What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-11-13 compared with 2023-08-14 · 337 added, 275 removed, 622 unchanged (50% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

June 30, 2023

September 30, 2023

December 31, 2022

2 unchanged sentences

Mortgages receivable, net

Investments in rental real estate, net

Interest and fees receivable

5 unchanged sentences

Unsecured notes payable (net of deferred financing costs of $ 6,641,817 and $ 8,352,597 )

Secured note payable

Repurchase facility

Mortgage payable

Lines of credit

Line of credit

Accrued dividends payable

1 unchanged sentence

Advances from borrowers

Below-market lease intangible

Deferred revenue

5 unchanged sentences

2,903,000 shares designated as Series A Preferred Stock;

1,928,000 and 1,903,000 shares of Series A Preferred Stock issued and outstanding at June 30, 2023 and December 31, 2022, respectively

Common stock - $ .001 par value;

1,996,000 and 1,903,000 shares of Series A Preferred Stock issued and outstanding at September 30, 2023 and December 31, 2022, respectively

Common shares - $ .001 par value;

200,000,000 shares authorized;

43,822,050 and 41,093,536 issued and outstanding at June 30, 2023 and December 31, 2022, respectively

45,364,429 and 41,093,536 issued and outstanding at September 30, 2023 and December 31, 2022, respectively

Paid-in capital

9 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Interest income from loans

13 unchanged sentences

(Gain) Loss on sale of real estate

Provision for Credit Losses

(Recovery of) provision for loan losses

Impairment loss

Total operating costs and expenses

Preferred stock dividend

Dividends paid on Series A Preferred Stock

( 2,816,279 )

9 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED JUNE 30, 2023

Preferred Stock

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2023

Preferred Shares

Common Shares

Comprehensive

Balance, April 1, 2023

Balance, July 1, 2023

( 7,222,078 )

Issuance of Preferred Stock, net of expenses

Issuance of Common Stock, net of expenses

Stock Buyback

Issuance of Series A Preferred Stock, net of expenses

Issuance of common shares, net of expenses

Stock based compensation

Unrealized gain on investments

Unrealized gain (loss) on investments

Dividends paid on Series A Preferred Stock

Dividends Paid on Common Stock

Dividends paid on common shares

( 5,895,035 )

Net income for the period ended June 30, 2023

Balance, June 30, 2023

Net income for the period ended September 30, 2023

Balance, September 30, 2023

( 7,893,673 )

FOR THE THREE MONTHS ENDED JUNE 30, 2022

Preferred Stock

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2022

Preferred Shares

Common Shares

Comprehensive

Balance, April 1, 2022

Balance, July 1, 2022

( 1,583,202 )

Issuance of Common Stock, net of expenses

Issuance of common shares, net of expenses

Stock based compensation

Unrealized loss on marketable securities

Dividends paid on Preferred Stock

Dividends paid on Common Stock

Dividends paid on Series A Preferred Stock

Dividends paid on common shares

( 5,253,923 )

Net income for the period ended June 30, 2022

Balance, June 30, 2022

Net income for the period ended September 30, 2022

Balance, September 30, 2022

( 2,705,252 )

FOR THE SIX MONTHS ENDED JUNE 30, 2023

Preferred Stock

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023

Preferred Shares

Common Shares

Comprehensive

4 unchanged sentences

( 2,489,574 )

Issuance of Preferred Stock, net of expenses

Issuance of Common Stock, net of expenses

Stock Buyback

Issuance of Series A Preferred Stock, net of expenses

Issuance of common shares, net of expenses

Repurchase of common shares

Stock based compensation

Unrealized gain on investments

Unrealized loss on investments

Dividends paid on Series A Preferred Stock

1 unchanged sentence

( 2,816,279 )

Dividends paid on Common Stock

Dividends paid on common shares

( 11,601,133 )

Net income for the period ended June 30, 2023

Balance, June 30, 2023

Net income for the period ended September 30, 2023

Balance, September 30, 2023

( 7,893,673 )

FOR THE SIX MONTHS ENDED JUNE 30, 2022

Preferred Stock

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022

Preferred Shares

Common Shares

Comprehensive

1 unchanged sentence

( 4,992,450 )

Issuance of Common Stock, net of expenses

Issuance of common shares, net of expenses

Exercise of warrants

1 unchanged sentence

Unrealized gain on marketable securities

Dividends paid on Preferred Stock

Dividends paid on Series A Preferred Stock

( 2,765,297 )

Dividends paid on Common Stock

Dividends paid on common shares

( 9,580,187 )

Net income for the period ended June 30, 2022

Balance, June 30, 2022

Net income for the period ended September 30, 2022

Balance, September 30, 2022

( 2,705,252 )

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOW

Six Months Ended

Nine Months Ended

September 30,

CASH FLOWS FROM OPERATING ACTIVITIES

2 unchanged sentences

Depreciation expense

Write-off of other assets - pre-offering costs

Stock based compensation

10 unchanged sentences

Other assets - miscellaneous

( 1,235,523 )

Due from borrowers

21 unchanged sentences

Acquisitions of and improvements to real estate owned, net

Purchase of property and equipment

Proceeds from sale (purchases) of property and equipment, net

( 1,292,160 )

Investment in rental real estate, net

( 10,725,237 )

Principal disbursements for mortgages receivable

2 unchanged sentences

Principal collections on mortgages receivable

Other assets - pre-offering costs

NET CASH USED FOR INVESTING ACTIVITIES

7 unchanged sentences

Accounts payable and accrued liabilities - principal payments on other notes

Dividends paid on Common Stock

Dividends paid on common shares

( 16,943,293 )

( 13,507,787 )

Dividends paid on Preferred Stock

Dividends paid on Series A Preferred Stock

( 2,816,279 )

1 unchanged sentence

Proceeds from issuance of common shares, net of expenses

Common Stock buyback

Repurchase of common shares

Proceeds from issuance of Series A Preferred Stock, net of expenses

Gross proceeds from issuance of fixed rate notes

Gross proceeds from issuance of secured note

Financings costs incurred in connection with fixed rate notes

1 unchanged sentence

NET CASH PROVIDED BY FINANCING ACTIVITIES

NET DECREASE IN CASH AND CASH EQUIVALENTS

( 8,584,113 )

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

( 6,474,640 )

4 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOW (Continued)

Six Months Ended

Nine Months Ended

September 30,

SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION

Interest paid

Real estate acquired in connection with the foreclosure of certain mortgages, inclusive of interest and other fees receivable, during the six months ended June 30, 2023 and 2022 amounted to $ 1,186,663 and $ 1,091,348 , respectively.

Increase in mortgage receivable from sale of real estate owned during the six months ended June 30, 2023 amounted to $ 1,307,112 .

Real estate acquired in connection with the foreclosure of certain mortgages, inclusive of interest and other fees receivable, during the nine months ended September 30, 2023 and 2022 totaled to $ 1,186,663 and $ 1,091,348 , respectively.

Increase in mortgage receivable from sale of real estate owned during the nine months ended September 30, 2023 totaled to $ 2,487,568 .

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

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2023

SEPTEMBER 30, 2023

Sachem Capital Corp.

13 unchanged sentences

The accompanying unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2022 and the notes thereto included in the Company’s Annual Report on Form 10-K.

Results of operations for the three months and six month periods ended June 30, 2023, are not necessarily indicative of the operating results to be attained in the entire fiscal year, or for any subsequent period.

Results of operations for the three months and nine month periods ended September 30, 2023, are not necessarily indicative of the operating results to be attained in the entire fiscal year, or for any subsequent period.

Use of Estimates

4 unchanged sentences

The Company considers all demand deposits, cashier’s checks, money market accounts and certificates of deposit with an original maturity of three months or less to be cash equivalents.

The Company maintains its cash and cash equivalents at financial institutions.

The combined account balances typically exceed the Federal Deposit Insurance Corporation insurance coverage, and, as a result, there is a concentration of credit risk related to amounts on deposit.

The Company maintains its cash and cash equivalents at multiple financial institutions.

The aggregate amounts held at each institution typically exceeds the Federal Deposit Insurance Corporation insurance coverage, and, as a result, there is a concentration of credit risk related to amounts on deposit.

The Company does not believe that the risk is significant.

8 unchanged sentences

If the cost of an investment exceeds its fair value, the Company evaluates, among other factors, general market conditions, credit quality of debt instrument issuers, and the extent to which the fair value is less than cost.

If qualitative factors indicate an available-for-sale debt security may be credit impaired the loss is measured as the excess of carrying value over the present value of expected cash flows,

If qualitative factors indicate an available-for-sale debt

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2023

limited to the excess of carrying value over fair value.

SEPTEMBER 30, 2023

security may be credit impaired, the loss is measured as the excess of carrying value over the present value of expected cash flows, limited to the excess of carrying value over fair value.

To determine credit losses, the Company may employ a systematic methodology that considers available quantitative and qualitative evidence.

1 unchanged sentence

If the Company has plans to sell the security or it is more likely than not that the Company will be required to sell the security before recovery, then a decline in fair value below cost is recorded as an impairment charge in net income and a new cost basis in the investment is established.

If market, industry, and/or there is a deterioration in the financial health, business outlook or other conditions of the person or entity to which it provided credit, the Company may incur future impairments.

If there are adverse changes in the markets or industries in which the borrower operates, or there is a deterioration in the financial health, business outlook or other conditions of the person or entity to which it provided credit, the Company may incur future impairments.

Equity investments with readily determinable fair values are measured at fair value.

5 unchanged sentences

The initial CECL allowance adjustment of $ 2,489,574 was recorded effective January 1, 2023 as a cumulative-effect of change in accounting principle through a direct charge to accumulated deficit on the consolidated statements of shareholders’ equity.

however, subsequent changes to the CECL allowance will be recognized in the consolidated statements of comprehensive income.

Subsequent changes to the CECL allowance will be recognized in the consolidated statements of comprehensive income.

The Company records an allowance for credit losses in accordance with the CECL standard on the Company’s loan portfolio, including unfunded construction commitments, on a collective basis by assets with similar risk characteristics.

3 unchanged sentences

Fair value of collateral is reduced by estimated cost to sell if the collateral is expected to be sold.

The amount of loans in pending/pre-foreclosure as of June 30, 2023 and December 31, 2022 was approximately $ 50.0 million and $ 24.0 million, respectively.

As of June 30, 2023 and December 31, 2022, none of those loans required an allowance for credit loss.

The amount of loans in pending/pre-foreclosure including unpaid interest and other charges as of September 30, 2023 and December 31, 2022 was approximately $ 68.1 million and $ 24.0 million, respectively.

As of September 30, 2023 and December 31, 2022, none of those loans required an allowance for credit loss.

The CECL standard requires an entity to consider historical loss experience, current conditions, and a reasonable and supportable forecast of the economic environment.

7 unchanged sentences

The CECL allowance related to the late payment fees are presented in “Interest and fees receivable” and “Due from borrowers” in the Company’s consolidated balance sheets.

As of June 30, 2023 and January 1, 2023, the CECL allowance for mortgages receivable was approximately $ 2.2 million and approximately $ 1.9 million, respectively, an increase of approximately $ 0.3 million.

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2023

As of June 30, 2023 and January 1, 2023, the CECL allowance for interest and fees receivable was approximately $ 29,100 and approximately $ 26,100 , respectively, an increase of approximately $ 3,000 .

As of June 30, 2023 and January 1, 2023, the CECL allowance for amounts due from borrowers was approximately $ 32,300 and $ 19,900 , respectively, an increase of approximately $ 12,400 .

As of June 30, 2023 and January 1, 2023, the CECL allowance for unfunded commitments was approximately $ 531,500 and $ 522,000 , respectively, an increase of approximately $ 9,500 .

SEPTEMBER 30, 2023

As of September 30, 2023, the CECL allowance for mortgages receivable was approximately $ 2.1 million compared to approximately $ 2.0 million at January 1, 2023, an increase of approximately $ 0.1 million.

As of September 30, 2023, the CECL allowance for interest and fees receivable was approximately $ 23,400 compared to approximately $ 26,100 at January 1, 2023, a decrease of approximately $ 2,700 .

As of September 30, 2023, the CECL allowance for amounts due from borrowers was approximately $ 24,400 compared to approximately $ 19,900 at January 1, 2023, an increase of approximately $ 4,500 .

As of September 30, 2023, the CECL allowance for unfunded commitments was approximately $ 498,600 compared to approximately $ 522,000 at January 1, 2023, a decrease of approximately $ 23,400 .

Fair Value Measurements

15 unchanged sentences

The Company relocated its entire operations to this property in March 2019.

As of June 30, 2023 this property was under contract to be sold and, as such, the company classifies it as available-for-sale.

The carrying value of the land and building is $ 1,048,380 , which is net of an impairment loss of $ 200,000 that the Company recognized during the quarter ended June 30, 2023.

On August 14, 2023 this property was sold.

The Company realized a loss of approximately $ 184,600 on the sale, which is included in (gain) loss on sale of real estate in the consolidated statements of comprehensive income, for the three and nine months ended September 30, 2023.

Land and building acquired in 2021 to serve as the Company’s new corporate headquarters is stated at cost.

1 unchanged sentence

The building is being depreciated using the straight-line method over its estimated useful life of 40 years .

The new building was placed in service during the six months ended June 30, 2023.

Real Estate Owned

Real estate owned by the Company is stated at cost and is tested for impairment quarterly.

The new building was placed in service in March 2023 when the Company received the Certificate of Occupancy.

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2023

SEPTEMBER 30, 2023

Investment in real estate

The Company allocates the purchase price of real estate to land and building (inclusive of site and tenant improvements) and, if determined to be material, intangibles, such as the value of above- and below-market leases and origination costs associated with the in-place leases.

The allocation of the purchase price to the tangible and intangible assets acquired and liabilities assumed involves subjectivity as the allocations are based on an analysis of the respective fair values.

In determining the fair value of the real estate acquired, the Company utilized a third-party valuation which primarily utilizes cash flow projections that apply, among other things, estimated revenue and expense growth rates, discount rates and capitalization rates, as well as sales comparison approach, which utilizes comparable sales, listings and sales contracts.

The Company assesses the fair value of the acquired leases based on estimated cash flow projections that utilize appropriate discount rates and available market information.

Estimates of future cash flows are based on a number of factors including the historical operating results, known trends, and market/economic conditions that may affect the property.

The determined and allocated fair values to the real estate acquired will affect the amount of depreciation and amortization we record over the respective estimated useful lives or term of the lease.

2023 Acquisition

On June 23, 2023, the Company entered into a purchase and sale contract for $ 10,600,000 to acquire a commercial building in Westport, CT.

The transaction was completed on August 31, 2023.

In connection with this transaction, which was accounted for as an asset acquisition, the Company allocated the purchase price and acquisition-related costs to the tangible and intangible assets acquired based on fair value.

In addition, the Company recorded a lease liability stemming from below-market rental rates.

Total consideration, including capitalized acquisition-related costs, was $ 10,725,237 .

The following table summarizes the allocation for the acquisition:

Site improvements

Tenant improvements

Below-market lease intangible

Lease in-place intangible (included in Other assets)

Deferred leasing costs (included in Other assets)

Building and site improvements are being depreciated using the straight-line method over its estimated useful life of 40 years and 15 years , respectively.

Tenant improvements are amortized over the life of the respective lease using the straight-line method.

For the three and nine months ended September 30, 2023, depreciation and amortization was nominal.

Lease in-place intangible assets, deferred leasing costs and acquired below market leases are amortized on a straight-line basis over the respective life of the lease For the three and nine months ended September 30, 2023, amortization of each of the lease-in place intangible assets, deferred leasing costs and acquired below market leases was nominal.

The Company leases space to a tenant under a ten year operating lease.

The lease provides for the payment of fixed base rent payable monthly in advance that ranges from approximately $ 834,000 in lease year one with escalations up to approximately $ 996,000 in lease year ten.

Additionally, the lease allows the Company to pass through to tenants their share of increases in real estate taxes and operating expenses over a base year, as defined.

The lease also provides for one year of rent concessions and a tenant improvement allowance funded by the Company.

Commencement of the lease is anticipated in 2024 once tenant improvements are completed.

The Company anticipates payments on the lease to begin in 2025 after the rent concession period has ended.

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

Estimated annual amortization of acquired in-place lease intangible is as follows:

2023 (3 months)

Estimated annual amortization of acquired below-market leases is as follows:

2023 (3 months)

Real Estate Owned

Real estate owned by the Company is stated at cost and is tested for impairment quarterly.

Consolidations

6 unchanged sentences

Goodwill is not amortized, but rather tested for impairment annually or more frequently if events or changes in circumstances indicate potential impairment.

Goodwill at June 30, 2023 represents the excess of the consideration paid over the fair value of net assets acquired from Urbane New Haven, LLC in October 2022.

Goodwill at September 30, 2023 represents the excess of the consideration paid over the fair value of net assets acquired from Urbane New Haven, LLC in October 2022.

In testing goodwill for impairment, the Company follows FASB ASC 350, “Intangibles—Goodwill and Other”, which permits a qualitative assessment of whether it is more likely than not that the fair value of a reporting unit is less than its carrying value including goodwill.

1 unchanged sentence

However, if the qualitative assessment determines that it is more likely than not that the fair value of the reporting unit is less than its carrying value including goodwill, or the Company chooses not to perform the qualitative assessment, then the Company compares the fair value of that reporting unit with its carrying value, including goodwill.

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

Deferred Financing Costs

Costs incurred in connection with the Company’s revolving credit facilities, described in Note 7 – Lines of Credit, Mortgage Payable, and Churchill Facility and Note 9 – Secured Note Payable, are amortized over the term of the applicable facility using the straight-line method.

Costs incurred in connection with the Company’s revolving credit facilities, described in Note 8 – Lines of Credit, Mortgage Payable, and Churchill Facility, are amortized over the term of the applicable facility using the straight-line method.

Costs incurred by the Company in connection with the public offering of its unsecured, unsubordinated notes, described in Note 9 – Unsecured Notes Payable, are being amortized over the term of the respective Notes.

3 unchanged sentences

The Company, generally, does not accrue interest income on mortgages receivable that are more than ninety (90) days past due or interest charged at default rates.

However, interest income not accrued at June 30, 2023 but collected prior to the issuance of this report is included in income for the period ended June 30, 2023.

However, interest income not accrued at September 30, 2023 but collected prior to the issuance of this report is included in income for the period ended September 30, 2023.

Origination and modification fee revenue, generally 1 % – 3 % of either the original loan principal or the modified loan balance, is collected at loan funding and is recognized ratably over the contractual life of the loan in accordance with ASC 310.

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2023

The Company believes it qualifies as a real estate investment trust (“REIT”) for federal income tax purposes and operates accordingly.

9 unchanged sentences

The Company does not expect to incur any corporate federal income tax liability outside of the TRSs, as it believes it has maintained its qualification as a REIT.

During the three and six months ended June 30, 2023 and 2022, the Company’s TRSs, nor has the Company, recognized any provisions for federal income tax or state, local and franchise taxes on the Company’s consolidated statements of operations.

The income tax provision for the Company differs from the amount computed from applying the statutory federal income tax rate to income before income taxes due to non-taxable REIT income and other permanent differences including the non-deductibility of acquisition costs of business combinations for federal income tax reporting.

During the three and nine months ended September 30, 2023 and 2022, neither the Company nor any of its TRSs, recognized any provisions for federal income tax or state, local and franchise taxes on the Company’s consolidated statements of operations.

The income tax provision for the Company differs from the amount computed by applying the statutory federal income tax rate to income before income taxes due to non-taxable REIT income and other permanent differences including the non-deductibility of acquisition costs of business combinations for federal income tax reporting.

FASB ASC Topic 740-10 “Accounting for Uncertainty in Income Taxes ” prescribes a recognition threshold and measurement attribute for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return and disclosure required.

1 unchanged sentence

The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in interest expense.

The Company has determined that there are no uncertain tax positions requiring accrual or disclosure in the accompanying consolidated financial statements as of June 30, 2023 and 2022.

The Company has determined that there are no uncertain tax positions requiring accrual or disclosure in the accompanying consolidated financial statements as of September 30, 2023 and 2022.

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

Earnings Per Share

10 unchanged sentences

The increase in the allowance is driven by the fact that the allowance under CECL covers expected credit losses over the full expected life of the loan portfolios and takes into account forecasts of expected future economic conditions.

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2023

In March 2022, the FASB issued ASU 2022-02, “Financial Instruments-Credit Losses” (Topic 326):

2 unchanged sentences

The amendments in this update became effective for fiscal years beginning after December 15, 2022.

This update did not have a material effect on the Company’s financial statements.

This update did not have a material effect on the Company’s financial statements, except for requiring additional disclosure relating to loan modifications to borrowers experiencing financial difficulty.

In June 2022, the FASB issued ASU 2022-03, “Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions.” ASU 2022-03 was issued to (1) to clarify the guidance in FASB ASC Topic 820, “Fair Value Measurement”, when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security, (2) to amend a related illustrative example, and (3) to introduce new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with FASB ASC Topic 820.

3 unchanged sentences

Reclassifications

Certain amounts included in the June 30, 2022 and December 31, 2022 consolidated financial statements have been reclassified to conform to the June 30, 2023 presentation.

Certain amounts included in the September 30, 2022 and December 31, 2022 consolidated financial statements have been reclassified to conform to the September 30, 2023 presentation.

Fair Value Measurement

1 unchanged sentence

Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

The following table sets forth by Level, within the fair value hierarchy, the Company’s assets at fair value as of June 30, 2023:

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

The following table sets forth by Level, within the fair value hierarchy, the Company’s assets at fair value as of September 30, 2023:

Stocks and ETFs

Debt securities

Convertible preferred equity security

Total liquid investments

Real estate owned

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2023

The following table sets forth by Level, within the fair value hierarchy, the Company’s assets at fair value as of December 31, 2022:

14 unchanged sentences

Valued at the closing price reported in the active market in which the individual securities are traded.

Convertible preferred equity security (level 3):

The Company estimates fair values of convertible preferred equity securities using market information such as recent sales of such securities.

Real estate owned (level 3) :

5 unchanged sentences

Pursuant to ASC 326-30-50-4 and 50-5, the Company is required to disclose investment securities that have been in a continuous unrealized loss position for 12 months or more as of the balance sheet date.

As of June 30, 2023 and December 31, 2022, the Company had a continuous unrealized losses over 12 months in Available-For-Sale debt securities of approximately $ 645,000 and approximately $ 531,000 , respectively.

As of September 30, 2023 and December 31, 2022, the Company had a continuous unrealized losses over 12 months in Available-For-Sale debt securities (AFS’s) of approximately $ 834,000 and approximately $ 531,000 , respectively.

The Company reviewed several factors to assess the credit quality of the debt instruments including, but not limited to, current cash position, operating cash flow, and corporate earnings as of the most recently filed financial statements.

As such, as of June 30, 2023, the Company has concluded no such allowance for credit losses regarding Available-For-Sale debt securities was deemed necessary.

As such, as of September 30, 2023, the Company has concluded no such allowance for credit losses regarding AFS’s debt securities was deemed necessary.

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2023

The following table presents the impact of the Company’s Available-For-Sale (AFS) securities - debt securities on its Other Comprehensive Income (OCI) for the three and six months ended June 30, 2023:

SEPTEMBER 30, 2023

The following table presents the impact of the Company’s AFS’s - debt securities included in Other Comprehensive Income (OCI) for the three and nine months ended September 30, 2023:

Three Months Ended

Six months Ended

Nine months Ended

September 30,

OCI from AFS securities:

3 unchanged sentences

Balance at end of period

The following table presents the Company’s Level 3 Investments of Real Estate Owned as of June 30, 2023 and December 31, 2022:

Six Months Ended

The following table presents the Company’s Level 3 Investments of Real Estate Owned as of September 30, 2023 and December 31, 2022:

Nine Months Ended

Twelve Months Ended

June 30, 2023

September 30, 2023

December, 31, 2022

7 unchanged sentences

Balance at end of period

The following table presents the Company’s Level 3 Investments of Convertible preferred equity securities as of June 30, 2023 and December 31, 2022:

Six Months Ended

Twelve Months Ended

June 30, 2023

December, 31, 2022

Convertible preferred equity securities at the beginning of period

Investment in

Balance at end of period

Mortgages Receivable

8 unchanged sentences

Most of the loans provide for monthly payments of interest only (in arrears) during the term of the loan and a “balloon” payment of the principal on the maturity date.

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2023

Allowance for credit losses is charged to income in amounts sufficient to maintain an allowance for credit losses inherent in the loans which are established systematically by management as of the reporting date.

Allowance for credit losses is charged to income in amounts sufficient to maintain an allowance for credit losses inherent in the loans that are established systematically by management as of the reporting date.

Management’s estimate of expected credit losses is based on an evaluation of relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the future collectability of the reported amounts.

The Company uses static pool modeling techniques to determine the allowance for loan losses expected over the remaining life of the loans, which is supplemented by management judgment.

The Company uses static pool modeling techniques to determine the allowance for loan losses expected over the remaining life of the loans, which is supplemented by management’s judgment.

Expected losses are estimated for groups of accounts aggregated by geographical location.

The Company’s estimate of expected credit losses includes 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.

The Company reviews charge-off experience factors, contractual delinquency, historical collection rates, the value of underlying collateral and other information to make the necessary judgments as to credit losses expected in the portfolio as of the reporting date.

The Company reviews charge-off experience factors, contractual delinquency, historical collection rates, the value of underlying collateral

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

and other information to make the necessary judgments as to credit losses expected in the portfolio as of the reporting date.

While management utilizes the best information available to make its evaluations, changes in macroeconomic conditions, interest rate environments, or both, may significantly impact the assumptions and inputs used in determining the allowance for credit losses.

2 unchanged sentences

Accrual of interest income is generally resumed when the delinquent contractual principal and interest is paid in full or when a portion of the delinquent contractually payments are made and the ongoing required contractual payments have been made for an appropriate period.

As of June 30, 2023 and December 31, 2022, loans on nonaccrual status had an outstanding principal balance of $ 96,371,599 and $ 55,691,857 , respectively.

As of September 30, 2023 and December 31, 2022, loans on nonaccrual status had an outstanding principal balance of $ 82,913,227 and $ 55,691,857 , respectively.

The nonaccrual loans are inclusive of loans pending foreclosure.

For the three and six months ended June 30, 2023, $ 174,397 and $ 222,506 of interest income, respectively, was recorded on nonaccrual loans.

For the six months ended June 30, 2023 and 2022, the aggregate amounts of loans funded by the Company were $ 114,468,454 and $ 191,971,926 , respectively, offset by principal repayments of $ 66,355,505 and $ 60,895,362 , respectively.

As of June 30, 2023, the Company’s mortgage loan portfolio includes loans ranging in size up to $ 34.0 million with stated interest rates ranging from 5.0 % to 14.2 % .

For the three and nine months ended September 30, 2023, $ 61,718 and $ 394,909 of interest income, respectively, was recorded on nonaccrual loans due to payments received.

For the nine months ended September 30, 2023 and 2022, the aggregate amounts of loans funded by the Company were $ 159,678,482 and $ 252,370,675 , respectively, offset by principal repayments of $ 123,495,534 and $ 95,173,969 , respectively.

As of September 30, 2023, the Company’s mortgage loan portfolio includes loans ranging in size up to approximately $ 36.1 million with stated interest rates ranging from 5.0 % to 15.0 % .

The default interest rate is generally 18 % but could be more or less depending on state usury laws and other considerations deemed relevant by the Company.

At June 30, 2023, and December 31, 2022, no single borrower or group of related borrowers had loans outstanding representing more than 10 % of the total balance of the loans outstanding.

At September 30, 2023, and December 31, 2022, no single borrower or group of related borrowers had loans outstanding representing more than 10 % of the total balance of the loans outstanding.

The Company may agree to extend the term of a loan if, at the time of the extension, the loan and the borrower meet all the Company’s then underwriting requirements.

6 unchanged sentences

The Company derived an annual historical loss rate based on its historical loss experience in its portfolio, adjusted to incorporate the risks of construction lending and to reflect the Company’s expectations of the macroeconomic environment.

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2023

The following table summarizes the activity in the CECL Allowance from adoption on January 1, 2023:

5 unchanged sentences

(dollars in thousands)

June 30, 2023

September 30, 2023

Geographical Location

(1) As of December 31, 2022, amounts represent probable loan loss provisions recorded before the adoption of the ASU 2016-13.

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(2) As a component of the adoption of ASU 2016-13, $ 498,600 of the CECL allowance is excluded from this table because it relates to unfunded commitments and has been recorded as a liability under accounts payable and accrued liabilities in the Company’s consolidated balance sheet.

Presented below is the Company’s loan portfolio by geographical location:

June 30, 2023

September 30, 2023

December 31, 2022

8 unchanged sentences

Presented below are the carrying values by Property Type:

June 30, 2023

September 30, 2023

December 31, 2022

5 unchanged sentences

Carrying value, net

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2023

The following tables allocate the carrying value of the Company’s loan portfolio based on internal credit quality indicators in assessing estimated credit losses and vintage of origination at the dates indicated:

June 30, 2023

September 30, 2023

Year Originated (1)

4 unchanged sentences

The FICO Scores are calculated at the inception of the loan and are updated if the loan is modified or on an as needed basis.

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

December 31, 2022

5 unchanged sentences

The FICO Scores are calculated at the inception of a loan and are updated if the loan is modified or on an as needed basis.

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2023

The following table sets forth the maturities of mortgages receivable as of June 30, 2023 and December 31, 2022:

As of June 30, 2023

The following table sets forth the maturities of mortgages receivable as of September 30, 2023 and December 31, 2022:

As of September 30, 2023

As of December 31, 2022

1 unchanged sentence

Less, CECL and Direct Allowances

At June 30, 2023, of the 360 mortgage loans included in the Company’s loan portfolio, 126 , or approximately 19.1 %, representing approximately $ 97.1 million of mortgage receivables, have matured but have not been repaid in full or extended.

Of these 126 loans, 51 are in foreclosure status, of which have an aggregate principal balance of approximately $ 47.2 million.

At December 31, 2022, of the 444 mortgage loans included in the Company’s loan portfolio, 105 loans, or 13.4 %, representing approximately $ 61.6 million of mortgage receivables had matured but have not been repaid in full or extended.

Of these 105 loans, 40 were in foreclosure status, of which had an aggregate principal balance of approximately $ 22.5 million.

At September 30, 2023, of the 327 mortgage loans included in the Company’s loan portfolio, 95 , having an aggregate outstanding principal balance of approximately $ 84.8 million, or approximately 17.0 %, of mortgage receivables, have matured but have not been repaid in full or extended.

Of these 95 loans, 64 are in foreclosure status, which have an aggregate principal balance of approximately $ 63.5 million.

At December 31, 2022, of the 444 mortgage loans included in the Company’s loan portfolio, 105 loans having an aggregate outstanding principal balance of approximately $ 61.6 million, or approximately 13.4 %, of mortgage receivables, had matured but have not been repaid in full or extended.

Of these 105 loans, 40 were in foreclosure status, which had an aggregate principal balance of approximately $ 22.6 million.

All loans in maturity default and not in foreclosure are subject to modification and will be extended if the borrower can satisfy the Company’s underwriting criteria, including the proper loan-to-value ratio, at the time of renewal.

In the case of each of the loans in foreclosure, the Company believed the value of the collateral exceeded the outstanding balance on the loan.

Loan modifications made to borrowers experiencing financial difficulty

In certain situations, the Company may provide loan modifications to borrowers experiencing financial difficulty.

These modifications may include term extensions, and adding unpaid interest, charges and taxes to the principal balance intended to minimize the Company’s economic loss and to avoid foreclosure or repossession of collateral.

The Company generally receives additional collateral as part of extending the terms of the loan.

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

The table below presents loan modifications made to borrowers experiencing financial difficulty:

Three Months Ended September 30, 2023

% of Total Carrying Value of

(in thousands)

Carrying Value

Financial Effect

Loans modified during the period ended

Term extension

A weighted average of 19.7 months were added to the life of the loans

Nine Months Ended September 30, 2023

% of Total Carrying Value of

Carrying Value

Financial Effect

Loans modified during the period ended

Term extension

A weighted average of 17.3 months were added to the life of the loans

Unpaid interest/taxes/charges added to principal balance

The Company monitors the performance of loans modified to borrowers experiencing financial difficulty.

The table below presents the performance of loans that have been modified in the last 12 months to borrowers experiencing financial difficulty.

The Company considers loans that are 90 days past due to be in payment default.

Three Months Ended September 30, 2023

(in thousands)

90-119 days past due

120+ days past due

Loans modified during the period ended

Term extension

Nine Months Ended September 30, 2023

90-119 days past due

120+ days past due

Loans modified during the period ended

Term extension

The Company has committed to lend additional amounts totaling $ 23.2 million to borrowers experiencing financial difficulty.

Investment in Real Estate

At September 30, 2023, investment in real estate consisted of the following:

Site improvements

Tenant improvements

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

Real Estate Owned

Property purchased for rental or acquired through foreclosure are included on the balance sheet as real estate owned.

As of June 30, 2023 and June 30, 2022, the fair value of real estate owned totaled $ 4,998,934 and $ 5,904,614 , respectively, with no valuation allowance.

For the three months ended June 30, 2023 and 2022, the Company recorded an impairment loss of $ 212,500 and $ 230,000 , respectively.

For the six months ended June 30, 2023 and 2022, the Company recorded an impairment loss of $ 212,500 and $ 490,500 , respectively.

As of June 30, 2023, real estate owned included $ 817,609 of real estate held for rental and $ 4,181,325 of real estate held for sale.

As of June 30, 2022, real estate owned included $ 800,949 of real estate held for rental and $ 5,103,685 of real estate held for sale.

Property acquired through foreclosure are included on the balance sheet as real estate owned and further categorized as held for sale or held for rental, described in detail below.

As of September 30, 2023 and December 31, 2022, the fair value of real estate owned totaled $ 3,481,177 and $ 5,216,149 , respectively, with no valuation allowance.

For the three months ended September 30, 2023 and 2022, the Company recorded an impairment loss of $ 400,000 and $ 195,000 , respectively.

For the nine months ended September 30, 2023 and 2022, the Company recorded an impairment loss of $ 612,500 and $ 685,500 , respectively.

As of September 30, 2023, real estate owned included $ 825,963 of real estate held for rental and $ 2,655,214 of real estate held for sale.

As of September 30, 2022, real estate owned included $ 800,053 of real estate held for rental and $ 4,815,887 of real estate held for sale.

Properties Held for Sale

During the three months ended June 30, 2023, the Company sold three ( 3 ) properties held for sale and recognized an aggregate loss of $ 21,239 .

During the six months ended June 30, 2023, the Company sold five ( 5 ) properties held for sale and recognized an aggregate gain of $ 126,861 .

During the three months ended June 30, 2022, the Company sold two ( 2 ) properties held for sale and recognized an aggregate gain of $ 188,182 .

During the six months ended June 30, 2022, the Company sold three ( 3 ) properties held for sale and recognized an aggregate gain of $ 122,343 .

During the three months ended September 30, 2023, the Company sold one ( 1 ) property held for sale and recognized a loss of $ 14,229 .

During the nine months ended September 30, 2023, the Company sold six ( 6 ) properties held for sale and recognized an aggregate net gain of $ 112,633 .

During the three months ended September 30, 2022, the Company sold two ( 2 ) properties held for sale and recognized an aggregate net loss of $ 962 .

During the nine months ended September 30, 2022, the Company sold five ( 5 ) properties held for sale and recognized an aggregate net gain of $ 121,381 .

Properties Held for Rental

As of June 30, 2023, one property, a commercial building, was held for rental.

As of September 30, 2023, one property, a commercial building, was held for rental.

The tenant signed a five-year lease that commenced on August 1, 2021.

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2023

Rental payments due from real estate held for rental are as follows:

3 unchanged sentences

Year ending December 31, 2026

As of June 30, 2023 and December 31, 2022, other assets consists of the following:

June 30, 2023

As of September 30, 2023 and December 31, 2022, other assets consists of the following:

September 30, 2023

December 31, 2022

2 unchanged sentences

Intangible asset – trade name

Intangible asset – lease

Deferred financing costs, net

Deferred leasing cost

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

Lines of Credit, Mortgage Payable, and Churchill Facility

1 unchanged sentence

During the year ended December 31, 2020, the Company established a margin loan account at Wells Fargo Advisors that is secured by the Company’s portfolio of short-term securities.

The credit line bears interest at a rate equal to 1.75 % below the prime rate ( 6.5 % at June 30, 2023, 6.75 % as of July 27, 2023).

As of June 30, 2023 the total outstanding balance on the Wells Fargo credit line was $ 25.9 million.

The credit line bears interest at a rate equal to 1.75 % below the prime rate ( 6.75 % at September 30, 2023, 6.75 % as of November 10, 2023).

As of September 30, 2023 the total outstanding balance on the Wells Fargo credit line was $ 26.3 million.

Mortgage Payable

13 unchanged sentences

The unpaid principal amount of the loan and all accrued and unpaid interest are due and payable in full on March 1, 2038.

The new loan is a non-recourse obligation, secured primarily by a first mortgage lien on the properties located 698 Main Street, Branford, Connecticut and 568 East Main Street, Branford, Connecticut, which are owned by the Company.

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2023

The new loan is a non-recourse obligation, secured by a first mortgage lien on the property located at 568 East Main Street, Branford, Connecticut.

Churchill MRA Funding I LLC Repurchase Financing Facility

2 unchanged sentences

In addition, the Company has the right and, in some instances the obligation, to repurchase those loans from Churchill.

The amount that Churchill will pay for each mortgage loan it purchases will vary based on the attributes of the loan and various other circumstances.

The amount that Churchill will pay for each mortgage loan it purchases will vary based on the attributes of the loan and various other factors.

The repurchase price is calculated by applying an interest factor, as defined, to the purchase price of the mortgage loan.

The Company has also pledged the mortgage loans sold to Churchill to secure its repurchase obligation.

The cost of capital under the Facility is equal to the sum of (a) the greater of (i) 0.25 % and (ii) the 90 -day LIBOR plus (b) 3 %- 4 %, depending on the aggregate principal amount of the mortgage loans held by Churchill at that time.

On November 18, 2022, the Facility was amended to replace the 90-day LIBOR with the 90-day SOFR as the new benchmark rate.

As of June 30, 2023 the effective rate charged under the Facility was 9.31 %.

The cost of capital under the Facility is equal to the sum of (a) the greater of (i) 0.25 % and (ii) the 90 -day SOFR (which replaced the 90-day LIBOR) plus (b) 3 %- 4 %, depending on the aggregate principal amount of the mortgage loans held by Churchill at that time.

The Facility is subject to other terms and conditions, including representations and warranties, covenants and agreements typically found in these types of financing arrangements.

3 unchanged sentences

The Company then has an additional 180 days after termination to repurchase all the mortgage loans held by Churchill.

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

The Company uses the proceeds from the Facility to finance the continued expansion of its lending business and for general corporate purposes.

At June 30, 2023, the total amount outstanding under the Facility was $ 50.5 million.

The collateral pledged to Churchill at June 30, 2023 was 26 mortgage loans that in the aggregate had unpaid principal balance of approximately $ 82.9 million.

At September 30, 2023, the total amount outstanding under the Facility was $ 47.9 million.

The collateral pledged to Churchill at September 30, 2023 was 22 mortgage loans that in the aggregate had unpaid principal balance of approximately $ 79.9 million.

As of September 30, 2023 the effective rate charged under the Facility was 9.47 %.

Each of the New NHB Mortgage and the Churchill Facility contain cross-default provisions.

9 unchanged sentences

The Credit Facility 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 the Company to maintain:

(A) a ratio of Adjusted EBITDA (as defined in the Credit Agreement) to Debt Service (as defined in the Credit Agreement) of less than 1.40 to 1.0 , tested on a trailing-twelve-month basis at the end of each fiscal quarter, commencing with the quarter ended June 30, 2023;

(B) a sum of cash, cash equivalents and availability under the facility equal to or greater than $ 10 million;

and (C) an asset coverage ratio of at least 150 %.

As of June 30, 2023, the interest rate on the Credit Facility was 8.0 % and as of July 27, 2023, interest is accruing at the rate of 8.25 % per annum.

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2023

Effective as of September 8, 2023, in accordance with the terms of the Credit Agreement, the Credit Agreement was amended to increase the Maximum Revolving Loan Commitment (as defined in the Credit Agreement) to $ 65 million.

The Company uses the proceeds from the Credit Facility to finance the continued expansion of its lending business and for general corporate purposes.

At June 30, 2023, the total amount outstanding under the Credit Facility was $ 10.0 million.

At September 30, 2023, the total amount outstanding under the Credit Facility was $ 25.0 million, and the interest rate was 8.25 %.

Unsecured Notes Payable

At June 30, 2023, the Company had an aggregate of $ 281,178,294 of unsecured, unsubordinated notes payable outstanding, net of $ 7,223,456 of deferred financing costs (collectively, the “Notes”).

At September 30, 2023, the Company had an aggregate of $ 281,759,933 of unsecured, unsubordinated notes payable outstanding, net of $ 6,641,817 of deferred financing costs (collectively, the “Notes”).

Currently, the Company has seven series of Notes outstanding:

3 unchanged sentences

(iv) Notes having an aggregate principal amount of $ 51,750,000 bearing interest at 6.0 % per annum and maturing December 30, 2026 (the “December 2026 Notes”);

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(v) Notes having an aggregate principal amount of $ 51,875,000 bearing interest at 6.0 % per annum and maturing March 30, 2027 (the “March 2027 Notes”);

9 unchanged sentences

The December 2026 Notes will be callable at any time after December 30, 2023, the March 2027 Notes will be callable at any time after March 9, 2024, the June 2027 Notes will be callable at any time after May 11, 2024, and the September 2027 Notes will be callable at any time after August 23, 2024.

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2023

The following are the future principal payments on the notes payable as of June 30, 2023:

As of the date of this report, the Company is actively pursuing strategies to address the 2024 maturities including, but not limited to, refinancing, extending, or paying off in full.

The following are the future principal payments on the notes payable as of September 30, 2023:

Year ending December 31,

4 unchanged sentences

Total notes payable, net of deferred financing costs

The estimated amortization of the deferred financing costs as of June 30, 2023 is as follows:

The estimated amortization of the deferred financing costs as of September 30, 2023 is as follows:

Year ending December 31,

1 unchanged sentence

Total deferred costs

Secured Note Payable

On May 30, 2023, and in connection with the Company’s investment in Shem Creek Sachem 100 LLC (one of the Company’s wholly-owned subsidiaries), the Company obtained a commercial loan from PeoplesBank of $ 7,000,000 .

At closing the Company had an outstanding principal balance of $ 6,224,000 with the ability to draw an additional $ 776,000 so long as there are no existing events of default under the loan agreement.

The loan accrues interest at a fixed annual rate of 6.50 %.

The loan has an original maturity date of June 20, 2026 and a one year extension option that defers the maturity date until June 20, 2027.

During the first 36 payment periods, only interest is due and payable, after which principal must be repaid for the remainder of the loan term under a thirty ( 30 ) year amortization schedule.

The PeoplesBank loan is non-recourse, secured by a first lien on the Shem Creek Middlesex mortgage receivable, as described in Note 18.

As of June 30, 2023, the outstanding balance remained at $ 6,224,000 .

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

Accounts Payable and Accrued Liabilities

As of June 30, 2023 and December 31, 2022, accounts payable and accrued liabilities include the following:

June 30, 2023

As of September 30, 2023 and December 31, 2022, accounts payable and accrued liabilities include the following:

September 30, 2023

December 31, 2022

2 unchanged sentences

Accrued interest

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2023

Fee and Other Income

For the three and six month periods ended June 30, 2023 and 2022, fee and other income consists of the following:

ended June 30,

For the three and nine month periods ended September 30, 2023 and 2022, fee and other income consists of the following:

ended September 30,

Late and other fees

7 unchanged sentences

The unamortized portion is recorded as deferred revenue on the consolidated balance sheet.

At June 30, 2023, deferred revenue was $ 4.8 million, which will be recorded as income as follows:

Year ending December 31, 2023

At September 30, 2023, deferred revenue was approximately $ 5.0 million, which will be recorded as income as follows:

Year ending December 31, 2023

2 unchanged sentences

In instances in which mortgages are repaid before their maturity date, the balance of any unamortized deferred revenue is recognized in full at the time of repayment.

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2023

Employment Agreements

3 unchanged sentences

(iii) incentive compensation in such amount as determined by the Compensation Committee of the Company’s Board of Directors;

(iv) participation in the Company’s employee benefit plans;

(iv) participation

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

in the Company’s employee benefit plans;

(v) full indemnification to the extent permitted by law;

7 unchanged sentences

One -third of such shares will vest on each of January 1, 2024, 2025 and 2026 .

As of June 30, 2023, 226,483 restricted common shares remain unvested.

As of September 30, 2023, 226,483 restricted common shares remain unvested.

In July 2022, the Company entered into an employment agreement with John E.

11 unchanged sentences

Unfunded Commitments

At June 30, 2023, the Company had future funding obligations totaling approximately $ 110.3 million, which can be drawn by the borrowers when the conditions relating thereto have been satisfied.

At September 30, 2023, the Company had future funding obligations totaling approximately $ 107.7 million, which can be drawn by the borrowers when the conditions relating thereto have been satisfied.

The unfunded commitments will be funded from loan payoffs and additional drawdowns under existing and future credit facilities and proceeds from sale of debt and equity securities.

1 unchanged sentence

The Company actively monitors these actions and, in all cases, believes there remains sufficient value in the subject property to assure that no loan impairment exists.

At June 30, 2023, there were five such proceedings.

At September 30, 2023, there was one such proceeding pending.

The unpaid principal balances on the properties that are the subject of these proceedings was approximately $ 0.1 million.

In accordance with the asset purchase agreement with Urbane New Haven, LLC in October 2022 under certain circumstances the Company will be required to pay the seller 20 % of the net proceeds, as defined, of certain real estate development projects completed by the Company until such time that the principal former owner is no longer employed by the Company.

Any future payments will be expensed and included in net income.

On June 23, 2023, the Company entered into a purchase and sale contract for $ 10,600,000 to acquire a commercial building in Wesport, CT.

Upon execution of the agreement, the Company put down a deposit of $ 1,060,000 that is non-refundable, unless seller fails to meet certain diligence requirements.

The transaction is expected to close in the third quarter of 2023, but as of the date of this filing no closing date has been set.

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2023

In accordance with the asset purchase agreement with Urbane New Haven, LLC (“Urbane”) in October 2022, under certain circumstances the Company will be required to pay Urbane 20 % of the net proceeds, as defined, of certain real estate development projects completed by the Company until such time that the former principal owner of Urbane, who is currently employed by the Company, is no longer employed by the Company.

Any future payments will be expensed.

On September 11, 2023, the Company entered into a contract to acquire a residential property in Miami, FL.

The purchase price for the property is $ 2,300,000 .

The Company paid $ 230,000 upon the execution and delivery of the contract, which amount is refundable if the seller fails to satisfy certain closing conditions or fails to transfer ownership of the property.

The balance of the purchase price is due at closing.

Related Party Transactions

2 unchanged sentences

The terms of such loans, including the interest rate, income, origination fees and other closing costs are the same as those applicable to loans made to unrelated third parties in the portfolio.

As of June 30, 2023 and 2022, loans to known shareholders totaled approximately $ 28.0 million and $ 18.4 million, respectively.

Interest income earned on these loans for the three months ended June 30, 2023 and 2022 totaled $ 546,266 and $ 666,584 , respectively, and for the six months ended June 30, 2023 and 2022 totaled $ 1,092,533 and $ 312,546 , respectively.

The wife of the Company’s chief executive officer was employed by the Company as its director of finance until her retirement from the Company on June 30, 2022.

For the six-month periods ended June 30, 2023 and 2022, she was paid $ 0 and $ 60,394 , respectively, as compensation from the Company.

For the three months ended June 30, 2023 and 2022, the corresponding amounts were $ 0 and $ 34,247 , respectively.

As of September 30, 2023 and December 31, 2022, loans to known shareholders totaled approximately $ 28.9 million and approximately $ 23.5 million, respectively.

Interest income earned on these loans for the three months ended September 30, 2023 and 2022 totaled $ 541,177 and $ 416,275 , respectively, and for the nine months ended September 30, 2023 and 2022 totaled $ 1,623,530 and $ 1,248,826 , respectively.

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

The wife of the Company’s chief executive officer was employed by the Company as its director of finance until her retirement from the Company on September 30, 2022.

For the three and nine month periods ended September 30, 2022, she was paid $ 2,115 and $ 62,865 , respectively, as compensation from the Company.

In December 2021, the Company hired the daughter of the Company’s chief executive officer to perform certain internal audit and compliance services.

For the three-month periods ended June 30, 2023 and 2022, she received compensation of $ 33,000 and $ 36,704 , respectively.

For the six-month periods ended June 30, 2023 and 2022, she received compensation of $ 76,000 and $ 62,850 , respectively.

For the three months ended September 30, 2023 and 2022, she received compensation of $ 38,754 and $ 35,727 , respectively.

For the nine months ended September 30, 2023 and 2022, she received compensation of $ 114,754 and $ 106,327 , respectively.

Concentration of Credit Risk

3 unchanged sentences

The Company is potentially subject to concentration of credit risk in its investment securities.

Currently, all its investment securities, which include common stocks, preferred stock, corporate bonds and mutual funds, are held at Wells Fargo Advisors.

Currently, all its investment securities, which include common shares, Series A Preferred Stock, corporate bonds and mutual funds, are held at Wells Fargo Advisors.

Wells Fargo Advisors is a member of the Securities Investor Protection Corporation (SIPC).

11 unchanged sentences

Stock-Based Compensation

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2023

Company’s shareholders and to afford an incentive to such officers, employees, consultants and advisors to continue as such, to increase their efforts on the Company’s behalf and to promote the success of the Company’s business.

On October 27, 2016, the Company adopted the 2016 Equity Compensation Plan (the “Plan”), the purpose of which is to align the interests of the Company’s officers, other employees, advisors and consultants or any subsidiary, if any, with those of the Company’s shareholders and to afford an incentive to such officers, employees, consultants and advisors to continue as such, to increase their efforts on the Company’s behalf and to promote the success of the Company’s business.

The Plan is administered by the Compensation Committee.

The maximum number of common shares reserved for the grant of awards under the Plan is 1,500,000 , subject to adjustment as provided in Section 5 of the Plan.

The number of securities remaining available for future issuance under the Plan as of June 30, 2023 was 1,005,078 .

During the six months ended June 30, 2023 and 2022, the Company granted an aggregate of 183,390 and 138,967 restricted common shares under the Plan, respectively, with a fair value of $ 707,719 and $ 718,913 , respectively.

With respect to the restricted common shares granted during the six months ended June 30, 2023, (i) an aggregate of 17,500 shares vested immediately on the date of grant, an additional aggregate of 17,500 shares will vest on each of the first and second anniversaries of the date of grant and (ii) 43,630 shares will vest on January 1, 2024, and an additional 43,630 shares will vest on January 1, 2025 and 2026, respectively.

Stock based compensation for the three months ended June 30, 2023 and 2022 was $ 222,211 and $ 123,428 , respectively.

Stock based compensation for the six months ended June 30, 2023 and 2022 was $ 395,709 and $ 230,167 , respectively.

As of June 30, 2023, unrecorded stock based compensation expense was $ 1,125,694 .

The number of securities remaining available for future issuance under the Plan as of September 30, 2023 was 988,785 .

During the nine months ended September 30, 2023 and 2022, the Company granted an aggregate of 201,390 and 153,967 restricted common shares under the Plan, respectively, with a fair value of $ 771,621 and $ 357,167 , respectively.

With respect to the restricted common shares granted during the nine months ended September 30, 2023, (i) an aggregate of 22,000 shares vested immediately on the date of grant, an additional aggregate of 22,000 shares will vest on each of the first and

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

second anniversaries of the date of grant, and 4,500 shares will vest on the third anniversary of the date of grant, and (ii) 43,630 shares will vest on January 1, 2024, 2025 and 2026, respectively.

Stock-based compensation for the three months ended September 30, 2023 and 2022 was $ 220,971 and $ 127,000 , respectively.

Stock-based compensation for the nine months ended September 30, 2023 and 2022 was $ 616,496 and $ 357,167 , respectively.

As of September 30, 2023, unrecorded stock-based compensation expense was $ 904,724 .

Employee Benefits

3 unchanged sentences

Under the terms of the 401(k) Plan, the Company is obligated to contribute 3 % of a participant’s compensation to the 401(k) Plan on behalf of an employee-participant.

For the three months ended June 30, 2023 and 2022, the 401(k) Plan expense was $ 30,693 and $ 30,008 , respectively.

For the six months ended June 30, 2023 and 2022, the 401(k) Plan expense was $ 75,389 and $ 50,001 , respectively.

For the three months ended September 30, 2023 and 2022, the 401(k) Plan expense was $ 48,346 and $ 21,924 , respectively.

For the nine months ended September 30, 2023 and 2022, the 401(k) Plan expense was $ 123,735 and $ 71,925 , respectively.

On August 24, 2022, the Company filed a prospectus supplement to its Form S-3 Registration Statement covering the sale of up to $ 75,000,000 of its common shares and its Series A Preferred Stock (as defined in Note 20 below) having an aggregate liquidation preference of up to $ 25,000,000 in an “at-the market” offering, which is ongoing.

During the six months ended June 30, 2023, under this offering, the Company sold an aggregate of 2,616,124 common shares, realizing gross proceeds of approximately $ 9.9 million, and sold shares of its Series A Preferred Stock having an aggregate liquidation preference of $ 615,075 , realizing gross proceeds of approximately $ 527,600 representing a discount of approximately 16.6 % from the liquidation preference.

In October 2022, the Board adopted a stock repurchase plan (the “Repurchase Program”), pursuant to which the Company may repurchase up to an aggregate of $ 7,500,000 of its Common Shares.

Under the Repurchase Program, share repurchases will be made from time to time on the open market at prevailing market prices or in negotiated transactions off the market in accordance with applicable federal securities laws, including Rule 10b-18 and 10b5-1 of the Exchange Act.

During the six month period ended June 30, 2023, the Company repurchased 71,000 Common Shares under the Repurchase Program at a total cost of approximately $ 226,000 .

Following the repurchase, such shares were retired.

As of June 30, 2023, there were approximately $ 7,277,000 available under the Repurchase Program.

The Repurchase Program is expected to continue through September 30, 2023, unless extended or shortened by the Board.

During the nine months ended September 30, 2023, under this offering, the Company sold an aggregate of 4,140,503 common shares, realizing gross proceeds of approximately $ 15.6 million, and sold an aggregate of 92,879 shares of its Series A Preferred Stock having an aggregate liquidation preference of $ 2,321,975 , realizing gross proceeds of approximately $ 1,933,900 representing a discount of approximately 16.7 % to the liquidation preference.

In October 2022, the Board adopted a stock repurchase plan (the “Repurchase Program”), pursuant to which the Company could repurchase up to an aggregate of $ 7,500,000 of its common shares.

Under the Repurchase Program, share repurchases are made from time to time on the open market at prevailing market prices or in negotiated transactions off the market in accordance with applicable federal securities laws, including Rule 10b-18 and 10b5-1 of the Exchange Act.

During the nine month period ended September 30, 2023, the Company repurchased 71,000 common shares under the Repurchase Program at a total cost of approximately $ 226,000 .

Following the repurchase, such shares were returned to authorized but unissued shares of the Company.

As of September 30, 2023, there were approximately $ 7,277,000 available under the Repurchase Program.

On September 7, 2023, the Company’s Board of Directors extended the Repurchase Program.

The new Repurchase Program will expire on October 9, 2024.

Partnership Investments

As of June 30, 2023, the Company had invested an aggregate of approximately $ 35.4 million in four limited liability companies in which it held non-controlling interests.

The Company’s ownership interest in the four limited liability companies ranges up to 49 %.

The Company accounts for these investments at cost because the Company does not control or have significant influence over the investments.

In May 2023, the Company made an additional investment in a limited liability company, Shem Creek Sachem 100 LLC, of which it owns 100 % and, as such, the Company consolidates this investment within its books and records.

In connection

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2023

with this investment the third party manager originated a mortgage loan in the amount of $ 8,750,000 at a fixed rate of 8.4 % and borrowed $ 7,000,000 via a secured commercial loan, as more accurately described in Note 9.

The third party manager of both the non-controlling and consolidated investments is a commercial real estate finance company that provides debt capital solutions to local and regional commercial real estate owners in the Northeastern United States.

As of September 30, 2023, the Company had invested an aggregate of approximately $ 40.0 million in five limited liability companies in which it held non-controlling interests.

The Company’s ownership interest in four of the limited liability companies ranges from approximately 7 % to 49 % and one of the partnerships is owned 100 % by the Company.

The Company accounts for these investments at cost because the Company does not manage the entities and thus, has no control or have significant influence over the investments.

The third party manager of the investments is a commercial real estate finance company that provides debt capital solutions to local and regional commercial real estate owners in the Northeastern United States.

The Company’s withdrawal from each limited liability company may only be granted by the manager of such entity.

1 unchanged sentence

The Company’s partnership investments can be categorized into two fund structures, fund investments and direct loan investments.

The fund investments primarily include investments in two funds that invest in mortgage loans to borrowers.

The direct loan investments are through two partnerships whereby the Company directly invests in the participation of individual loans to borrowers.

The fund investments primarily include investments in two partnerships that invest in mortgage loans.

The direct loan investments are through three partnerships whereby the Company directly invests in the participation of individual loans.

Both the fund and direct loan structure primarily invest in mortgage loans to borrowers with a majority of the deals being leveraged by a bank.

1 unchanged sentence

The Company receives quarterly dividends from the partnerships that are composed of a preferred return, return of capital and promote depending on each loan’s waterfall calculation, as defined by the loan agreements.

The Company cannot redeem its fund investment at any time, its investment will be repaid as the underlying loans are repaid.

The Company’s interests in

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

the funds are not redeemable at any time, as its investment will be repaid as the underlying loans are repaid.

The Company expects to be repaid on its current investments by December 31, 2026.

For the three months ended June 30, 2023 and 2022, the non-controlling partnership interests generated $ 1.0 million and $ 0.3 million, respectively, of income for the Company.

For the six months ended June 30, 2023 and 2022, the partnerships generated $ 1.6 million and $ 0.6 million, respectively, of income for the Company.

At June 30, 2023, the Company had unfunded partnership commitments totaling approximately $ 2.1 million.

For the three months ended September 30, 2023 and 2022, these investments generated $ 0.7 million and $ 0.5 million, respectively, of income for the Company.

For the nine months ended September 30, 2023 and 2022, the partnerships generated $ 2.3 million and $ 1.1 million, respectively, of income for the Company.

At September 30, 2023, the Company had unfunded partnership commitments totaling approximately $ 1.0 million.

Special Purpose Acquisition Corporation

On March 24, 2021, the Company loaned $ 25,000 to its wholly-owned subsidiary, Sachem Sponsor LLC.

Sachem Sponsor LLC used those funds to purchase 1,437,500 shares of Class B common stock of Sachem Acquisition Corp., a newly organized blank check company formed under the laws of Maryland in February 2021, for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination with one or more businesses.

As of June 30, 2023, the Company had incurred approximately $ 457,000 of costs related to the preparation and filing of the registration statement, including legal fees, accounting fees and filing fees as well as organizational costs and an expense advance to the underwriter.

On July 14, 2021, Sachem Acquisition Corp.

filed a registration statement on Form S-1 registering the sale of 5,750,000 units at $ 10.00 per unit, or $ 57,500,000 in the aggregate.

Each unit consists of one share of Class A common stock and one -half of a warrant to purchase one share of Class A common stock.

In the third quarter ended September 30, 2023, the Company reported a loss of $ 477,047 representing its investment in Sachem Acquisition Corp., a special purpose acquisition company.

Series A Preferred Stock

5 unchanged sentences

The Series A Preferred Stock has no stated maturity, is not subject to any sinking fund or mandatory redemption and will remain outstanding indefinitely unless repurchased or redeemed by the Company or converted into common shares in connection with a Change of Control by the holders of the Series A Preferred Stock.

Upon the occurrence of a Change of Control, each holder of Series A Preferred Stock will have the right (subject to the Company’s election to redeem the Series

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2023

A Preferred Stock in whole or in part, as described above, prior to the Change of Control Conversion Date as defined in the Series A Designation Certificate) to convert some or all of the Series A Preferred Stock held by such holder on the Change of Control Conversion Date into a number of the common shares determined by formula, in each case, on the terms and subject to the conditions described in the Series A Designation Certificate, including provisions for the receipt, under specified circumstances, of alternative consideration as described in the Series A Designation Certificate.

Upon the occurrence of a Change of Control, each holder of Series A Preferred Stock will have the right (subject to the Company’s election to redeem the Series A Preferred Stock in whole or in part, as described above, prior to the Change of Control Conversion Date as defined in the Series A Designation Certificate) to convert some or all of the Series A Preferred Stock held by such holder on the Change of Control Conversion Date into a number of the common shares determined by formula, in each case, on the terms and subject to the conditions described in the Series A Designation Certificate, including provisions for the receipt, under specified circumstances, of alternative consideration as described in the Series A Designation Certificate.

Except under limited circumstances, holders of the Series A Preferred Stock generally do not have any voting rights.

1 unchanged sentence

Subsequent Events

On July 26, 2023, the board of directors declared a dividend of $ 0.13 per common share payable on August 11, 2023 to shareholders of record as of August 7, 2023.

From July 1, 2023 through August 11, 2023, the Company sold an aggregate of 1,524,379 common shares under its at-the-market offering facility, realizing gross proceeds of approximately $ 5,756,477 .

From July 1, 2023 through August 11, 2023, the Company sold an aggregate of 28,531 Series A Preferred shares under its at-the-market offering facility, realizing gross proceeds of approximately $ 585,804 .

Management has evaluated subsequent events through August 11, 2023 the date on which the financial statements were available to be issued.

On July 26, 2023, the Company’s Board of Directors declared a dividend of $ 0.11 per common share payable on November 7, 2023 to shareholders of record as of October 31, 2023.

Management has evaluated subsequent events through the date on which the financial statements were available to be issued.

Based on the evaluation, no adjustments were required in the accompanying financial statements.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements