Korth Direct Mortgage Swings to Profit on Surging Origination, Leasing Revenue

TL;DR

**KDM is back in the black, but watch those declining mortgage assets and increasing property holdings – it's a pivot play.**

AI Summary

Korth Direct Mortgage Inc. reported a significant turnaround for the nine months ended September 30, 2025, achieving a net income attributable to common stockholders of $1,051,763, a substantial improvement from a net loss of $2,537,484 in the prior year period. Total revenues surged to $12,910,525 from $8,473,994, driven primarily by a 84.4% increase in Origination Revenue, Net to $2,050,334 and a 111.4% rise in Leasing Revenue to $4,561,175. Investment Interest also contributed significantly with $2,407,317, up from zero. Despite a decrease in Mortgages Owned from $451,974,989 at December 31, 2024, to $301,898,930 at September 30, 2025, the company's total assets decreased from $521,851,543 to $403,072,699. Key changes include a $9,000,000 positive change in fair value of mortgage secured notes and a $5,557,032 realized gain on foreclosure, offsetting a $2,724,459 unrealized loss on mortgages. The company's strategic outlook involves continued mortgage origination and investment in real estate through special purpose entities and the KDM Capital Partners LP Fund.

Why It Matters

This turnaround is crucial for Korth Direct Mortgage, demonstrating improved operational efficiency and revenue diversification beyond traditional mortgage servicing. For investors, the shift from a significant loss to a profit, coupled with increased origination and leasing revenue, suggests a more robust business model and potential for sustained growth. Employees may see increased job security and opportunities as the company expands its real estate holdings and fund activities. Customers could benefit from a more stable and diversified mortgage provider. In the competitive landscape, KDM's ability to generate substantial investment interest and real estate gains positions it uniquely against traditional mortgage lenders, especially as it leverages its KDM Capital Partners LP Fund to invest in mortgages and real estate.

Risk Assessment

Risk Level: medium — The company's total assets decreased by approximately 22.8% from $521,851,543 at December 31, 2024, to $403,072,699 at September 30, 2025, primarily due to a significant reduction in Mortgages Owned from $451,974,989 to $301,898,930. While net income improved, this substantial asset reduction, coupled with a $2,724,459 unrealized loss on mortgages, indicates potential volatility in its core mortgage portfolio and reliance on fair value adjustments and foreclosure gains.

Analyst Insight

Investors should closely monitor Korth Direct Mortgage's asset composition, particularly the continued decline in Mortgages Owned and the growth in property and equipment, to understand its strategic shift towards real estate ownership and leasing. Evaluate the sustainability of its 'Realized Gain on Foreclosure' and 'Change in Fair Value of Mortgage Secured Notes' as recurring revenue drivers.

Financial Highlights

debt To Equity

N/A

revenue

$12,910,525

operating Margin

N/A

total Assets

$403,072,699

total Debt

N/A

net Income

$1,051,763

eps

N/A

gross Margin

N/A

cash Position

N/A

revenue Growth

+52.3%

Revenue Breakdown

Key Numbers

• $1,051,763 — Net Income attributable to common stockholders (Significant turnaround from a $2,537,484 net loss in the prior year period)
• $12,910,525 — Total Revenues (Increased from $8,473,994 in the prior year, representing a 52.3% growth)
• $2,050,334 — Origination Revenue, Net (Increased by 84.4% from $1,247,425 in the prior year period)
• $4,561,175 — Leasing Revenue (Increased by 111.4% from $2,157,082 in the prior year period)
• $2,407,317 — Investment Interest (New revenue stream, up from $0 in the prior year period)
• $301,898,930 — Mortgages Owned (Decreased from $451,974,989 at December 31, 2024, indicating a shift in asset allocation)
• $403,072,699 — Total Assets (Decreased from $521,851,543 at December 31, 2024, a 22.8% reduction)
• $5,557,032 — Realized Gain on Foreclosure (Significant gain, up from $1,045,062 in the prior year period)
• $9,000,000 — Change in Fair Value of Mortgage Secured Notes (Positive adjustment, though lower than $12,660,000 in the prior year)
• 5,000,000 — Shares of common stock outstanding (Consistent as of November 13, 2025, and December 31, 2024)

Key Players & Entities

• Korth Direct Mortgage Inc. (company) — registrant and parent company
• J.W. Korth & Company Limited Partnership (company) — wholly owned subsidiary and securities broker-dealer
• KDM Funding I LLC (company) — wholly owned subsidiary and issuer of Mortgage Secured Notes
• KDM Capital Partners LP (company) — limited partnership formed to invest in mortgages and real estate
• SEC (regulator) — Securities and Exchange Commission
• FINRA (regulator) — Financial Industry Regulatory Authority
• MSRB (regulator) — Municipal Securities Rulemaking Board
• Florida (person) — state of incorporation
• Delaware (person) — state of incorporation for KDM Capital Partners LP
• Coral Gables, FL (person) — principal executive offices location

FAQ

Risk Factors

• Fair Value Fluctuations [medium — financial]: The company is exposed to fluctuations in the fair value of its financial instruments, including mortgage-backed securities and notes. A $2,724,459 unrealized loss on mortgages was recorded, although this was partially offset by a $9,000,000 positive change in fair value of mortgage secured notes.
• Interest Rate Sensitivity [high — market]: Changes in interest rates can significantly impact the company's profitability, affecting mortgage origination volumes, the value of its mortgage portfolio, and borrowing costs. The decrease in Mortgages Owned from $451,974,989 to $301,898,930 suggests a strategic adjustment to market conditions.
• Real Estate Market Conditions [medium — operational]: The company's performance is tied to the health of the real estate market. A realized gain on foreclosure of $5,557,032 indicates challenges within the portfolio, though the gain itself is a positive outcome.
• Regulatory Compliance [medium — regulatory]: As a mortgage lender, Korth Direct Mortgage Inc. is subject to extensive federal and state regulations. Non-compliance can result in significant fines and reputational damage.

Industry Context

The mortgage industry is highly sensitive to interest rate fluctuations and real estate market conditions. Companies like Korth Direct Mortgage Inc. navigate this by managing origination volumes, portfolio holdings, and investment strategies. The trend towards specialized revenue streams like leasing and investment interest suggests diversification efforts within the sector.

Regulatory Implications

As a mortgage originator and servicer, Korth Direct Mortgage Inc. faces stringent regulatory oversight from bodies like the CFPB. Compliance with lending laws, fair housing regulations, and data privacy requirements is critical to avoid penalties and maintain operational integrity.

What Investors Should Do

1. Monitor interest rate sensitivity and its impact on net interest margins and loan portfolio valuations.
2. Analyze the sustainability of the recent revenue growth, particularly in Leasing Revenue and Investment Interest.
3. Evaluate the company's strategy regarding its mortgage portfolio, given the significant decrease in 'Mortgages Owned'.

Key Dates

• 2025-09-30: Nine months ended — Reported significant net income turnaround and substantial revenue growth.
• 2024-12-31: End of prior fiscal year — Baseline for comparison of asset levels, particularly Mortgages Owned ($451,974,989).

Glossary

Origination Revenue, Net

Revenue generated from originating new mortgage loans, net of certain expenses. (A key driver of the company's top-line growth, increasing by 84.4%.)

Leasing Revenue

Income derived from leasing activities, which has shown substantial growth. (A significant and rapidly growing revenue stream for the company.)

Mortgages Owned

The company's portfolio of mortgage loans that it holds on its balance sheet. (A decrease from $451,974,989 to $301,898,930 indicates a shift in asset strategy or portfolio sales.)

Fair Value of Mortgage Secured Notes

The estimated market value of debt instruments secured by mortgages. (A positive $9,000,000 adjustment indicates an improvement in the valuation of these instruments.)

Realized Gain on Foreclosure

Profit recognized when a foreclosed property is sold. (A substantial gain of $5,557,032 suggests successful resolution of distressed assets.)

Year-Over-Year Comparison

Korth Direct Mortgage Inc. has demonstrated a significant financial turnaround compared to the prior year period. Total revenues increased by 52.3% to $12,910,525, driven by strong growth in Origination and Leasing revenues, alongside a new Investment Interest stream. This revenue growth translated into a net income of $1,051,763, a substantial improvement from a net loss. However, total assets decreased by 22.8% to $403,072,699, primarily due to a reduction in Mortgages Owned, indicating a strategic shift in asset management.

Filing Documents

• kdm11725210q.htm (10-Q) — 932KB
• ex31_1.htm (EX-31.1) — 9KB
• ex32_1.htm (EX-32.1) — 4KB
• 0001214659-25-016397.txt ( ) — 6296KB
• cik0001695963-20250930.xsd (EX-101.SCH) — 57KB
• cik0001695963-20250930_cal.xml (EX-101.CAL) — 71KB
• cik0001695963-20250930_def.xml (EX-101.DEF) — 229KB
• cik0001695963-20250930_lab.xml (EX-101.LAB) — 354KB
• cik0001695963-20250930_pre.xml (EX-101.PRE) — 324KB
• kdm11725210q_htm.xml (XML) — 1070KB

– FINANCIAL INFORMATION

PART I – FINANCIAL INFORMATION Item 1. Unaudited Condensed Consolidated Financial Statements 4 Unaudited Condensed Consolidated Statements of Financial Condition 4 Unaudited Condensed Consolidated Statements of Operations 5 Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity 6 Unaudited Condensed Consolidated Statements of Cash Flows 7 Notes to Unaudited Condensed Consolidated Financial Statements 8 Item 2.

Management's Discussion and Analysis of Consolidated Financial Condition and Results of Consolidated Operations

Management's Discussion and Analysis of Consolidated Financial Condition and Results of Consolidated Operations 26 Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Quantitative and Qualitative Disclosures about Market Risk 28 Item 4.

Controls and Procedures

Controls and Procedures 28

– OTHER INFORMATION

PART II – OTHER INFORMATION Item 1.

Legal Proceedings

Legal Proceedings 28 Item 1A.

Risk Factors

Risk Factors 28 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 28 Item 3. Defaults Upon Senior Securities 29 Item 4. Mine Safety Disclosures 29 Item 5. Other Information 29 Item 6. Exhibits 30

SIGNATURES

SIGNATURES 32 3 Table of Contents

—FINANCIAL INFORMATION

PART I—FINANCIAL INFORMATION

Unaudited

Item 1. Unaudited Condensed Consolidated Financial Statements . KORTH DIRECT MORTGAGE INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION September 30, 2025 December 31, 2024 (Unaudited) ASSETS Cash and Cash Equivalents $ 6,168,226 $ 2,898,659 Restricted Cash 8,421,096 15,431,460 Restricted Investment - 1,192,510 Mortgages Owned 301,898,930 451,974,989 Mortgage Servicing Rights, at Fair Value 6,535,766 9,260,225 Portfolio Loans 4,253,683 5,161,709 Loans Held for Sale - 520,215 Securities 41,991 41,991 ROU Leased Asset 622,220 270,281 Goodwill 110,000 110,000 Property and equipment, net of depreciation 69,563,421 31,922,404 Other Assets 5,457,366 3,067,100 TOTAL ASSETS $ 403,072,699 $ 521,851,543 LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Escrows Payable $ 5,298,758 $ 15,306,451 Lease Liability 630,210 294,412 Deferred Revenue, net 1,480,697 1,958,967 Deferred Tax Liability, net 2,216,100 1,378,721 Line of Credit Payable 3,000,000 - Mortgage Secured Notes Payable 333,779,220 450,264,519 Warehouse Line of Credit, net 17,355,235 17,269,278 Other Liabilities and Payables 6,740,692 4,613,539 Total Liabilities 370,500,912 491,085,887 STOCKHOLDERS' EQUITY Accumulated Deficit ( 2,273,924 ) ( 3,325,687 ) Additional Paid-in Capital 29,672,429 29,632,262 Common Stock, $ 0.001 par value, 60,000,000 shares authorized 5,000,000 shares issued and outstanding at September 30, 2025 and December 31, 2024 5,000 5,000 Series A Preferred Stock, $ 0.001 par value, 460,000 shares authorized, 460,000 shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively 460 460 Series B Preferred Stock, $ 0.001 par value, 20,000 shares authorized, 19,000 shares issued and outstanding at September 30, 2025 and December 31, 2024 19 19 Non-Controlling Interest 5,167,803 4,453,602 Total Stockholders' Equity 32,571,787 3

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