Sachem Capital Corp.

Previous wording

Preparing our unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We base the use of estimates on (a) various assumptions that consider prior reporting results, (b) our projections regarding future operations, and (c) general financial market and local and general economic conditions. Actual amounts could differ from those estimates. Significant estimates include the provisions for current expected credit losses, loans held for sale at fair value, and real estate owned. See Note 2 – Significant Accounting Policies for further details.

Current wording

Preparing our unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We base the use of estimates on (a) various assumptions that consider prior reporting results, (b) our projections regarding future operations, and (c) general financial market and local and general economic conditions. Actual amounts could differ from those estimates. Significant estimates include the provisions for current expected credit losses, loans held for sale at fair value, and real estate owned. See Note 2 – Significant Accounting Policies — to our condensed consolidated financial statements for further details.

Previous wording

We record an allowance for credit losses (“CECL”) in accordance with the CECL standard on our loan portfolio, including unfunded construction commitments, on a collective basis by assets with similar risk characteristics. This methodology replaces the probable incurred loss impairment methodology. In addition, interest and fees receivable and amounts included in due from borrowers, other than reimbursements, which include origination, modification and other fees receivable are also analyzed for credit losses in accordance with the CECL standard, as they represent a financial asset that is subject to credit risk. Further, CECL requires credit losses to be presented as an allowance rather than as a write-down on available-for-sale debt securities if management does not intend to sell and does not believe that it is more likely than not, they will be required to sell. As allowed under the CECL standard that we have adopted, as a practical expedient, the fair value of the collateral at the reporting date is compared to the net carrying amount of the loan when determining the allowance for credit losses for loans in pending/pre-foreclosure status, as defined. Fair value of collateral is reduced by estimated cost to sell if the collateral is expected to be sold. The CECL standard requires an entity to consider historical loss experience, current conditions, and a reasonable and supportable forecast of the economic environment. We utilize a loss-rate method for estimating current expected credit losses. The loss rate method involves applying a loss rate to a pool of loans with similar risk characteristics to estimate the expected credit losses on that pool of loans. In determining the CECL allowance, we consider various factors including (1) historical loss experience in its portfolio, (2) loan specific losses for loans deemed collateral dependent based on excess amortized cost over the fair value of the underlying collateral, and (3) its current and future view of the macroeconomic environment. We also utilize a reasonable and supportable forecast period equal to the contractual term of the loan plus any applicable short-term extensions that are reasonably expected for construction loans. Loans, interest receivable, due from borrowers, unfunded commitments, and (available-for-sale debt) investment securities are all presented net on the Condensed Consolidated Balance Sheets with expanded disclosures in the notes to the condensed consolidated financial statements. The change in the balances during the reporting period are recorded in the Condensed Consolidated Statements of Operations under the provision for credit losses.

Current wording

We record an allowance for credit losses (“CECL”) on our loan portfolio in accordance with FASB Topic 326, Financial Instruments - Credit Losses, including unfunded construction commitments, on a collective basis by assets with similar risk characteristics. This methodology replaces the probable incurred loss impairment methodology. In addition, interest and fees receivable and amounts included in due from borrowers, other than reimbursements, which include origination, modification and other fees receivable are also analyzed for credit losses in accordance with the CECL standard, as they represent a financial asset that is subject to credit risk. Further, CECL requires credit losses to be presented as an allowance rather than as a write-down on available-for-sale debt securities if management does not intend to sell and does not believe that it is more likely than not, they will be required to sell. As allowed under the CECL standard that we have adopted, as a practical expedient, the fair value of the collateral at the reporting date is compared to the net carrying amount of the loan when determining the allowance for credit losses for loans in pending foreclosure status, as defined. Fair value of collateral is reduced by estimated cost to sell if the collateral is expected to be sold. The CECL standard requires an entity to consider historical loss experience, current conditions, and a reasonable and supportable forecast of the economic environment. We utilize a loss-rate method for estimating current expected credit losses. The loss rate method involves applying a loss rate to a pool of loans with similar risk characteristics to estimate the expected credit losses on that pool of loans. In determining the CECL allowance, we consider various factors including (1) historical loss experience in our loan portfolio, (2) loan specific losses for loans deemed collateral dependent based on excess amortized cost over the fair value of the underlying collateral, and (3) management's current and future view of the macroeconomic environment. We also utilize a reasonable and supportable forecast period equal to the contractual term of the loan plus any applicable short-term extensions that are reasonably expected for construction loans. Loans, interest receivable, due from borrowers, unfunded commitments, and investment securities are all presented net on our Condensed Consolidated Balance Sheets with expanded disclosures in the notes to our condensed consolidated financial statements. The change in the balances during the reporting period are recorded in our Condensed Consolidated Statements of Operations under the provision for credit losses.

Previous wording

The following table highlights certain information regarding our real estate lending activities for the three months ended March 31, 2025 (in thousands, except number of loans and weighted averages):

Current wording

The following table highlights certain information regarding our real estate lending activities for the three and six months ended June 30, 2025:

Previous wording

At March 31, 2025, our outstanding mortgage loan portfolio included loans ranging in size from $35,000 to $42.8 million. The table below gives a breakdown of our loans held for investment by loan size as of March 31, 2025:

Current wording

At June 30, 2025, our outstanding mortgage loan portfolio included loans with outstanding principal balance amount up to $38.3 million. The table below gives a breakdown of our loans held for investment by loan size as of June 30, 2025:

Previous wording

Our allowance for credit losses is influenced by historical loss experience, current exposure by geographical region, current expected credit losses on loans in foreclosure based on fair value less cost to sell, non-performing status, and other supportable forecasts of economic conditions. A loan is considered non-performing once it has been delinquent on its monthly payments past 90 days.

Current wording

Our allowance for credit losses is influenced by historical loss experience, current exposure by geographical region, current expected credit losses on loans in foreclosure based on fair value less cost to sell, non-performing status, and other supportable forecasts of economic conditions. A loan is considered non-performing once it has been delinquent on its monthly payments more than 90 days.

Previous wording

For further information, see Note 4 – Loans and Allowance for Credit Losses.

Current wording

For further information, see Note 4 – Loans and Allowance for Credit Losses — to our condensed consolidated financial statements.

Previous wording

As of March 31, 2025, we owned twenty properties, each of which previously served as collateral for first mortgage loans. One property was acquired during the three months ended March 31, 2025 in connection with foreclosure actions.

Current wording

As of June 30, 2025, we owned nineteen properties, each of which previously served as collateral for first mortgage loans. One and four properties were acquired during the three and six months ended June 30, 2025, respectively, in connection with foreclosure actions. Three and four properties were sold during the three and six months ended June 30, 2025, respectively.

Previous wording

For further information, see Note 6 – Real Estate Owned (REO).

Current wording

For further information, see Note 6 – Real Estate Owned (REO) — to our condensed consolidated financial statements.

Previous wording

Net (loss) income attributable to common shareholders and net (loss) income attributable to common shareholders per share

Current wording

Net income (loss) attributable to common shareholders and net income (loss) attributable to common shareholders per share

Previous wording

Net loss attributable to common shareholders for the three months ended March 31, 2025 was $0.2 million, or $0.00 per share, compared to net income attributable to common shareholders of $3.6 million, or $0.08 per share, for the three months ended March 31, 2024.

Current wording

Net income attributable to common shareholders for the three months ended June 30, 2025 was $0.8 million, or $0.02 per common share, compared to net loss attributable to common shareholders of $4.1 million, or $0.09 per common share, for the three months ended June 30, 2024.

Previous wording

Book value per common share as of March 31, 2025, was $2.57, a decrease of $0.07 from our book value per common share as of December 31, 2024 of $2.64. Such decrease is primarily due to cash dividends declared and paid for the three months ended March 31, 2025 on Common Shares and Series A Preferred Stock totaling $3.5 million, or $0.07 per share.

Current wording

Book value per common share as of June 30, 2025, was $2.54, a decrease of $0.03 from our book value per common share as of March 31, 2025 of $2.57. Such decrease is primarily due to cash dividends declared and paid for the three months ended June 30, 2025 on issued and outstanding common shares and shares of Series A Preferred Stock totaling $3.5 million, or $0.07 per common share, partially offset by net income for the three months ended June 30, 2025 of $0.8 million, or $0.02 per common share.

Previous wording

Total revenue for the three months ended March 31, 2025 was $11.4 million compared to $16.8 million for the three months ended March 31, 2024, a decrease of $5.4 million, or 31.9%. The change in revenue was primarily due to the cumulative effect of fewer originations over the last fifteen months resulting in a reduction in the unpaid principal balance of loans held for investment in addition to a currently elevated amount of nonperforming loans and real estate owned. On the other hand, income from our preferred membership limited liability company investments increased approximately 71.7%, quarter-over-quarter.

Current wording

Total revenue for the six months ended June 30, 2025 was $22.2 million compared to $32.0 million for the six months ended June 30, 2024, a decrease of $9.8 million, or 30.7%. The change in revenue was primarily due to the cumulative effect of materially lower net new origination over the last twelve months, resulting in a reduction in the unpaid principal balance of loans held for investment, in addition to a currently elevated amount of nonperforming loans and real estate owned. As of June 30, 2025, net loans held for investment totaled $364.5 million, compared to $485.7 million as of June 30, 2024, representing a decline of $121.2 million in the net principal balance. On the other hand, income from our preferred membership limited liability company investments increased by $0.6 million or 25.6% from the prior year.

Previous wording

Total operating expenses for three months ended March 31, 2025 were $10.4 million compared to $12.5 million for the three months ended March 31, 2024,a decrease of $2.1 million or 16.9%. The largest contributors to this decrease were the decreases in interest and amortization of deferred financing fees as a result of the repayment of $58.2 million of aggregate principal amount of our unsecured, unsubordinated notes in 2024, and a aggregate decrease in compensation and employee benefits, provision for credit losses related to loans held for investment, and other expenses totaling $0.9 million, partially offset by $0.01 million increase in general and administrative expenses.

Current wording

Total operating expenses for six months ended June 30, 2025 were $20.1 million compared to$30.8 million for the six months ended June 30, 2024, a decrease of$10.7 million or 34.7%. The largest contributors to this decrease was the decrease of $2.2 million in interest and amortization of deferred financing fees as a result of the repayment of $58.2 million of aggregate principal amount of our unsecured, unsubordinated notes in 2024, and a decrease in provision for credit losses related to loans held for investment of $7.9 million, as noted above.

Previous wording

Total liabilities at March 31, 2025 were $312.1 million compared to $310.3 million at December 31, 2024, an increase of $1.8 million, or 0.6%. This increase is primarily due to a $7.8 million increase in our repurchase agreements, partially offset by a $3.9 million decrease in lines of credit, a $1.7 million decrease in accounts payable and accrued liabilities, and a $1.0 decrease in advances from borrowers.

Current wording

Total liabilities at June 30, 2025 were $323.9 million compared to $310.3 million at December 31, 2024, an increase of $13.5 million, or 4.4%. This increase is primarily due to a $46.4 million increase in senior secured notes payable net of deferred financing costs of $3.6 million, offset by repayments of repurchase agreements of $19.2 million and lines of credit of $13.7 million.

Previous wording

Total shareholders’ equity at March 31, 2025 was $179.3 million compared to $181.7 million at December 31, 2024, a decrease of $2.3 million, or 1.3%. This decrease was due primarily to $3.5 million in dividends paid partially offset by $0.9 million of net income for the period and $0.3 million increase in additional paid-in capital related to stock-based compensation.

Current wording

Total shareholders’ equity at June 30, 2025 was $177.9 million compared to $181.7 million at December 31,2024, a decrease of $3.7 million, or 2.1%. This decrease was due primarily to an aggregate of $7.0 million of dividends paid to holders of Series A Preferred Stock and common shares, which was partially offset by $2.8 million of cumulative net earnings for the six month period and $0.4 million increase in additional paid-in capital related to stock-based compensation.

Previous wording

For a detailed breakdown of our cash flows during the three months ended March 31, 2025 and 2024, see the statement of cash flows included in our accompanying condensed consolidated financial statements.

Current wording

For a detailed breakdown of our cash flows during the six months ended June 30, 2025 and 2024, see our Condensed Consolidated Statement of Cash Flows.

Previous wording

We project anticipated cash requirements for our operating needs as well as cash flows generated from operating activities available to meet these needs. Our short-term cash requirements primarily include funding of loans, dividend payments, interest and principal payments on our indebtedness, including repayment/refinancing of the Notes maturing in September 2025, and payments for usual and customary operating and administrative expenses, such as employee compensation and sales and marketing expenses. Based on this analysis, we believe that our current cash balances, availability on our debt facilities, and our anticipated cash flows from operations will be sufficient to fund the operations for the next 12 months.

Current wording

We project anticipated cash requirements for our operating needs as well as cash flows generated from operating activities available to meet these needs. Our short-term cash requirements primarily include funding of loans, dividend payments, interest and principal payments on our indebtedness, including repayment/refinancing of the unsecured notes payable maturing in September 2025, and payments for usual and customary operating and administrative expenses, such as employee compensation and sales and marketing expenses. Based on this analysis, we believe that our current cash balances, availability on our debt facilities, and our anticipated cash flows from operations will be sufficient to fund the operations for the next 12 months.

Previous wording

On March 20, 2025, we entered into a new Credit Agreement with Needham Bank, replacing the prior Needham Credit Facility, which was fully repaid and terminated on the same date. The new facility matures on March 2, 2026, and includes an option to extend the term by one year upon satisfaction of certain conditions. Under the new agreement, SN Holdings LLC (“SN Holdings”), our wholly owned subsidiary, serves as the borrower, and Sachem Capital, the parent, serves as guarantor of all obligations. The Needham Credit Facility is secured by a first priority lien on all the assets of SN Holdings, and includes a requirement that SN Holdings maintain assets equal to at least two times the outstanding principal balance under the facility. In addition, SN Holdings is required to collaterally assign to Needham Bank a portfolio of mortgage loans with an outstanding principal balance of no less than the greater of $30 million or the full drawn balance on the facility. Sachem Capital, as guarantor, has also granted Needham a blanket lien on substantially all of its assets, with the ability to request lien releases to facilitate other financings. The Needham Credit Facility, at the subsidiary borrower level, is subject to other terms and conditions, including representations and warranties, covenants and agreements typically found in these types of financing arrangements, including a covenant that requires SN Holdings to maintain: (A) a ratio of Adjusted EBITDA (as defined in the Credit Agreement) to Debt Service (as defined in the Credit Agreement) of not less than 1.40 to 1.0, tested on a trailing-twelve-month basis at the end of each fiscal quarter; (B) a sum of cash, cash equivalents (at the consolidated guarantor level) and availability under the facility equal to or greater than $10 million; and (C) an Asset Coverage Ratio (as defined) of at least 150%. As of March 31, 2025, SN Holdings had borrowed $36.1 million under the facility. The Company was in compliance with all covenants under the new agreement as of March 31, 2025. On April 1, 2025, SN Holdings made a principal payment of $9.9 million, further reducing the outstanding indebtedness to $26.2 million.

Current wording

On March 20, 2025, we entered into a new Credit Agreement with Needham Bank, replacing the prior Needham Credit Facility, which was fully repaid and terminated on the same date. The new facility matures on March 2, 2026, and includes an option to extend the term by one year upon satisfaction of certain conditions. Under the new agreement, SN Holdings LLC (“SN Holdings”), our wholly owned subsidiary, serves as the borrower, and we serve as guarantor of all SN Holdings' obligations under the new Credit Agreement. The Needham Credit Facility is secured by a first priority lien on all the assets of SN Holdings, and includes a requirement that SN Holdings maintain assets equal to at least two times the outstanding principal balance under the facility. In addition, SN Holdings is required to collaterally assign to Needham a portfolio of mortgage loans with an outstanding principal balance of no less than the greater of $30 million or the full drawn balance on the facility. We, as guarantor, have also granted Needham a lien on substantially all of our assets, with the ability to request lien releases to facilitate other financings. The Needham Credit Facility, at the subsidiary borrower level, is subject to other terms and conditions, including representations and warranties, covenants and agreements typically found in these types of financing arrangements, including a covenant that requires SN Holdings to maintain: (A) a ratio of Adjusted EBITDA (as defined in the Credit Agreement) to Debt Service (as defined in the Credit Agreement) of not less than 1.40 to 1.0, tested on a trailing-twelve-month basis at the end of each fiscal quarter; (B) a sum of cash, cash equivalents (at the consolidated guarantor level) and availability under the facility equal to or greater than $10 million; and (C) an Asset Coverage Ratio (as defined) of at least 150%. As of June 30, 2025, SN Holdings had borrowed $26.2 million under the new facility and was in compliance with all covenants under the Credit Agreement.

Previous wording

See “Note 2 — Significant Accounting Policies” to the unaudited condensed consolidated financial statements for explanation of recent accounting pronouncements impacting us.

Current wording

See Note 2 — Significant Accounting Policies — to our condensed consolidated financial statements for explanation of recent accounting pronouncements impacting us.