940 thousand from related mortgage funds and the manager pursuant to a series of secured promissory notes issued by RMI IX to the applicable affiliates (the “May Notes”). Each of the May Notes was secured by the applicable affiliate’s pro rata share (based upon relative principal advanced) of all proceeds payable to RMI IX under a single mortgage loan in the principal amount of $9.1 million with a contractual maturity date of June 1, 2027. The maturity dates for each of the May Notes was July 15, 2024. All obligations of RMI IX under the May Notes were satisfied in full on May 31, 2024.

In June 2024, RMI IX borrowed a total of $2.5 million from related mortgage funds pursuant to two unsecured promissory notes issued by RMI IX to the applicable affiliates (the “June Notes”). The loans evidenced by the June Notes were unsecured obligations of RMI IX with a contractual maturity date of August 12, 2024. All obligations of RMI IX under the June Notes were satisfied in full by September 2024.

In August 2024, RMI IX borrowed a total of $50 thousand from the manager pursuant to one unsecured promissory note issued by RMI IX to RMC. The loan evidenced by the promissory note was an unsecured obligation of RMI IX with a contractual maturity date of September 30, 2024. All obligations of RMI IX under the promissory note were satisfied in full by September 2024.

REDWOOD MORTGAGE INVESTORS IX, LLC

Notes to Financial Statements

September 30, 2024 (unaudited)

NOTE 4 – LOANS

Loans generally are funded at a fixed interest rate with a loan term of up to five years. Loans acquired between related mortgage funds are generally done so within the first six months of origination and are purchased at par value, which approximates fair value. See Note 3 (Manager and Other Related Parties) for a description of loans transferred by executed assignments between the related mortgage funds.

The company’s loans are secured by real estate in coastal California metropolitan areas. The portfolio segments are first and second trust deeds mortgages and the key credit quality indicator is the LTV. First mortgages are predominant, but second lien deeds of trust are not infrequent nor insignificant. First-mortgage loans comprised 86% of the portfolio at September 30, 2024 (83% at December 31, 2023).

Secured loans unpaid principal balance (principal)

Secured loan transactions for the three and nine months ended September 30, 2024 are summarized in the following table ($ in thousands).


	Three Months Ended September 30, 2024									Nine Months Ended September 30, 2024
	Total			First Trust Deeds			Second Trust Deeds			Total			First Trust Deeds			Second Trust Deeds
Principal, beginning of period(1)	$	74,752		$	64,605		$	10,147		$	62,916		$	52,263		$	10,653
Loans funded		1,307			1,307			—			36,501			35,213			1,288
Principal collected		(6,048	)		(6,030	)		(18	)		(25,388	)		(23,576	)		(1,812	)
Loans sold to non-affiliate		—			—			—			(4,018	)		(4,018	)		—
Principal, end of period	$	70,011		$	59,882		$	10,129		$	70,011		$	59,882		$	10,129

(1)

Includes principal collected and held in trust at September 30, 2024 of approximately $5 thousand, offset by principal collected and held in trust at December 31, 2023 of approximately $3 thousand which was disbursed to the company in January 2024.

During the three and nine months ended September 30, 2024, the company renewed one and seven maturing (or matured) loans with aggregate principal of approximately $1.4 million and $19.0 million, respectively, which are not included in the activity shown in the table above. The loans have an average extension period of approximately three and seven months, respectively, and were current and deemed well collateralized (i.e., the current LTV for the collateral was within lending guidelines as discussed in Note 2 to these financial statements). Interest rates charged to borrowers may be adjusted in conjunction with the loan extensions to reflect current market conditions (in the nine months ended September 30, 2024, two extensions included a rate increase).

In the three and nine months ended September 30, 2024, zero and four loans with principal of zero and approximately $4.0 million were sold to an unaffiliated third party, respectively. The company recognized a gain of zero and approximately $24 thousand, net of a commission, respectively.

As of September 30, 2024, there were no commitments to lend outstanding and no construction or rehabilitation loans outstanding.

REDWOOD MORTGAGE INVESTORS IX, LLC

Notes to Financial Statements

September 30, 2024 (unaudited)

Loan characteristics

Secured loans had the characteristics presented in the following table ($ in thousands).


	September 30,			December 31,
	2024			2023
Number of secured loans		44			47
First trust deeds		31			34
Second trust deeds		13			13

Secured loans – principal	$	70,011		$	62,916
First trust deeds	$	59,882		$	52,263
Second trust deeds	$	10,129		$	10,653

Secured loans – lowest interest rate (fixed)		7.3	%		7.3	%
Secured loans – highest interest rate (fixed)		12.9	%		11.8	%

Average secured loan – principal	$	1,591		$	1,339
Average principal as percent of total principal		2.3	%		2.1	%
Average principal as percent of members’ and manager’s capital, net		2.4	%		2.0	%
Average principal as percent of total assets		2.2	%		2.0	%

Largest secured loan – principal	$	8,686		$	6,200
Largest principal as percent of total principal		12.4	%		9.9	%
Largest principal as percent of members’ and manager’s capital, net		13.1	%		9.1	%
Largest principal as percent of total assets		11.7	%		9.1	%

Smallest secured loan – principal	$	185		$	185
Smallest principal as percent of total principal		0.3	%		0.3	%
Smallest principal as percent of members’ and manager’s capital, net		0.3	%		0.3	%
Smallest principal as percent of total assets		0.3	%		0.3	%

Number of California counties where security is located		13			16
Largest percentage of principal in one California county		19.3	%		21.7	%

Number of secured loans with prepaid interest		2			2
Prepaid interest	$	82		$	107

As of September 30, 2024, 26 loans with principal of approximately $51.6 million provide for monthly payments of interest only, with the principal due at maturity, and 18 loans with principal of approximately $18.4 million (representing 26% of the aggregate principal of the company’s loan portfolio) provide for monthly payments of principal and interest, typically calculated on a 30-year amortization, with the remaining principal due at maturity.

As of September 30, 2024, RMI IX’s largest loan with principal of $8.7 million, has an LTV at origination (OLTV) of 70%, and is in first lien position. The loan is secured by a commercial condo building located in Los Angeles County, with an interest rate of 10.50% and is scheduled to mature on June 1, 2027.

As of September 30, 2024, there were 13 loans in second lien position. The aggregate principal of these loans is approximately $10.1 million and the weighted average OLTV is 56%. All but two loans in second lien position were performing as of September 30, 2024. One delinquent loan has principal outstanding of $760 thousand (OLTV 70%), is secured by an industrial property located in Santa Clara County, California, bears an interest rate of 8.88% and matured on August 1, 2023. The borrower included this note/debt in a bankruptcy estate in December 2023 (notification received in March 2024) and continues to make monthly payments. The other delinquent loan has principal outstanding of $1.6 million (OLTV 45%), is secured by an industrial property located in Orange County, California, bears an interest rate of 11.00% and matured on April 1, 2024.

REDWOOD MORTGAGE INVESTORS IX, LLC

Notes to Financial Statements

September 30, 2024 (unaudited)

Lien position/OLTV

At funding, secured loans had the lien positions presented in the following table ($ in thousands).


	September 30, 2024								December 31, 2023
	Loans		Principal			Percent			Loans		Principal			Percent
First trust deeds(2)		31	$	59,882			86	%		34	$	52,263			83	%
Second trust deeds		13		10,129			14			13		10,653			17
Total principal, secured loans		44		70,011			100	%		47		62,916			100	%
Liens due other lenders at loan closing				30,470								26,644
Total debt			$	100,481							$	89,560
Appraised property value at loan closing			$	181,821							$	177,310
OLTV (weighted average)				59.3	%							54.6	%

(2)

One loan with principal of approximately $2.0 million has an OLTV of 108%. The loan agreement was executed by an individual with extensive real estate holdings and substantial financial resources. The loan matured July 1, 2024 (extended from May 1, 2024).

At the time a loan is funded, the LTV is such that the protective equity in the collateral securing the loan is sufficient to preclude any expected credit losses – principal unless there is a forward period adverse event that is uninsured and/or there are market conditions so adverse (and are other-than-temporary) that the protective equity is reduced to an amount not sufficient to recover the principal owed.

Secured loans, principal by OLTV and lien position at September 30, 2024 are presented in the following table ($ in thousands).


	Secured loans, principal
OLTV(3)	First trust deeds		Percent			Count		Second trust deeds		Percent			Count		Total principal		Percent
<40%	$	7,551		10.7	%		6	$	1,028		1.5	%		2	$	8,579		12.2	%
40-49%		8,285		11.8			4		3,500		5.0			2		11,785		16.8
50-59%		6,707		9.6			3		337		0.5			1		7,044		10.1
60-69%		26,718		38.2			14		1,542		2.2			2		28,260		40.4
Subtotal <70%		49,261		70.3			27		6,407		9.2			7		55,668		79.5

70-79%		8,621		12.3			3		3,722		5.3			6		12,343		17.6
Subtotal <80%		57,882		82.6			30		10,129		14.5			13		68,011		97.1

≥80%		2,000		2.9			1		—		0.0			—		2,000		2.9

Total	$	59,882		85.5	%		31	$	10,129		14.5	%		13	$	70,011		100.0	%

(3)

LTV classifications in the table above are based on principal, advances and interest unpaid at September 30, 2024.

REDWOOD MORTGAGE INVESTORS IX, LLC

Notes to Financial Statements

September 30, 2024 (unaudited)

Property type

Secured loans summarized by property type are presented in the following table ($ in thousands).


	September 30, 2024							December 31, 2023
	Loans		Principal		Percent			Loans		Principal		Percent
Single family(4)		19	$	22,849		33	%		21	$	21,786		35	%
Commercial
Office		3		5,725		8			3		5,725		9
Retail		4		4,914		7			6		9,948		15
Industrial		7		12,601		18			8		13,353		22
Commercial – Other		5		15,555		22			3		2,377		4
Commercial Total		19		38,795		55			20		31,403		50
Multi-family		6		8,367		12			5		8,227		13
Land		—		—		—			1		1,500		2
Total principal, secured loans		44	$	70,011		100	%		47	$	62,916		100	%

(4)

Single family includes 1-4 unit residential buildings, condominium units, townhouses and condominium complexes. At September 30, 2024, single family consists of 7 loans with aggregate principal of approximately $4.7 million that are owner occupied and 12 loans with principal of approximately $18.1 million that are non-owner occupied. At December 31, 2023, single family consisted of six loans with aggregate principal of approximately $3.3 million that are owner occupied and 15 loans with principal of approximately $18.5 million that are non-owner occupied.

REDWOOD MORTGAGE INVESTORS IX, LLC

Notes to Financial Statements

September 30, 2024 (unaudited)

Distribution of secured loans - principal by California counties

The distribution of secured loans within California by counties is presented in the following table ($ in thousands).


	September 30, 2024					December 31, 2023
	Principal		Percent			Principal		Percent
San Francisco Bay Area(5)
San Francisco	$	13,536		19.3	%	$	13,662		21.7	%
San Mateo		13,108		18.7			4,832		7.7
Santa Clara		9,078		13.0			10,143		16.1
Alameda		6,758		9.6			3,925		6.2
Contra Costa		900		1.3			—		0.0
Napa		636		0.9			640		1.0
Solano		185		0.3			185		0.3
Marin		400		0.6			400		0.7
		44,601		63.7			33,787		53.7
Other Northern California
Placer		—		0.0			1,967		3.1
San Joaquin		—		0.0			750		1.2
Butte		1,203		1.7			1,203		1.9
Sacramento		—		0.0			551		0.9
		1,203		1.7			4,471		7.1
Northern California Total		45,804		65.4			38,258		60.8

Southern California Coastal
Los Angeles		11,117		15.9			4,058		6.5
Orange		3,906		5.6			7,177		11.4
San Diego		7,284		10.4			8,325		13.2
		22,307		31.9			19,560		31.1
Other Southern California – Riverside
Riverside		1,900		2.7			1,900		3.0
Ventura		—		0.0			3,198		5.1
		1,900		2.7			5,098		8.1
Southern California Total		24,207		34.6			24,658		39.2
Total principal, secured loans	$	70,011		100.0	%	$	62,916		100.0	%

(5)

Includes Silicon Valley

Scheduled maturities/Secured loans - principal

Secured loans scheduled to mature in periods as of and after September 30, 2024 , are presented in the following table ($ in thousands).


	First Trust Deeds				Second Trust Deeds				Total
	Loans		Principal		Loans		Principal		Loans		Principal		Percent
2024		5	$	7,433		2	$	1,863		7	$	9,296		13	%
2025		12		24,819

Redwood Mortgage Investors IX 10-Q