What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-11-14 compared with 2024-08-14 · 337 added, 260 removed, 671 unchanged (47% of the section changed)

3 unchanged sentences

(dollars in thousands, except share data)

June 30, 2024

September 30, 2024

December 31, 2023

26 unchanged sentences

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

2,206,128 and 2,029,923 shares of Series A Preferred Stock issued and outstanding at June 30, 2024 and December 31, 2023, respectively

Common shares - $ .001 par value;

2,279,824 and 2,029,923 shares of Series A Preferred Stock issued and outstanding at September 30, 2024 and December 31, 2023, respectively

Common stock - $ .001 par value;

200,000,000 shares authorized;

47,547,051 and 46,765,483 issued and outstanding at June 30, 2024 and December 31, 2023

47,011,349 and 46,765,483 issued and outstanding at September 30, 2024 and December 31, 2023, respectively

Additional paid-in capital

8 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Interest income from loans

7 unchanged sentences

General and administrative expenses

Provision for credit losses related to loans

Provision for (recovery of) credit losses related to loans

Impairment loss on real estate owned

Loss (gain) on sale of real estate and property and equipment, net

Other expenses

Total operating expenses

Income before other income (loss)

Operating income (loss) before other income (loss)

Other income (loss)

Impairment loss

Gain (loss) on sale of real estate and property and equipment, net

Gain on equity securities

Gain (loss) on equity securities

Total other income (loss), net

11 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Net income (loss)

9 unchanged sentences

(dollars in thousands, except share data)

FOR THE THREE MONTHS ENDED JUNE 30, 2024

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2024

Preferred Shares

2 unchanged sentences

Income (Loss)

Balance, April 1, 2024

Balance, July 1, 2024

Issuance of Series A Preferred Stock, net of expenses

Issuance of Common Shares, net of expenses

Stock-based compensation

Unrealized loss on debt securities

Reversal of losses from unrealized to realized

Stock buyback

Stock-based compensation, less shares forfeited

Dividends paid on Series A Preferred Stock

Dividends paid on Common Shares

Net income (loss)

Balance, June 30, 2024

FOR THE THREE MONTHS ENDED JUNE 30, 2023

Balance, September 30, 2024

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2023

Preferred Shares

1 unchanged sentence

Comprehensive

Balance, April 1, 2023

Balance, July 1, 2023

Issuance of Series A Preferred Stock, net of expenses

Issuance of Common Shares, net of expenses

Stock Buyback

Stock-based compensation

Unrealized gain on debt securities

Stock-based compensation, less shares forfeited

Unrealized loss on debt securities

Dividends paid on Series A Preferred Stock

Dividends paid on Common Shares

Balance, June 30, 2023

Balance, September 30, 2023

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

2 unchanged sentences

(dollars in thousands, except share data)

FOR THE SIX MONTHS ENDED JUNE 30, 2024

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2024

Preferred Shares

5 unchanged sentences

Issuance of Common Shares, net of expenses

Stock-based compensation

Stock buyback

Stock-based compensation, less shares forfeited

Unrealized loss on debt securities

2 unchanged sentences

Dividends paid on Common Shares

Balance, June 30, 2024

FOR THE SIX MONTHS ENDED JUNE 30, 2023

Balance, September 30, 2024

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023

Preferred Shares

6 unchanged sentences

Stock buyback

Stock-based compensation

Stock-based compensation, less shares forfeited

Unrealized gain on debt securities

1 unchanged sentence

Dividends paid on Common Shares

Balance, June 30, 2023

Balance, September 31, 2023

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

2 unchanged sentences

(dollars in thousands)

Six Months Ended

Nine Months Ended

September 30,

CASH FLOWS FROM OPERATING ACTIVITIES

Adjustments to reconcile net income to net cash provided by operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Amortization of deferred financing costs and bond discount

Depreciation expense

Write-off of other assets - pre-offering costs

Stock-based compensation

1 unchanged sentence

Impairment loss

(Gain) on sale of real estate and property and equipment, net

(Gain) loss on sale of real estate and property and equipment, net

(Gain) on equity securities

12 unchanged sentences

Proceeds from sale of real estate owned

Acquisitions of and improvements to real estate owned, net

Improvements to real estate owned, net

Purchases of property and equipment

2 unchanged sentences

Principal collections on mortgages receivable

Other assets – pre-offering costs

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES

10 unchanged sentences

NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES

NET DECREASE IN CASH AND CASH EQUIVALENTS

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS – BEGINNING OF PERIOD

4 unchanged sentences

(dollars in thousands)

Six Months Ended

Nine Months Ended

September 30,

SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION

Cash paid during the period for interest

Real estate acquired in connection with the foreclosure of certain mortgages during the six months ended June 30, 2024 and 2023 amounted to $ 1,627 and $ 1,187 , respectively.

Real estate owned decreased as a result of increases in mortgages receivable that were financed by new borrowers, during the six months ended June 30, 2024 and 2023, which amounted $ 1,980 and $ 1,370 , respectively.

Real estate acquired in connection with the foreclosure of certain mortgage loans during the nine months ended September 30, 2024 and 2023 totaled $ 2,991 and $ 1,187 , respectively.

Real estate owned decreased as a result of increases in mortgage loans that were financed by the Company to new borrowers during the nine months ended September 2024 and 2023, which totaled $ 2,414 and $ 2,488 , respectively.

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

1 unchanged sentence

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024

Sachem Capital Corp.

9 unchanged sentences

Unaudited Consolidated Financial Statements

The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information.

The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information.

Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements.

2 unchanged sentences

The balance sheet information as of December 31, 2023 is derived from audited financial statements but does not include all disclosures required by GAAP.

Results of operations for the three months and six month periods ended June 30, 2024, 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, 2024, are not necessarily indicative of the operating results to be attained in the entire fiscal year or for any subsequent period.

Basis of Presentation and Principles of Consolidation

The accompanying unaudited consolidated financial statements have been prepared in accordance with GAAP.

The preparation of the accompanying unaudited 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 such financial statements and the reported amounts of revenues and expenses during the reporting period.

9 unchanged sentences

Fair value is calculated based on publicly available market information or other estimates determined by management.

If the cost of an investment exceeds its fair value, management evaluates, among other factors, general market conditions, credit quality of debt

If the cost of an investment exceeds its fair value, management 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.

To determine credit losses, management may employ a

SACHEM CAPITAL CORP.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024

instrument issuers, and the extent to which the fair value is less than cost.

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

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024

systematic methodology that considers available quantitative and qualitative evidence.

In addition, management may consider specific adverse conditions related to the financial health of, and business outlook for, the issuer of the debt security.

5 unchanged sentences

Changes in value are recorded in net income (loss).

Allowance for Current Expected Credit Losses

The Company adopted the current expected credit loss (“CECL”) standard effective January 1, 2023 in accordance with ASU No.

The initial CECL credit allowance adjustment of $ 2.5 million 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.

Non-accrual loans

A loan is generally placed on non-accrual status when it is probable that principal and interest will not be collected under the original contractual terms.

At that time, interest income is no longer accrued.

Non-accrual loans consist of loans for which principal or interest has been delinquent for 90 days or more.

Interest income is subsequently recognized only to the extent it is received in cash or until the loan qualifies for return to accrual status.

Loans are restored to accrual status when contractually current and the collection of future payments is reasonably assured.

In certain instances, the Company may make exceptions to placing a loan on non-accrual status if the loan is in the process of modification.

Loan modifications made to borrowers experiencing financial difficulty.

In situations where economic or legal circumstances may cause a borrower to experience significant financial difficulties, the Company may grant concessions for a period of time to the borrower that it would not otherwise consider.

These modified terms may include interest rate reductions, principal forgiveness, term extensions, and other-than-insignificant payment delays intended to minimize the Company’s economic loss and to avoid foreclosure or repossession of collateral.

The Company monitors the performance of all loans, including loans modified to borrowers experiencing financial difficulty, and considers loans that are 90 days past due to be in payment default.

Allowance for Credit Losses

The Company adopted the current expected credit loss (“CECL”) standard effective January 1, 2023 in accordance with ASU 2016-13, “Financial Instruments – Credit Losses”.

The initial CECL adjustment of $ 2.5 million 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.

Subsequent changes to the CECL allowance will be recognized in the consolidated statements of operations in “Provision for credit losses related to loans”.

The Company records an “Allowance for credit losses” in accordance with the CECL standard on the consolidated balance sheets with respect to its loan portfolio, including unfunded construction commitments, on a collective basis by assets with similar risk characteristics.

The Company records an “Allowance for credit losses” on the consolidated balance sheets with respect to its loan portfolio, including unfunded construction commitments, on a collective basis by assets with similar risk characteristics.

This methodology, known as the “static pool 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.

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 ASU 2016-13, as they represent a financial asset that is subject to credit risk.

As allowed under the CECL standard used by the Company, 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 amount of loans in pending/pre-foreclosure as of June 30, 2024 and December 31, 2023 was $ 73.1 million and $ 68.1 million, respectively.

As of June 30, 2024 and December 31, 2023, the Company has taken reserves against loans subject to foreclosure of $ 11.3 million and $ 6.2 million, respectively, which is included in “Allowance for credit losses” on the consolidated balance sheets included in the accompanying consolidated financial statements.

The aggregate outstanding principal balance and the accrued but unpaid interest and borrower charges of loans in pending/pre-foreclosure as of September 30, 2024 and December 31, 2023 was $ 81.8 million and $ 68.1 million, respectively.

As of September 30, 2024 and December 31, 2023, the Company has reserved $ 16.1 million and $ 6.2 million, respectively, against loans subject to foreclosure which is included in “Allowance for credit losses” on the consolidated balance sheets included in the accompanying consolidated financial statements.

SACHEM CAPITAL CORP.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024

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

8 unchanged sentences

Lastly, the allowance related to unfunded commitments for construction loans is presented in “Accounts payable and accrued liabilities” on the Company’s consolidated balance sheets.

SACHEM CAPITAL CORP.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024

The below table represents the financial statement line items that are impacted by the Allowance for credit losses:

2 unchanged sentences

losses related to loans

Balance as of June 30, 2024

Balance as of September 30, 2024

(in thousands)

Mortgages receivable

Interest receivable

Interest and fees receivable

Due from borrower

1 unchanged sentence

Total Allowance for credit losses

During the six months ended June 30, 2024, there were $ .05 million of mortgages receivable that were directly written off, that are included in the $ 9.9 million provision for credit losses related to loans presented on the consolidated statements of operations.

There were no such write offs for the six months period ended June 30, 2023, nor were there during the three months ended June 30, 2024 and 2023.

As of June 30, 2024 and December 31, 2023 the Company had an Allowance for credit losses on debt securities of $ 0 and $ 0.8 million, respectively, which is presented in “Investment securities (at fair value)” on the Company’s consolidated balance sheets.

During the three months ended June 30, 2024, the Company sold all of its debt securities, as such, as of June 30, 2024 the balance of these securities was $ 0 .

For the nine months ended September 30, 2024, the Company recorded an $ 18.0 million provision for credit losses related to mortgage loans on its consolidated statements of operations.

This amount includes $ 54,000 of direct charge-offs as a result of losses on settlement of loans.

There was no such allowance created in relation to theses charge-offs.

There were no such charge-offs related to loans that were settled for the three and nine months period ended September 30, 2023.

As of September 30, 2024 and December 31, 2023 the Company recorded an “Allowance for credit losses” on debt securities of $ 0 and $ 0.8 million, respectively, which is presented in “Investment securities (at fair value)” on the Company’s consolidated balance sheets.

During the three months ended June 30, 2024, the Company sold all of its debt securities, as such, as of September 30, 2024 the balance of these securities was $ 0 .

As of December 31, 2023, the fair value of these securities was $ 0.8 million.

3 unchanged sentences

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

The three levels of the fair value hierarchy under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820 are described as follows:

The three levels of the fair value hierarchy under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, “Fair Value Measurement” are described as follows:

Level 1 Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company can access.

SACHEM CAPITAL CORP.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024

Level 2 Inputs to the valuation methodology include:

8 unchanged sentences

Renovation of the building was completed in the first quarter of 2023 and the Company relocated its operations to the building in March 2023.

SACHEM CAPITAL CORP.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024

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

The building was placed in service during the three months ended March of 2023.

During the three and six months ended June 30, 2024 and 2023, the Company had impairment of $ 0 and $ 0.2 million on the building that served as the Company’s old office building.

The following tables represent the Company’s Property and Equipment, Net as of June 30, 2024 and December 31, 2023:

June 30, 2024

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

The building was placed in service during the three months ended March 31, 2023.

The following tables represent the Company’s property and equipment, net as of September 30, 2024 and December 31, 2023:

September 30, 2024

Accumulated Depreciation

17 unchanged sentences

If the cost of the redeveloped property, including the net book value of the existing property, exceeds the estimated fair value of the redeveloped property, the excess is charged to expense.

Depreciation is recognized on a straight-line basis over the estimated useful lives of these assets which range from 7 to 40 years .

Depreciation is recognized on a straight-line basis over the estimated useful

SACHEM CAPITAL CORP.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024

lives of these assets which range from 7 to 40 years .

Tenant allowances are amortized on a straight-line basis over the shorter of the lives of the related leases, or the useful lives of the assets.

6 unchanged sentences

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

SACHEM CAPITAL CORP.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024

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.

4 unchanged sentences

Total consideration, including capitalized acquisition-related costs, was $ 10.7 million.

See Note 5 – Investment in Rental Real Estate, net for further details surrounding the above acquisition as of June 30, 2024.

See Note 6 – Investment in Rental Real Estate, net for further details surrounding the above acquisition as of September 30, 2024.

Real Estate Owned (“REO”)

7 unchanged sentences

If the undiscounted cash flow is less than the carrying amount of these assets, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets.

SACHEM CAPITAL CORP.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024

Goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate potential impairment.

Goodwill at June 30, 2024 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, 2024 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 adheres to ASC Topic 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 it compares the fair value of that reporting unit with its carrying value, including goodwill.

As of June 30, 2024 and 2023, goodwill was $ 0.4 million, which is presented in other assets on the Company’s consolidated balance sheets.

There was no impairment to goodwill during the three and six months ended June 30, 2024 and 2023.

As of September 30, 2024 and December 31, 2023, goodwill was $ 0.4 million, respectively, which is presented in other assets on the Company’s consolidated balance sheets.

There was no impairment to goodwill during the three and nine months ended September 30, 2024 and 2023.

Deferred Financing Costs

1 unchanged sentence

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

SACHEM CAPITAL CORP.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024

Revenue Recognition

1 unchanged sentence

Generally, the Company’s loans provide for interest to be paid monthly in arrears.

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

However, interest income not accrued at June 30, 2024 but collected prior to the issuance of this Report is included in income for the six-month period ended June 30, 2024.

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 Topic 310.

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

However, interest income not accrued at September 30, 2024 but collected prior to the issuance of this Report is included in income for the three and nine month periods ended September 30, 2024.

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

6 unchanged sentences

Other than taxes incurred by TRSs (see below), 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.

SACHEM CAPITAL CORP.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024

The Company has elected, and may elect in the future, to treat certain of its existing or newly created corporate subsidiaries as taxable REIT subsidiaries (“TRSs”).

1 unchanged sentence

The TRSs generate income, resulting in federal and state income tax liability for these entities.

During the three and six months ended June 30, 2024, the Company’s TRSs recognized provisions for federal and state income tax of $ 0 and $ 0.2 million, respectively, which is represented in other expenses on the Company’s consolidated statements of operations.

During the three and six months ended June 30, 2023, there were no recognized provisions for federal income tax nor state tax.

During the three and nine months ended September 30, 2024, the Company’s TRSs recognized provisions for federal and state income tax of $ 0 and $ 0.2 million, respectively, which is represented in other expenses on the Company’s consolidated statements of operations.

During the three and nine months ended September 30, 2023, there were no recognized provisions for federal income tax nor state tax.

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.

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.

ASC Sub-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.

Under this standard, an entity may only recognize or continue to recognize tax positions that meet a “ more likely than not ” threshold.

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, 2024 and 2023.

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, 2024 and 2023.

Earnings (Losses) Per Share

2 unchanged sentences

The numerator in calculating both basic and diluted earnings (losses) per common share for each period is the reported net income (loss).

SACHEM CAPITAL CORP.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024

For the three and six months ended June 30, 2024, the Company had basic and diluted weighted average shares of 47,504,875 and 47,415,630 outstanding , resulting in basic and diluted losses per share of $0.09 and $0.01 , respectively .

For the three and six months ended June 30, 2023, the Company had basic and diluted weighted averages shares of 43,844,285 and 43,321,303 outstanding, resulting in basic and diluted earnings per share of $ 0.11 and $ 0.21 , respectively .

For the three and nine months ended September 30, 2024, the Company had basic and diluted weighted average shares of 47,339,635 and 47,390,113 outstanding , resulting in basic and diluted losses per share of $ 0.13 and $ 0.14 , respectively .

For the three and nine months ended September 30, 2023, the Company had basic and diluted weighted averages shares of 44,754,921 and 43,805,310 outstanding, resulting in basic and diluted earnings per share of $ 0.12 and $ 0.32 , respectively .

Recent Accounting Pronouncements

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.

In June 2022, the FASB issued ASU 2022-03, “Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions” (“ASU 2023-03”).

ASU 2022-03 was issued to (1) to clarify the guidance in 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 ASC Topic 820.

The amendments in this update are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.

This update did not have a material effect on the accompanying unaudited consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (FASB ASC Topic 280):

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (ASC Topic 280):

Improvements to Reportable Segment Disclosures” (“ASU 2023-07”).

ASU 2023-07 intends to improve reportable segment disclosure requirements, enhance interim disclosure requirements and provides new segment disclosure requirements for entities with a single reportable segment.

This standard is effective for the Company beginning with its 2024 annual reporting.

ASU 2023-07 is to be adopted retrospectively to all prior periods presented.

ASU 2023-07 is effective for fiscal years beginning after December 15, 2023 and for interim periods within fiscal years beginning after December 15, 2024.

ASU 2023-07 applies retrospectively to all prior periods presented.

This update is not expected to have a material effect on the accompanying consolidated financial statements.

Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted, would have a material effect on the Company’s unaudited consolidated financial statements.

SACHEM CAPITAL CORP.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024

Reclassifications

Certain amounts included in the Company’s June 30, 2023 and December 31, 2023 consolidated financial statements have been reclassified to conform to the presentation in the accompanying unaudited consolidated financial statements.

Certain amounts included in the Company’s December 31, 2023 and September 30, 2023 consolidated financial statements have been reclassified to conform to the presentation in the accompanying unaudited consolidated financial statements.

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, 2024:

The following table sets forth by Level, within the fair value hierarchy, the Company’s assets at fair value as of September 30, 2024:

(in thousands)

Stocks and ETFs

Debt securities

Total investment securities, at fair value

SACHEM CAPITAL CORP.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024

The following table sets forth by Level, within the fair value hierarchy, the Company’s assets at fair value as of December 31, 2023:

18 unchanged sentences

Pursuant to ASC Topic 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, 2024 and December 31, 2023, the Company had a continuous unrealized losses over 12 months in Available-For-Sale (“AFS”) debt securities of $ 0 and $ 0.8 million, respectively.

As of September 30, 2024 and December 31, 2023, the Company had a continuous unrealized losses over 12 months in Available-For-Sale (“AFS”) debt securities of $ 0 and $ 0.8 million, respectively.

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

As such, at June 30, 2024 and December 31, 2023, the Company has an allowance for credit losses regarding AFS debt securities totaling $ 0 and $ 0.8 million, respectively, of which is included in investment securities (at fair value) on the consolidated balance sheets included in the accompanying consolidated financial statements.

There was no such related provision of credit losses for the three and six month periods ended June 30, 2024 and 2023.

During the three months ended June 30, 2024, the Company sold all of the remaining AFS debt securities.

The following table presents the impact of the Company’s AFS securities - debt securities on its Other Comprehensive Income (“OCI”) for the three and six months ended June 30, 2024 and 2023:

As such, at September 30, 2024 and December 31, 2023, the Company has an allowance for credit losses regarding AFS debt securities totaling $ 0 and $ 0.8 million, respectively, of which is included in investment securities (at fair value) on the consolidated balance sheets included in the accompanying consolidated financial statements.

There was no such

SACHEM CAPITAL CORP.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024

related provision of credit losses for the three and nine month periods ended September 30, 2024 and 2023.

During the nine months ended September 30, 2024, the Company sold all of the remaining AFS debt securities.

The following table presents the impact of the Company’s AFS securities - debt securities on its Other Comprehensive Income (“OCI”) for the three and nine months ended September 30, 2024 and 2023:

Three Months Ended

Six months Ended

Nine months Ended

September 30,

(in thousands)

5 unchanged sentences

Balance at end of period

As of June 30, 2024 and 2023, the investment securities cost basis was $ 3.1 million and $ 38.9 million, respectively.

SACHEM CAPITAL CORP.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024

Mortgages Receivable, net

As of September 30, 2024 and 2023, the investment securities cost basis was $ 3.1 million and $ 39.0 million, respectively.

Mortgages receivable

The Company offers secured, non-bank loans to real estate owners and investors (also known as “hard money” loans) to fund their acquisition, renovation, development, rehabilitation or improvement of properties located primarily in the Northeastern and Southeastern United States.

The Company’s lending standards typically require that the original principal amount of all mortgage receivable notes be secured by first mortgage liens on one or more properties owned by the borrower or related parties and that the maximum LTV be no greater than 70% of the appraised value of the underlying collateral, as determined by an independent appraiser at the time of the loan origination.

The Company considers the maximum LTV as an indicator for the credit quality of a mortgage note receivable.

The Company’s lending standards typically require that the original principal amount of all mortgage receivable notes be secured by first mortgage liens on one or more properties owned by the borrower or related parties and that the principal amount of the loan be no greater than 70% of the appraised value of the underlying collateral, as determined by an independent appraiser at the time of the loan origination.

In the case of properties undergoing renovation, the LTV ratio is calculated based on the estimated fair market value of the property after the renovations have been completed.

Generally, the Company considers a maximum loan-to-value ratio of 70% as an indicator for the credit quality of a mortgage note receivable.

However, the Company makes exceptions to this guideline if the facts and circumstances support the incremental risk.

3 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.

As of June 30, 2024 and December 31, 2023, loans on nonaccrual status had an outstanding principal balance of $ 106.9 million and $ 84.6 million, respectively.

The nonaccrual loans are inclusive of loans pending foreclosure.

For the three and six months ended June 30, 2024, $ 0.3 million and $ 0.4 million of interest income was recorded on nonaccrual loans due to payments received, respectively.

For both the three and six months ended June 30, 2023, $ 0.2 million of interest income, was recorded on nonaccrual loans.

For the six months ended June 30, 2024 and 2023, the aggregate amounts of loans funded by the Company were $ 84.3 million and $ 114.5 million, respectively, offset by principal repayments of $ 79.6 million and $ 66.4 million, respectively.

As of June 30, 2024, the Company’s mortgage loan portfolio includes loans ranging in size up to $ 41.7 million with stated interest rates ranging from 5.0 % to 15.0 %, compared to loans ranging in size of up to $ 34.0 million with stated interest rates ranging from 5.0 % to 14.2 % for the period ended June 30, 2023.

As of September 30, 2024 and December 31, 2023, loans on nonaccrual status had an outstanding principal balance of $ 147.0 million and $ 84.6 million, respectively.

Nonaccrual loans include loans pending foreclosure.

For the three and nine months ended September 30, 2024, $ 0.5 million and $ 0.8 million of interest income, respectively, was recorded on nonaccrual loans due to payments received.

For the three and nine months ended September 30, 2023, $ 0.06 million and $ 0.4 million of interest income, respectively, was recorded on nonaccrual loans.

Real estate owned decreased as a result of increases in mortgages receivable that were financed by the Company to new borrowers during the nine months ended September 30, 2024 and 2023, which amounted to $ 2.4 million and $ 2.5 million, respectively.

For the nine months ended September 30, 2024 and 2023, the aggregate amounts of loans funded by the Company were $ 115.7 million and $ 159.7 million, respectively, offset by principal repayments of $ 135.3 million and $ 123.5 million, respectively.

As of September 30, 2024, the Company’s mortgage loan portfolio includes loans ranging in size up to $ 42.0 million with stated interest rates ranging from 5.0 % to 15.0 %, compared to loans ranging in size of up to $ 37.4 million with stated interest rates ranging from 5.0 % to 15.0 % as of December 31, 2023.

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.

As of June 30, 2024, and December 31, 2023, the Company had one borrower representing 11.7 % and 10.1 % of the outstanding mortgage loan portfolio, or $ 58.4 million and $ 50.4 million, respectively.

SACHEM CAPITAL CORP.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024

As of September 30, 2024, and December 31, 2023, the Company had one borrower representing 11.3 % and 10.1 % of the outstanding mortgage loan portfolio, or $ 54.1 million and $ 50.4 million, respectively.

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.

3 unchanged sentences

The deferred origination, loan servicing and amendment fee income represents amounts that will be recognized over the contractual life of the underlying mortgage notes receivable.

Allowance for Credit Loss

Allowance for Credit Losses

Allowance for credit losses are 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.

1 unchanged sentence

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.

SACHEM CAPITAL CORP.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024

Expected credit 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.

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, other specific circumstances, and to reflect the Company’s expectations of the macroeconomic environment.

The following table summarizes the activity in the mortgages receivable allowance for credit losses from December 31, 2023 through June 30, 2024:

The following table summarizes the activity in the mortgages receivable allowance for credit losses from December 31, 2023 through September 30, 2024:

Allowance for credit losses

1 unchanged sentence

Provision for credit losses

as of June 30,

as of September 30,

December 31, 2023

2 unchanged sentences

Geographical Location

SACHEM CAPITAL CORP.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024

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

June 30, 2024

September 30, 2024

December 31, 2023

7 unchanged sentences

Carrying value, net

SACHEM CAPITAL CORP.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024

Presented below are the carrying values by property type:

June 30, 2024

September 30, 2024

December 31, 2023

7 unchanged sentences

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, 2024

September 30, 2024

Year Originated (1)

7 unchanged sentences

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024

December 31, 2023

6 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.

The following table sets forth the maturities of mortgages receivable as of June 30, 2024:

As of June 30, 2024

The following table sets forth the maturities of mortgages receivable as of September 30, 2024:

For the years ended December 31,

(in thousands)

2024 (6 month) and prior

2024 (9 months) and prior

Allowance for credit losses

At June 30, 2024, of the 262 mortgage loans included in the Company’s loan portfolio, 79 , or 30.2 %, representing $ 132.0 million of mortgage receivables have matured but have not been repaid in full or extended.

At September 30, 2024, of the 226 mortgage loans included in the Company’s loan portfolio, 74 , or 32.7 %, having an aggregate outstanding principal balance of $ 130.1 million have matured but have not been repaid in full or extended.

The 74 aforementioned loans are inclusive of loans in pending/pre-foreclosure status.

1 unchanged sentence

The Company treats renewals and extensions of existing loans as new loans.

At December 31, 2023, of the 311 mortgage loans in the Company’s portfolio, 89 , or 28.6 %, representing $ 123.8 million of mortgage receivables, had matured in 2023 but were not repaid in full or extended.

At December 31, 2023, of the 311 mortgage loans in the Company’s portfolio, 89 , or 28.6 %, representing $ 123.8 million of mortgages receivable, had matured by 2023 but were not repaid in full or extended.

Loan modifications made to borrowers experiencing financial difficulty

4 unchanged sentences

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

For the three months ended June 30, 2024 and 2023, $ 61.0 million, or 12.2 %, and $ 17.7 million, or 3.5 %, of total mortgage receivable was modified for borrowers experiencing financial difficulty, respectively.

For the six months ended June 30, 2024 and 2023, $ 104.5 million, or 20.9 %, and $ 27.6 million, or 5.4 %, of total mortgage receivable was modified for borrowers experiencing financial difficulty, respectively.

For the three months ended September 30, 2024 and 2023, $ 16.1 million, or 3.5 %, and $ 32.8 million, or 6.6 %, of total mortgages receivable were modified for borrowers experiencing financial difficulty, respectively.

For the nine months ended September 30, 2024 and 2023, $ 103.6 million, or 22.7 %, and $ 63.0 million, or 12.7 %, of total mortgages receivable were modified for borrowers experiencing financial difficulty, respectively.

SACHEM CAPITAL CORP.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024

As of June 30, 2024 and 2023, the Company has committed to lend additional amounts totaling $ 13.4 million and $ 3.5 million to borrowers experiencing financial difficulty, respectively.

Investment in Rental Real Estate, net

As of June 30, 2024 and December 31, 2023, investment in rental real estate, net consist of the following:

Six months ended June 30, 2024

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024

As of September 30, 2024, the Company was committed to lend additional amounts totaling $ 8.5 million to borrowers experiencing financial difficulty.

Investment in Rental Real Estate

As of September 30, 2024 and December 31, 2023, investment in rental real estate, net consist of the following:

Nine months ended September 30, 2024

Accumulated Depreciation

14 unchanged sentences

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 six months ended June 30, 2024, depreciation and amortization related to the asset was $ 0.1 million.

For the nine months ended September 30, 2024, depreciation and amortization related to the asset was $ 0.1 million.

Tenant improvements and other intangibles associated with the tenant are not being amortized until the commencement of the lease which is not until 2025.

3 unchanged sentences

The rent concession period, or beginning of the lease term, begins January 2025 with a rent abatement period of 425 days.

As of June 30, 2024, future minimum rents under non-cancelable operating leases were as follows:

As of September 30, 2024, future minimum rents under non-cancelable operating leases were as follows:

Years Ending December 31,

3 unchanged sentences

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024

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

15 unchanged sentences

In January 2024, the Company submitted a proposal to the town of Westport for eight market rate residential units and two affordable rate units.

Those units were approved in March of 2024, subject to a 30-day appeal period.

Those units were approved in March 2024, subject to a 30-day appeal period.

In April 2024, the 30-day appeal period for the Westport Asset land approval expired, and the Company deemed these events which would give rise to a payment of Additional Purchase Price allocated to land to be considered probable.

Accordingly, the agreed payment of $ 0.1 million per certain approved and sold or permitted market rate residential units has been recognized.

The expected payment, of which is $ 0.6 million, has been accrued as of June 30, 2024 and is included in accounts payable and accrued liabilities on the consolidated balance sheets included in the accompanying unaudited consolidated financial statements.

The expected payment, of which is $ 0.6 million, has been accrued as of September 30, 2024 and is included in accounts payable and accrued liabilities on the consolidated balance sheets included in the accompanying unaudited consolidated financial statements.

SACHEM CAPITAL CORP.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024

Real Estate Owned (REO)

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

As of June 30, 2024 and December 31, 2023, REO totaled $ 3.9 million and $ 3.5 million, respectively.

For the three months ended June 30, 2024 and 2023, the Company recorded an impairment loss of 0.1 million and $ 0.2 million, respectively.

For the six months ended June 30, 2024 and 2023, the Company recorded an impairment loss of $ 0.1 million and $ 0.2 million, respectively.

The following table presents the Company’s REO as of June 30, 2024 and December 31, 2023:

June 30, 2024

As of September 30, 2024 and December 31, 2023, REO totaled $ 4.3 million and $ 3.5 million, respectively.

For the three months ended September 30, 2024 and 2023, the Company recorded an impairment loss of $ 0.3 million and $ 0.2 million, respectively.

For the nine months ended September 30, 2024 and 2023, the Company recorded an impairment loss of $ 0.4 million and $ 0.6 million, respectively.

The following table presents the Company’s REO as of September 30, 2024 and December 31, 2023:

September 30, 2024

December 31, 2023

7 unchanged sentences

Balance at end of period

As of June 30, 2024, REO included $ 0.8 million of real estate held for rental and $ 3.1 million of real estate held for sale.

As of September 30, 2024, REO included $ 0.8 million of real estate held for rental and $ 3.5 million of real estate held for sale.

As of December 31, 2023, REO included $ 0.8 million of real estate held for rental and $ 2.7 million of real estate held for sale.

Properties Held for Sale

During the three months ended June 30, 2024, the Company sold ten properties held for sale and recognized a net gain of $ 0.3 million.

During the six months ended June 30, 2024, the Company sold eleven properties held for sale and recognized a net gain of $ 0.3 million.

During the three months ended June 30, 2023, the Company sold three properties held for sale and recognized a net loss of $ 0.02 million.

During the six months ended June 30, 2023, the Company sold five properties held for sale and recognized a net gain of $ 0.1 million.

During the three months ended September 30, 2024, the Company sold two properties held for sale and recognized a net gain of $ 0.02 million.

During the nine months ended September 30, 2024, the Company sold 13 properties held for sale and recognized a net gain of $ 0.3 million.

During the three months ended September 30, 2023, the Company sold one property held for sale and recognized a net loss of $ 0.01 million.

During the nine months ended September 30, 2023, the Company sold five properties held for sale and recognized a net gain of $ 0.1 million.

Properties Held for Rental

As of June 30, 2024, one property, a commercial building, was held for rental.

As of September 30, 2024, one property, a commercial building, was held for rental.

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

As of June 30, 2024, future minimum rents under this lease were as follows:

As of September 30, 2024, future minimum rents under this lease were as follows:

Years Ending December 31,

3 unchanged sentences

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024

As of June 30, 2024 and December 31, 2023, other assets consist of the following:

June 30, 2024

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024

As of September 30, 2024 and December 31, 2023, other assets consist of the following:

September 30, 2024

December 31, 2023

10 unchanged sentences

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 ( 7.02 % at June 30, 2024 and 6.77 % at December 31, 2023).

The credit line bears interest at a rate equal to 1.75 % below the prime rate ( 6.25 % at September 30, 2024 and 6.77 % at December 31, 2023).

During the second quarter of 2024, the Company sold all of its investment securities that collateralized the line of credit.

As such, the balance as of June 30, 2024 was $ 0 .

As such, the balance as of September 30, 2024 was $ 0 .

At December 31, 2023 the total outstanding balance on the Wells Fargo credit line was $ 26.8 million.

Line of Credit – Needham Bank

On March 2, 2023, the Company entered into a Credit and Security Agreement (the “Credit Agreement”), with Needham Bank, a Massachusetts co-operative bank, as the administrative agent (the “Administrative Agent”) for the lenders party thereto (the “Lenders”) with respect to a $ 45 million revolving credit facility (the “Needham Credit Facility”).

On March 2, 2023, the Company entered into a Credit and Security Agreement (the “Credit Agreement”), with Needham Bank, a Massachusetts co-operative bank, as the administrative agent (“Needham”) for the lenders party thereto (the “Lenders”) with respect to a $ 45 million revolving credit facility (the “Needham Credit Facility”).

Under the Credit Agreement, the Company also has the right to request an increase in the size of the Needham Credit Facility up to $ 75 million, subject to certain conditions, including the approval of the Lenders.

2 unchanged sentences

All amounts borrowed under the Needham Credit Facility are secured by a first priority lien on virtually all of the Company’s assets.

Assets excluded from the lien include real estate owned by the Company (other than real estate acquired pursuant to foreclosure) and mortgages sold to Churchill under the Facility.

The Needham Credit Facility expires March 2, 2026 but the Company has a right to extend the term for one year upon the consent of the Administrative Agent and the Lenders, which consent cannot be unreasonably withheld, and so long as it is not in default and satisfies certain other conditions.

All outstanding revolving loans and accrued but unpaid interest are due and payable on the expiration date.

The Company may terminate the Needham Credit Facility at any time without premium or penalty by delivering written notice to the Administrative Agent at least ten ( 10 ) days prior to the proposed date of termination.

Assets excluded from the lien include real estate owned by the Company (other than real estate acquired pursuant to foreclosure) and mortgages sold under the Churchill Facility (as defined below).

The Needham Credit Facility expires March 2, 2026 but the Company has a right to extend the term for one year upon the consent of Needham and the Lenders, which consent cannot be unreasonably withheld, and so long as it is not in default and satisfies certain other conditions.

All outstanding revolving loans and accrued but unpaid interest is due and payable on the expiration date.

The Company may terminate the Needham Credit Facility at any time without premium or penalty by delivering written notice to Needham at least ten ( 10 ) days prior to the proposed date of termination.

The Needham 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:

2 unchanged sentences

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

As of September 30, 2024, the Company was not in compliance with the debt service coverage ratio covenant described above.

The Company’s inability to comply with this covenant is directly related to the provision for credit losses, which is a non-cash

SACHEM CAPITAL CORP.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024

charge that adversely impacts earnings.

Unlike other non-cash charges against earnings, such as depreciation and amortization, provision for credit losses is not added back to earnings under the definition of EBITDA.

Needham is aware of the situation and has informed the Company that it is considering granting a waiver on the debt service covenant ratio.

Per the Credit Agreement, the breach of a covenant can result in a default which, if left uncured for more than 30 days , allows Needham to terminate the Needham Credit Facility.

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

As of June 30, 2024 and December 31, 2023, the total outstanding principal balance on the Needham Credit Facility was $ 55.0 million and $ 35.0 million, respectively, with an interest rate of 8.25 %.

As of September 30, 2024 and December 31, 2023, the total outstanding principal balance on the Needham Credit Facility was $ 35.5 million and $ 35.0 million, respectively, with an interest rate of 7.75 % and 8.25 %, respectively.

Mortgage Payable

10 unchanged sentences

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.

As of June 30, 2024 and December 31, 2023, the total outstanding principal balance on the New NHB Mortgage was $ 1.0 million and $ 1.1 million, respectively.

As of September 30, 2024 and December 31, 2023, the total outstanding principal balance on the New NHB Mortgage was $ 1.0 million and $ 1.1 million, respectively.

Churchill MRA Funding I LLC Repurchase Financing Facility

6 unchanged sentences

The cost of capital under the Churchill 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.

As of June 30, 2024 and December 31, 2023, the effective interest rate charged under the facility was 9.60 % and 9.47 %, respectively.

As of September 30, 2024 and December 31, 2023, the effective interest rate charged under the facility was 8.95 % and 9.47 %, respectively.

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

1 unchanged sentence

and (B) must maintain unencumbered cash and cash equivalents in an amount equal to or greater than 2.50 % of the amount of its repurchase obligations.

Churchill has the right to terminate the Churchill Facility at any time upon 180 days prior notice to the Company.

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

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

At June 30, 2024, the total amount outstanding under the Churchill Facility was $ 23.0 million.

The collateral pledged to Churchill at June 30, 2024 was 16 mortgage loans that in the aggregate had unpaid principal balance of $ 54.0

Churchill has the right to

SACHEM CAPITAL CORP.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024

terminate the Churchill Facility at any time upon 180 days prior notice to the Company.

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

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

At September 30, 2024, the total amount outstanding under the Churchill Facility was $ 23.5 million.

The collateral pledged to Churchill at September 30, 2024 was 11 mortgage loans that in the aggregate had unpaid principal balance of $ 45.8 million.

At December 31, 2023, the total amount outstanding under the Churchill Facility was $ 26.5 million.

2 unchanged sentences

Unsecured Notes Payable

At June 30, 2024, the Company had an aggregate of $ 259.9 million of unsecured, unsubordinated notes payable outstanding, net of $ 4.8 million of deferred financing costs (collectively, the “Notes”).

On June 25, 2024, the Company redeemed its 7.125 % unsecured, unsubordinated Notes due June 30, 2024 in the aggregate principal amount of $ 23.7 million (“the June 2024 Notes”) plus the accrued interest thereon.

Following the repayment of the June 2024 Notes, the Company has six series of Notes outstanding:

At September 30, 2024, the Company had an aggregate of $ 260.5 million of unsecured, unsubordinated notes payable outstanding, net of $ 4.3 million of deferred financing costs (collectively, the “Notes”).

During the nine months ended September 30, 2024, the Company redeemed its 7.125 % unsecured, unsubordinated Notes due June 30, 2024 in the aggregate principal amount of $ 23.7 million plus the accrued interest thereon.

At September 30, 2024, the Company had six series of Notes outstanding:

(i) Notes having an aggregate principal amount of $ 34.5 million bearing interest at 6.875 % per annum and maturing December 30, 2024 (the “December 2024 Notes”);

10 unchanged sentences

The redemption price will be equal to the outstanding principal amount of the Notes redeemed plus the accrued but unpaid interest thereon up to, but not including the date of redemption.

Currently, the December 2024 Notes, the September 2025 Notes, the December 2026 Notes, the March 2027 Notes, and the June 2027 Notes are callable at any time.

The September 2027 Notes will be callable at any time on or after August 23, 2024.

As of September 30, 2024, all of the Notes are callable at any time.

SACHEM CAPITAL CORP.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024

The following are the future principal payments on the notes payable as of June 30, 2024:

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024

The following are the future principal payments on the notes payable as of September 30, 2024:

Years ending December 31,

(in thousands)

2024 (6 months)

Remainder of 2024

Total principal payments

1 unchanged sentence

Total notes payable, net of deferred financing costs

The estimated amortization of the deferred financing costs as of June 30, 2024 is as follows:

The estimated amortization of the deferred financing costs as of September 30, 2024 is as follows:

Years ending December 31,

(in thousands)

2024 (6 months)

Remainder of 2024

Total deferred costs

Accounts Payable and Accrued Liabilities

As of June 30, 2024 and December 31, 2023, accounts payable and accrued liabilities include the following:

June 30, 2024

As of September 30, 2024 and December 31, 2023, accounts payable and accrued liabilities include the following:

September 30, 2024

December 31, 2023

4 unchanged sentences

Fee income from loans

For the three and six month periods ended June 30, 2024 and 2023, fee income from loans consists of the following:

ended June 30,

For the three and nine month periods ended September 30, 2024 and 2023, fee income from loans consists of the following:

ended September 30,

(in thousands)

6 unchanged sentences

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024

Commitments and Contingencies

2 unchanged sentences

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

At June 30, 2024, deferred revenue was $ 4.8 million, which will be recorded as income as follows:

At September 30, 2024, deferred revenue was $ 3.4 million, which will be recorded as income as follows:

Years ending December 31,

(in thousands)

2024 (6 months)

Remainder of 2024

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.

Employment Agreements

Employment Agreements and Arrangements

In February 2017, the Company entered into an employment agreement with John Villano, the material terms of which are as follows:

15 unchanged sentences

All shares granted under John Villano’s employment contract are restricted until the respective vesting periods lapse.

As of June 30, 2024, 231,926 restricted common shares remain unvested.

As of September 30, 2024, 231,926 restricted common shares remain unvested.

Effective as of September 1, 2024, the Company entered into a new employment arrangement with Nicholas M.

Marcello, the Company’s Chief Financial Officer, the material terms of which are as follows:

(i) an annual base salary of $ 300,000 ;

(ii) a one - time payment of $ 20,000 ;

(iii) entitlement to an annual time - based equity award of $ 125,000 , payable in restricted common shares, commencing on January 1, 2025 and on January 1st of each year thereafter;

(iii) he will be entitled to an annual cash bonus of up to 50 % of his base salary, the exact amount to be determined by the Compensation Committee of the Company’s Board of Directors;

and (iv) he has continued eligibility to participate in the Company’s health insurance plan and the perquisites and other fringe benefits in accordance with prevailing Company policy.

Unfunded Commitments

At June 30, 2024, the Company had future funding obligations totaling $ 89.0 million, which can be drawn by the borrowers when the conditions relating thereto have been satisfied.

At September 30, 2024, the Company had future funding obligations totaling $ 71.9 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.

SACHEM CAPITAL CORP.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024

The Company incurred a net loss attributable to common shareholders of $ 6.6 million during the nine months ended September 30, 2024.

The loss was driven primarily from the increase in non-accrual loans which had significant increases in provisions for credit losses related to loans.

In addition, as of September 30, 2024, the Company breached its covenant related to the Needham Credit Facility (see Note 8 - Line of Credit – Needham Bank), and has unsecured, unsubordinated notes payable due of $ 34.5 million coming due in December 30, 2024 and another tranche of $ 56.4 million due in September 2025.

These factors raised economic uncertainty from a liquidity standpoint.

Management believes the ability to utilize the Company’s existing $ 200 million Churchill Facility (see Note 8 - Churchill MRA Funding I LLC Repurchase Financing Facility), cash and cash equivalents of $ 5.9 million, investment securities at fair value of $ 1.6 million, continued cash flows from operations, sales of Series A Preferred Stock through the Company’s at-the-market offering facility, and proceeds from the potential sale of mortgage loans in the secondary market (see Note 19 - Subsequent Events) would alleviate the uncertainty.

In the normal course of its business, the Company is named as a party-defendant in connection with tax foreclosure proceedings against properties on which it holds a first mortgage lien.

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, 2024, there was two such properties.

At September 30, 2024, there were two such properties.

The unpaid principal balance on the properties that are subject to these proceedings was $ 1.9 million.

SACHEM CAPITAL CORP.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024

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.

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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, 2024, and December 31, 2023, loans to known shareholders totaled $ 23.9 million and $ 25.6 million, respectively, which is included in mortgages receivables, net in the Company’s accompanying consolidated balance sheets.

Interest income earned on these loans for the three months ended June 30, 2024 and 2023 totaled $ 0.5 million for both periods, and for the six months ended June 30, 2024 and 2023 totaled $ 1.1 million for both periods, which is included in interest income in the Company’s accompanying consolidated statements of operations.

As of September 30, 2024, and December 31, 2023, loans to known shareholders totaled $ 15.7 million and $ 25.6 million, respectively, which is included in mortgages receivable, net in the Company’s accompanying consolidated balance sheets.

Of the $ 15.7 million and $ 25.6 million loans to known shareholders as of September 30, 2024 and December 31, 2023, $ 9.9 million and $ 23.2 million, respectively, related to Mod 21, LLC, which is a wholly owned entity of the Company’s Senior Vice President of Asset Management and Vice President of Asset Management.

Interest income earned on all related party loans for the three months ended September 30, 2024 and 2023 totaled $ 0.3 million and $ 0.5 million, respectively, and for the nine months ended September 30, 2024 and 2023 totaled $ 1.0 million and $ 1.6 million, respectively, which is included in interest income in the Company’s accompanying consolidated statements of operations.

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

For the three-month periods ended June 30, 2024 and 2023, she received compensation of $ .04 million and $ .03 million respectively.

For the six-month periods ended June 30, 2024 and 2023, she received compensation of $ .08 million and $ .08 million, respectively.

For the three-month periods ended September 30, 2024 and 2023, she received compensation of $ 0.04 million for each period.

For the nine-month periods ended September 30, 2024 and 2023, she received compensation of $ 0.1 million for each period.

Concentration of Credit Risk

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Accounts at the financial institution are insured by the Federal Deposit Insurance Corporation (FDIC) up to $ 250,000 , per depositor.

As of June 30, 2024, 36.3 % of the properties securing the Company’s mortgage loans were located in Connecticut, 28.4 % in Florida, and 12.8 % in New York.

The Company’s mortgage loans are categorized into four property types, which as of June 30, 2024 were;

SACHEM CAPITAL CORP.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024

As of September 30, 2024, 34.0 % of the properties securing the Company’s mortgage loans were located in Connecticut, 29.6 % in Florida, and 13.5 % in New York.

The Company’s mortgage loans are categorized into four property types, which as of September 30, 2024 were;

Residential ( 59.3 %), Commercial ( 28.0 %), Pre-development land ( 6.1 %), and Mixed Use ( 6.6 %).

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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, 2024 was 781,262 .

During the six months ended June 30, 2024 and 2023, the Company granted an aggregate of 212,857 and 183,390 , respectively, restricted common shares under the Plan, including restricted common shares granted to the Company’s Chief Executive Officer (see Note 12).

Such shares had a fair value of approximately $ 0.8 million and approximately $ 0.7 million, respectively.

SACHEM CAPITAL CORP.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024

With respect to the restricted common shares granted during the six months ended June 30, 2024, (i) 33,666 shares vested on May 9, 2024;

The number of securities remaining available for future issuance under the Plan as of September 30, 2024 was 781,262 .

During the nine months ended September 30, 2024 and 2023, the Company granted an aggregate of 212,857 and 201,390 , respectively, restricted common shares under the Plan, including restricted common shares granted to the Company’s Chief Executive Officer (see Note 13).

The fair value of each block of shares at the time of grant was approximately $ 0.8 million.

There were no such shares granted to the Company’s Chief Executive Officer during the three months ended September 30, 2024 and 2023.

With respect to the restricted common shares granted during the nine months ended September 30, 2024, (i) 33,666 shares vested on May 9, 2024;

(ii) 33,667 shares will vest on May 1, 2025 and 2026, respectively;

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and (iv) 37,286 shares will vest on January 1, 2026 and 2027 , respectively.

Stock-based compensation for the three months ended June 30, 2024 and 2023 was $ 0.2 million for both periods, which is included in compensation and employee benefits on the accompanying consolidated statements of operations.

Stock-based compensation for the six months ended June 30, 2024 and 2023 was $ 0.4 million for both periods.

As of June 30, 2024, there was unrecorded stock-based compensation expense of $ 1.1 million.

Stock-based compensation for the three months ended September 30, 2024 and 2023 was $ 0.2 million and $ 0.2 million, respectively, which is included in compensation and employee benefits on the accompanying consolidated statements of operations.

Stock-based compensation for the nine months ended September 30, 2024 and 2023 was $ 0.7 million and $ 0.6 million, respectively.

As of September 30, 2024, there was unrecorded stock-based compensation expense of $ 0.9 million.

Additionally, during the nine months ended September 30, 2024 and 2023, the Company had 333 and 5,333 unvested restricted common shares forfeited to the Company as a result of the termination of former employees, respectively.

Employee Benefits

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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, 2024 and 2023, the 401(k) Plan expense was $ 0.03 million and $ 0.03 million, respectively, which is included within compensation and employee benefits in the accompanying consolidated statements of operations.

For the six months ended June 30, 2024 and 2023, the 401 (k) Plan expense was $ 0.08 million and $ 0.08 million, respectively, which is included within compensation and employee benefits in the accompanying consolidated statements of operations.

Equity Offerings

For the three months ended September 30, 2024 and 2023, the 401(k) Plan expense was $ 0.3 million and $ 0.05 million, respectively, which is included within compensation and employee benefits in the accompanying consolidated statements of operations.

For the nine months ended September 30, 2024 and 2023, the 401 (k) Plan expense was $ 0.1 million and $ 0.1 million, respectively, which is included within compensation and employee benefits in the accompanying consolidated statements of operations.

On August 24, 2022, the Company filed a prospectus supplement to its Form S-3 Registration Statement covering the sale of up to $ 75.0 million of its common shares and its Series A Preferred Stock (as defined in Note 18 below) with an aggregate liquidation preference of up to $ 25.0 million in an “at-the market” offering, which is ongoing (the “ATM Offering”).

On June 17, 2024, the Company filed a new prospectus supplement (the “New Prospectus Supplement”) which modified the ATM Offering by reducing the amount of common shares the Company may offer and sell to up to an aggregate of $ 48.7 million, including the common shares the Company has already sold in the ATM Offering prior to the date of the New Prospectus Supplement.

On June 17, 2024, the

SACHEM CAPITAL CORP.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024

Company filed a new prospectus supplement (the “New Prospectus Supplement”) which modified the ATM Offering by reducing the amount of common shares the Company may offer and sell to up to an aggregate of $ 48.7 million, including the common shares the Company has already sold in the ATM Offering prior to the date of the New Prospectus Supplement.

All the other terms of the ATM Offering remained the same.

During the six months ended June 30, 2024, under this offering, the Company sold an aggregate of 568,711 common shares, realizing gross proceeds of $ 2.1 million and 176,205 shares of its Series A Preferred Stock having an aggregate liquidation preference of approximately $ 4.4 million, realizing gross proceeds of $ 3.7 million (representing a discount of 16.2 % from the liquidation preference).

The Company’s issuance costs for both common shares and Series A Preferred Stock shares sold during the six months ended June 30, 2024 were nominal.

During the nine months ended September 30, 2024, under this offering, the Company sold no common shares and 249,901 shares of its Series A Preferred Stock having an aggregate liquidation preference of approximately $ 6.2 million, realizing gross proceeds of $ 5.3 million (representing a discount of 15.8 % from the liquidation preference).

The Company’s issuance costs for both common shares and Series A Preferred Stock shares sold during the nine months ended September 30, 2024 were $ 0.1 million.

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

Under the Original Repurchase Plan, share repurchases were 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 months ended September 30, 2024 and 2023, under this program, the Company repurchased 535,369 and 71,000 common shares at a total cost of $ 1.4 million and $ 0.2 million, respectively.

Partnership Investments

As of June 30, 2024, the Company had invested an aggregate of $ 47.0 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 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.

Each limited liability company has elected to be treated as a partnership for income tax purposes.

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 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.

As of September 30, 2024, the Company had invested an aggregate of $ 51.6 million in seven limited liability companies (all of which have elected to be taxed as partnerships) managed by Shem Creek Capital, LLC (“Shem”).

The Company’s interest in each of these entities is “non-controlling”.

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

In September 2024, the Company acquired a seventh ownership interest, a 20 % membership interest in Shem.

At close, the Company paid $ 2.5 million in cash.

The balance of the purchase price is due and payable on or before September 6, 2025.

If the Company fails to make the deferred payment when due, it will forfeit half of its interest in Shem and all proceeds received therefrom, if any.

In addition, the Company has the right to acquire an additional 10 % interest in Shem (increasing its stake to 30 %) in two separate 5 % options of $ 1.4 million and $ 1.5 million at any time prior to March 31, 2027.

The Company is allowed one board member of Shem, but has no management rights in Shem.

The Company accounts for these investments at cost because the Company does not manage the entities in which it holds an interest and thus has no control or have significant influence over the investments.

Shem 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 Shem.

The Company’s investments can be categorized into three fund structures:

fund investments, direct loan investments (co-invest vehicles) and the manager investment.

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

The direct loan investments are through three entities 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.

These loans are primarily two- to three- year collateralized mortgage loans, often with contractual extension options for the borrowers

These loans are primarily two- to three- year collateralized mortgage loans, often with contractual extension options for the borrowers of an additional year.

The Company receives quarterly distributions from the entities that are comprised of a preferred return, return of capital, and the incentive fee depending on each loan’s waterfall calculation, as defined by the loan agreements.

The Company’s interests in the entities 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, 2027.

Shem’s compensation includes senior financing fees, incentive fees, and management fees that are charged to each entity that it manages, including the seven entities in which the Company has an investment.

The Company expects to receive quarterly distributions from the respective entities operating cash flows.

For the three months ended September 30, 2024 and 2023, the Shem investments generated, in the aggregate, $ 1.5 million and $ 0.8 million, respectively, of income for the Company.

For the nine months ended September 30, 2024 and 2023, the Shem investments generated $ 3.9 million and $ 2.3 million, respectively, of income for the Company.

SACHEM CAPITAL CORP.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024

of an additional year.

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

The Company’s interests in 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, 2027.

For the three months ended June 30, 2024 and 2023, the non-controlling partnership interests generated $ 1.2 million and $ 1.0 million, respectively, of income for the Company.

For the six months ended June 30, 2024 and 2023, the partnerships generated $ 2.4 million and $ 1.6 million, respectively, of income for the Company.

At June 30, 2024, the Company had unfunded partnership commitments totaling $ 2.7 million.

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024

At September 30, 2024, the Company had unfunded partnership commitments totaling $ 4.5 million in the Shem entities.

Cordo CLT Investors LLC

In September 2024, the Company, through its wholly owned subsidiary Urbane Capital, LLC, acquired a 7.2 % partnership interest in Cordo CLT Investors LLC for $ 2.5 million.

This entity was formed for the sole purpose of developing a commercial multifamily property in Charlotte, North Carolina.

The Company anticipates the project to be completed by the end of 2026.

The Company accounts for this investment at cost because the Company does not manage the entities in which it holds an interest and thus has no control or have significant influence over the investments.

Series A Preferred Stock

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Subsequent Events

On July 19, 2024 the Company declared a dividend of $ 0.08 per share, or $ 3.8 million in the aggregate, to shareholders of record as of July 29, 2024, which was paid on August 6, 2024.

Between July 1, 2024 and August 14, 2024, through the Company’s at-the-market offering facility, the Company sold no common shares, and 7,622 shares of its Series A Preferred Stock having an aggregate liquidation preference of $ 0.2 million, realizing gross proceeds of $ 0.2 million (representing a discount of 13.3 % from the liquidation preference.)

Between July 1, 2024 and August 14, 2024, the Company repurchased 114,796 of its common shares through its existing stock repurchase plan.

On November 7, 2024 , the Company declared a dividend of $ 0.05 per share, or $ 2.3 million in the aggregate, to shareholders of record as of November 18, 2024 , which is to be paid on November 26, 2024 .

Between October 1, 2024 and November 13, 2024, the Company transferred approximately $ 16.9 million of mortgages receivable, net to real estate owned.

Between October 1, 2024 and November 13, 2024, through the Company’s at-the-market offering facility, the Company sold no common shares, and 6,802 shares of its Series A Preferred Stock having an aggregate liquidation preference of $ 0.2 million, realizing gross proceeds of $ 0.1 million (representing a discount of 14.3 % from the liquidation preference.)

Effective on October 10, 2024, the Company’s Board of Directors adopted a new stock repurchase plan (the “New Repurchase Plan”) to replace the Original Repurchase Plan, pursuant to which the Company may repurchase up to an aggregate of $ 5,802,959.45 of its common shares.

Under the New Repurchase Plan, share repurchases will be made from time to time on the open market at prevailing market prices in accordance with applicable federal securities laws, including Rule 10b-18 of the Securities Exchange Act of 1934, as amended.

The New Repurchase Plan is expected to continue until the earlier of the repurchase of all the

SACHEM CAPITAL CORP.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024

common shares under the plan or termination with its terms.

Ladenburg Thalmann & Co.

and Janney Montgomery Scott LLC will act as the Company’s exclusive purchasing agents under the New Repurchase Plan.

On October 5, 2024, the Company retained the services of Mission Capital (“Mission”), a subsidiary of Marcus and Millichap, which is a real estate capital markets firm, to act as its sole and exclusive advisor in connection with the proposed sale by the Company of a pool of mortgage loans having an aggregate principal amount of approximately $ 78.8 million.

A majority of the loans offered for sale are designated by the Company as “non-accrual” loans, which means payments due under such loans are more than 90 days in arrears.

The sale process formally commenced in early October when Mission began to solicit indications of interest from potential buyers.

Indications of Interest were due by November 5, 2024.

Final bids are due by December 4, 2024.

The Company expects to consummate the sale before December 31, 2024.

The net proceeds from the proposed sale of the mortgage loans will be used for working capital and general corporate purposes.

All or a portion of such net proceeds may also be used to repay the December 2024 Notes.

Between October 1, 2024 and November 13, 2024, the Company repurchased 46,043 of its common shares through the Original Repurchase Plan.

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