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Item 9A. Controls and Procedures

2025-03-31 compared with 2024-04-01 · 942 added, 936 removed, 555 unchanged (77% of the section changed)

1 unchanged sentence

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of John L.

Villano, our chief executive and interim chief financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2023 (the “Evaluation Date”).

Based upon that evaluation, Mr.

Villano concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act (i) are recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (ii) are accumulated and communicated to our management, including our chief executive and interim chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

Management, with the participation of our Principal Executive Officer and Principal Accounting Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2024 (the “Evaluation Date”).

Based on this evaluation, our Principal Executive Officer and Principal Accounting Officer concluded that our disclosure controls and procedures were not effective as of the Evaluation Date.

This conclusion was based on the identification of a material weakness in our internal control over financial reporting related to stock-based compensation, as described in Management’s Report on Internal Control over Financial Reporting below.

Specifically, the material weakness resulted from deficiencies in the design and operation of controls surrounding the authorization and accounting for equity awards, which could impact the reliability of financial reporting and the accuracy of disclosures included in our periodic SEC filings.

Management has initiated remediation efforts, including strengthening review procedures and implementing enhanced oversight of equity award approvals, which are ongoing as of the date of this Report.

Management’s Annual Report on Internal Control Over Financial Reporting

1 unchanged sentence

As defined by the SEC, internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of John L.

Villano, our principal executive and principal accounting officer, and effected by the Board, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Villano and Jeffery C.

Walraven, our Principal Executive Officer and Principal Accounting Officer, respectively, and effected by the Board, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Our internal control over financial reporting is supported by written policies and procedures that:

(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

6 unchanged sentences

The COSO Framework summarizes each of the components of a company’s internal control system, including (i) the control environment, (ii) risk assessment, (iii) control activities, (iv) information and communication, and (v) monitoring.

Based on this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2023 .

Based on this evaluation, management identified a material weakness in our internal control over financial reporting relating to stock-based compensation.

Specifically, the Compensation Committee authorized a grant of restricted stock to an executive that exceeded the individual award limit prescribed by the Company’s 2016 Equity Compensation Plan.

Although the executive voluntarily forfeited the over-authorized shares upon discovery, management concluded that this deficiency demonstrated a failure in the design and operation of controls to ensure compliance with plan-based limits on equity compensation.

Additionally, controls were not designed or operating effectively to ensure that the amount of stock-based compensation expense recorded was appropriately calculated.

As a result, these control deficiencies could have resulted in a material misstatement in our financial statements that would not be prevented or detected on a timely basis.

Accordingly, management has concluded that our internal control over financial reporting was not effective as of December 31, 2024.

Management has initiated steps to remediate the material weakness, including strengthening procedures around the review and authorization of equity awards and implementing enhanced oversight to ensure compliance with the terms of the 2016 Equity Compensation Plan.

These efforts are ongoing as of the date of this report.

This Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting.

3 unchanged sentences

Other Information

Amendment of Bylaws

On March 25, 2025, the Board adopted and approved the Amended and Restated Bylaws of the Company (the “Amended and Restated Bylaws”), effective as of such date.

The Amended and Restated Bylaws, among other things:

● Adopt advance notice requirements for shareholders submitting a director nomination or shareholder proposal pursuant to the Amended and Restated Bylaws, including requiring certain information about such nomination or proposal and the nominating or proposing shareholder;

● Require shareholders seeking to take action by written consent in lieu of a shareholder meeting to request that the Board fix a record date for the purpose of determining the shareholders entitled to take such action;

● Specify the powers of the chair of a shareholder meeting to regulate conduct at such meeting and to adjourn the meeting;

● Require director candidates to make themselves available for interviews with members of the Board;

● Provide that special meetings of the Board may be held with less than 24 hours’ notice, if necessary or appropriate under the circumstances;

● Conform certain provisions of the Amended and Restated Bylaws to terms of the New York Business Corporation Law, including as related to quorum requirements, notices of shareholder meetings, and the maintenance of shareholder lists;

● Make various other updates, including ministerial and conforming changes and the elimination of obsolete provisions.

The foregoing does not purport to be complete and is qualified in its entirety by reference to the Amended and Restated Bylaws attached hereto as Exhibit 3.2 and incorporated herein by reference.

2025 Annual Meeting of Shareholders

The Company plans to hold its 2025 Annual Meeting of Shareholders (the “2025 Annual Meeting”) on July 9, 2025.

In accordance with the requirements set forth in the Amended and Restated Bylaws, a shareholder seeking to submit a proposal or to make a nomination for consideration by shareholders at the 2025 Annual Meeting without the inclusion of such proposal or nomination in our proxy materials must comply with the requirements set forth in our Amended and Restated Bylaws, including by delivering a notice of the shareholder’s proposal or nomination to the Secretary at the Company’s principal executive offices at 568 East Main Street, Branford, CT 06405.

Such notice must be received by the Secretary at such address no later than April 10, 2025.

In addition, to comply with the universal proxy rules, shareholders who intend to solicit proxies in support of director nominees other than the Company’s nominees must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act (including a statement that such shareholder intends to solicit the holders of shares representing at least 67% of the voting power of the Company’s shares entitled to vote on the election of directors in support of director nominees other than the Company’s nominees), which notice must be postmarked or transmitted electronically to the Company at its principal executive offices at 568 East Main Street, Branford, CT 06405 no later than May 12, 2025.

Because the expected date of the 2025 Annual Meeting is more than 30 days from the date of the anniversary of the Company’s 2024 Annual Meeting of Shareholders, we are informing shareholders of this change and the updated deadline for shareholders to submit proposals intended for inclusion in our proxy statement and form of proxy for consideration at the 2025 Annual Meeting in accordance with Rule 14a-8 under the Exchange Act.

Accordingly, to be timely, shareholders wishing to submit proposals intended to be considered for inclusion in our proxy and form of proxy statement relating to the 2025 Annual Meeting must ensure that proper notice is received by us at our offices no later than April 10, 2025, which we consider a reasonable time before we will begin printing and sending proxy materials.

(b) Insider Trading Arrangements

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

1 unchanged sentence

Directors, Executive Officers and Corporate Governance.

Our directors are elected annually by our shareholders and serve for one-year terms until his/her successor is elected and qualified or until such director’s earlier death, resignation or removal.

The executive officers are appointed by and serve at the pleasure of the Board.

Our executive officers and directors, and their respective ages as of March 29, 2024, are as follows:

Chairman of the Board, Chief Executive Officer, President and interim Chief Financial Officer

Leslie Bernhard (1, 2)

Goldberg (1, 3)

(1) Member of the Audit, Compensation and Nominating and Corporate Governance Committees.

(2) Chair of the Compensation Committee.

(3) Chair of the Audit Committee.

(4) Chair of the Nominating and Corporate Governance Committee.

Set forth below is a brief description of the background and business experience of our executive officers and directors:

Villano is Chairman of the Board, Chief Executive Officer, President and Interim Chief Financial Officer.

Villano is one of our founders.

Villano was appointed as a director and Chairman of the Board, Co-Chief Executive Officer, Chief Financial Officer and Secretary in February 2017, immediately prior to our initial public offering.

In November 2019, upon the resignation of his brother, Jeffrey C.

Villano, he became our sole Chief Executive Officer and was appointed Treasurer in addition to his then current positions with the Company and resigned as Secretary.

Villano served as our Chief Financial Officer until August 2022, when we hired John E.

Warch, and as our Treasurer until July 2022.

He was appointed as our Interim Chief Financial Officer in May 2023 upon the departure of Mr.

Warch, our then Chief Financial Officer.

Villano has been designated as our principal executive officer and principal accounting officer.

Villano is a certified public accountant and was engaged in the private practice of accounting and auditing for almost 30 years.

His responsibilities include overseeing all aspects of our business operations, including loan origination and servicing, investor relations, brand development and business development.

He is also responsible for all our accounting and financial matters.

Villano holds a bachelor’s degree in accounting from the University of Rhode Island in 1982.

We believe that Mr.

Villano’s experience in managing our business since its inception and his professional background as a certified public accountant make him an important part of our management team and make him a worthy candidate to serve on the Board.

Leslie Bernhard was appointed as a director in February 2017 immediately prior to the consummation of our initial public offering.

In February 2024, she also joined the board of directors of Sharplink Gaming Inc.

SBET), an online technology company, as a director.

In addition, since November 2023, she has been serving as the chairman of the board of Nexalin Technology, Inc.

NXL), a company that designs and develops medical devices that utilizes bioelectronic medical technology.

Prior to that, she served as an independent director of Milestone Scientific Inc.

(NYSE American:

MLSS), a developer and manufacturer of medical and dental devices, from May 2003 until January 4, 2023 and as the non-executive chairman of the Milestone board of directors from October 2009 through January 4, 2023.

She also served as interim chief executive officer of Milestone from October 2017 to December 2017.

From 2007 through September 2018, Ms.

Bernhard served as an independent director of Universal Power Group, Inc., a global supplier of power solutions (“UPG”), and as a consultant to UPG from September 2018 to December 2020.

Bernhard co-founded AdStar, Inc., an electronic ad intake service to the newspaper industry, and served as its president, chief executive officer and executive director until 2012.

Bernhard holds a BS Degree in Education from St.

John’s University.

We believe that Ms.

Bernhard’s experience as an entrepreneur and her service as a director of other public corporations will enable her to make an important contribution to the Board.

Goldberg was appointed as a director in February 2017 immediately prior to the consummation of our initial public offering.

He has been a private accounting and business consultant since April 2012.

From March 2011 through June 2015, he served as a director of Sport Haley Holdings, Inc., a manufacturer and distributor of sportswear and furniture.

From January 2008 through March 2013, he served as a member of the board of directors of SED International Holdings, Inc.

SEDN), a distributor of consumer electronics.

From January 2008 through March 2012, he served as the chief financial officer of Clear Skies Solar, Inc., an installer of solar panels.

Goldberg has held senior executive positions, including chief financial officer and chief operating officer, and served as a director of several public companies.

From January 2008 through June 2008, he served as the chief financial officer of Milestone Scientific, Inc.

(NYSE American:

MLSS), a developer and manufacturer of medical and dental devices.

From June 1999 through April 2005, Mr.

Goldberg was a partner with Tatum CFO Partners, LLP, which provided interim CFO staffing services for public and private companies.

Goldberg is an attorney and a certified public accountant and holds a B.B.A.

degree from the City College of New York, an M.B.A.

from the University of Chicago and J.D.

and LLM degrees from the New York University School of Law.

Goldberg was selected as a director because of his experience as the senior executive, operations and financial officer of several public companies and because of his background in law and accounting.

We believe that his background and experience will provide the Board with a perspective on corporate finance matters.

Given his financial experience, the Board has also determined that Mr.

Goldberg qualifies as the Audit Committee financial expert, pursuant to Item 407(d)(5) of Regulation S-K promulgated by the U.S.

Securities and Exchange Commission (the “SEC”).

Prinz was appointed as a director in February 2017 immediately prior to the consummation of our initial public offering.

Since 1976, Mr.

Prinz has been employed by Current, Inc., a leading manufacturer of laminated products including sheeting, tubes, rods, spacers and standoffs, as well as electrical grade laminates, a variety of carbon fiber products and other industrial products, which are used in various industries including construction, recreation, energy exploration and defense.

Since 2011, Mr.

Prinz has served as its president and chief financial officer.

Prinz graduated from Bryant College with a B.A.

We believe that his background and experience make him well qualified to serve as a member of the Board.

Director Independence and Committees of the Board of Directors

The members of the Board are John L.

Villano, Leslie Bernhard, Arthur Goldberg and Brian Prinz.

The Board has determined, in accordance with the NYSE American LLC Company Guide, that:

Bernhard and Messrs.

Goldberg and Prinz are independent and represent a majority of the directors;

Bernhard and Messrs.

Goldberg and Prinz, as the members of the Audit Committee, the Nominating and Corporate Governance and Compensation Committee, are independent for such purposes.

In determining director independence, the Board applies the independence standards set by NYSE American.

In applying these standards, the Board considers all transactions with the independent directors and the impact of such transactions, if any, on any of the independent directors’ ability to continue to serve on the Board.

We have three standing committees:

an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee.

Each committee is made up entirely of independent directors as defined under the NYSE American LLC Company Guide.

Goldberg is the chairman of the Audit Committee and qualifies as the “audit committee financial expert” pursuant to Item 407(d)(5) of Regulation S-K;

Bernhard is the chairman of the Compensation Committee;

Prinz is the chairman of the Nominating and Corporate Governance Committee.

As members of the committees, independent directors meet without the presence of non-independent directors in executive session.

Audit Committee.

The Audit Committee oversees our accounting and financial reporting processes, internal systems of accounting and financial controls, relationships with auditors and audits of financial statements.

Specifically, the Audit Committee’s responsibilities include the following:

● selecting, hiring and terminating our independent auditors;

● evaluating the qualifications, independence and performance of our independent auditors;

● approving the audit and non-audit services to be performed by the independent auditors;

● reviewing the design, implementation and adequacy and effectiveness of our internal controls and critical policies;

● overseeing and monitoring the integrity of our financial statements and our compliance with legal and regulatory requirements as they relate to our financial statements and other accounting matters;

● with management and our independent auditors, reviewing any earnings announcements and other public announcements regarding our results of operations;

● preparing the report that the SEC requires in our annual proxy statement.

Compensation Committee.

The Compensation Committee assists the Board in determining the compensation of our officers and directors.

The Compensation Committee is comprised entirely of directors who satisfy the standards of independence applicable to compensation committee members established under 162(m) of the Code and Section 16(b) of the Exchange Act.

Specific responsibilities include the following:

● approving the compensation and benefits of our executive officers;

● reviewing the performance objectives and actual performance of our officers;

● administering our stock option and other equity and incentive compensation plans.

Nominating and Corporate Governance Committee.

The Corporate Governance and Nominating Committee assists the Board by identifying and recommending individuals qualified to become members of the Board.

Specific responsibilities include the following:

● evaluating the composition, size and governance of the Board and its committees and making recommendations regarding future planning and the appointment of directors to our committees;

● establishing a policy for considering shareholder nominees to the Board;

● reviewing our corporate governance principles and making recommendations to the Board regarding possible changes;

● reviewing and monitoring compliance with our Code of Ethics and insider trading policy.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our officers and directors, and persons who own more than 10% of a registered class of our equity securities to file reports of ownership and changes in ownership with the SEC.

Officers, directors and greater than ten percent (10%) shareholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.

To the best of our knowledge, based solely on review of the copies of such forms furnished to us, or written representations that no other forms were required, we believe that all Section 16(a) filing requirements applicable to its officers, directors and greater than 10% shareholders were complied with during the year ended December 31, 2023 except as set forth below.

Delinquent Section 16(a) Reports

Code of Ethics

We have adopted a code of ethics that applies to our directors, principal executive officer, principal financial officer and other persons performing similar functions.

The Code of Ethics is posted on our web site at www.sachemcapitalcorp.com .

We will also provide a copy of the Code of Ethics to any person without charge, upon written request addressed to John L.

Villano at our principal executive office located at 568 East Main Street, Branford, CT 06405.

The information required by Item 10 is hereby incorporated by reference from our definitive Proxy Statement relating to our 2025 Annual Meeting of Shareholders, to be filed with the Securities and Exchange Commission not later than 120 days following the end of our fiscal year.

Executive Compensation.

The following Summary Compensation Table sets forth all compensation earned by or paid to, in all capacities, during the years ended December 31, 2023 and 2022 to John L.

Other than Mr.

Villano, no one else qualified as a “Named Executive Officer” as defined in Item 402(a)(3) of Regulation S-K.:

Summary Compensation Table

Name and Principal Position

Chairman of the Board, Chief Executive Officer, President, interim Chief Financial Officer and Director

(1) Represents the aggregate grant-date fair value of the awards computed in accordance with Financial Accounting Standards Board Accounting Standards Codified Topic 718 (“FASB ASC Topic 718”).

(2) Represents the grant-date fair value on an aggregate of 130,890 Common Shares awarded on February 17, 2023, computed in accordance with FASB ASC Topic 718.

(3) Represents the grant-date fair value on an aggregate of 98,425 Common Shares awarded on April 5, 2022, computed in accordance with FASB ASC Topic 718.

(4) Represents an auto allowance of $26,000 per annum and a one-time payment by the Company, in the amount of $88,392, to cover the estimated tax liability for the 2023 Stock Award.

Employment Agreements — John L.

In August 2016, in anticipation of our initial public offering, we entered into an employment agreement with John L.

The material terms of Mr.

Villano’s employment agreement are as follows.

Villano serves as our chairman, chief executive officer, president and interim chief financial officer.

● The term of his employment, which commenced in February 2017, is five years, unless terminated earlier in accordance with his employment agreement.

The termination date is extended one year on each anniversary date of the agreement unless either party to the agreement provides written notice at least 180 days before the next anniversary date that it is electing not to renew the agreement, in which case the agreement will terminate at the end of the fourth year from the next anniversary date.

● As of April 2021, Mr.

Villano’s base salary was $500,000 per annum.

In addition, for the year ended December 31, 2021, he was entitled to a one-time cash bonus of $250,000, which was paid in 2021.

He was also entitled to a “target bonus” of up to $250,000, as determined by the Compensation Committee, which would have been payable in 2022.

Villano waived his right to receive the target bonus.

● In April 2022, Mr.

Villano’s base salary was increased to $750,000 per annum, retroactive to January 1, 2022.

Villano is entitled to incentive compensation in such amount as shall be determined by the Compensation Committee of the Board in its sole and absolute discretion, based on our achievement of the financial performance goals set by the Board of directors and capital transactions.

Villano has the right to participate in all retirement, pension, deferred compensation, insurance and other benefit plans adopted and maintained by us for the benefit of employees and be entitled to additional compensation in an amount equal to the cost of any such benefit plan or program if he chooses not to participate.

Villano is indemnified to the full extent permitted by law against and for any claims, liabilities, losses, expenses and costs incurred that relate to any acts or omission taken in his capacity as an officer or director.

● We have the right to terminate the employment agreement at any time with or without cause and for death or disability (as defined in the employment agreement).

See below for the payments due upon a termination.

Villano is subject to a two-year non-competition provision if we terminate the employment agreement for cause.

● In the event any payment to the employee is subject to an excise tax under the Code, we are obligated to pay Mr.

Villano an additional amount equal to the amount of the excise tax and any other taxes (whether in the nature of excise taxes or income taxes) due with respect to such payment.

In April 2021, Mr.

Villano received a grant of 89,928 restricted Common Shares (based on the closing price of $5.56 per Common Share on April 8, 2021) vesting in three equal installments on each of January 1, 2022, 2023 and 2024, which are subject to forfeiture, to the extent unvested, if he voluntary resigns as an employee of the Company without “Good Reason” or if his employment is terminated for “Cause.”

In April 2022, Mr.

Villano received a grant of 98,425 restricted Common Shares (based on the closing price of $5.08 per Common Share on April 5, 2022) vesting in three equal installments on each of January 1, 2023, 2024 and 2025, which are subject to forfeiture under the same terms and conditions as the 2021 grant.

In February 2023, Mr.

Villano received a grant of 130,890 restricted Common Shares (based on the closing price of $3.82 per Common Share on February 16, 2023) vesting in three equal installments on each of January 1, 2024, 2025 and 2026, which are subject to forfeiture under the same terms and conditions as the 2021 grant.

In March 2024, Mr.

Villano received a grant of 111,857 restricted Common Shares (based on the closing price of $4.53 per Common Share on March 19, 2024) vesting in three equal installments on each of January 1, 2025, 2026, and 2027, which are subject to forfeiture under the same terms and conditions as the 2021 grant.

For the year ended December 31, 2022, Mr.

Villano was entitled to a “target bonus” of $250,000 as determined by the Compensation Committee, which was paid in March 2023.

In addition, for 2023, he was entitled to a “target bonus” of $375,000.

The Compensation Committee approved a bonus of $337,500 which is payable in 2024.

Termination and Change of Control Arrangement

Villano’s employment agreement provides that we may terminate his employment at any time with or without cause.

It also provides that his employment will terminate upon his death or disability.

If we terminate his employment for cause, we are only liable for his base salary and benefits through the date of termination.

In addition, he will not forfeit any rights to payments, options or benefits that have vested or have been earned or to which he is entitled as of the date of termination.

If we terminate his employment without cause or the agreement terminates due to Mr.

Villano’s death or disability or if Mr.

Villano terminates his employment for “Good Reason” (as defined in the employment agreement), he is also entitled to receive:

(i) a lump sum payment equal to 48 times his monthly salary on the date of termination;

(ii) any deferred compensation or accrued vacation pay;

(iii) continuation for a 12-month period after termination of health and welfare and long-term disability benefits;

and (iv) a pro rata share of any incentive compensation and any other compensation or benefits to which he would have been entitled had he not been wrongfully terminated.

Good Reason includes a “change in control” with respect to us.

A “change in control” means (1) if we merge into another corporation and, as a result of such merger, our shareholders immediately prior to such merger own less than 50% of the surviving corporation;

(2) we sell, lease or otherwise dispose of all or substantially all of our assets;

(3) the acquisition of beneficial ownership, directly or indirectly, of our Common Shares or any other securities having voting rights that we may issue in the future, rights to acquire our voting securities (including, without limitation, securities that are convertible into voting securities and rights, options warrants and other agreements or arrangements to acquire such voting securities) by any person, corporation or other entity or group thereof acting jointly, in such amount or amounts as would permit such person, corporation or other entity or group thereof acting jointly to elect a majority of the members of the Board, as then constituted;

or (4) the acquisition of beneficial ownership, directly or indirectly, of voting securities and rights to acquire voting securities having voting power equal to 40% or more of the combined voting power of our then outstanding voting securities by any person, corporation or other entity or group thereof acting jointly unless such acquisition is expressly approved by resolution of the Board passed upon affirmative vote of not less than a majority of the

directors and adopted at a meeting of the Board held not later than the date of the next regularly scheduled or special meeting held following the date we obtain actual knowledge of such acquisition (which approval may be limited in purpose and effect solely to affecting the rights of the executive under his employment agreement).

Notwithstanding the preceding sentence, any transaction that involves a mere change in identity form or place of organization within the meaning of Section 368(a)(1)(F) of the Code, or a transaction of similar effect, will not constitute a “change in control.”

Outstanding Equity Awards at December 31, 2023

The following table sets forth information concerning outstanding equity awards to the Named Executives as of December 31, 2023.

Number of shares or units of

Market value of shares or

stock that have not vested

units of stock that have not vested

(1) Calculated based on the closing market price of $3.74 on December 29, 2023.

(2) 106,414 of these restricted Common Shares vest on January 1, 2024, 76,439 of these restricted Common Shares vest on January 1, 2025 and 43,630 of these restricted Common Shares vest on January 1, 2026.

Unvested shares may not be transferred, sold, pledged, hypothecated or assigned, and are subject to forfeiture.

Compensation of Directors

Our non-employee director compensation plan, as amended on April 8, 2021 and retroactively effective as of January 1, 2021 (the “Director Plan”), provides as follows:

● each non-employee director will receive cash compensation at a rate of $60,000 per year, which amount shall be paid in equal quarterly installments of $15,000 on the first day of each calendar quarter ( i.e., January 1, April 1, July 1 and October 1);

● the additional cash compensation payable to the chairperson of each of the Audit Committee, the Compensation Committee and the Corporate Governance and Nominating Committee will remain unchanged as follows:

● the chairperson of the Audit Committee will receive additional cash compensation of $7,500 per year, payable in equal quarterly installments of $1,875 on the first day of each calendar quarter ( i.e., January 1, April 1, July 1 and October 1);

● the chairperson of the Compensation Committee will receive additional cash compensation of $5,000 per year, payable in equal quarterly installments of $1,250 on the first day of each calendar quarter ( i.e., January 1, April 1, July 1 and October 1);

● the chairperson of the Corporate Governance and Nominating Committee will receive additional cash compensation of $2,500 per year, payable in equal quarterly installments of $625 on the first day of each calendar quarter ( i.e., January 1, April 1, July 1 and October 1);

● each non-employee director will receive a grant of 5,000 Common Shares on the date he or she is re-elected to serve on the Board;

● the non-employee director serving on our Loan Approval Committee will receive additional cash compensation of $7,500 per year, payable in equal quarterly installments of $1,875 on the first day of each calendar quarter ( i.e., January 1, April 1, July 1 and October 1).

The Named Executives, who are also directors, do not receive additional compensation in connection with their positions as members of the Board.

The following table provides compensation information for the year ended December 31, 2023 for each of our non-employee directors.

Fees Earned or Paid

Leslie Bernhard

(1) During the year ended December 31, 2023, each of Ms.

Bernhard and Messrs.

Goldberg and Prinz was awarded a bonus of $30,000, which is included in their respective amount.

(2) During the year ended December 31, 2023, under the Director Plan, each of Ms.

Bernhard and Messrs.

Goldberg and Prinz was awarded an aggregate of 6,000 Common Shares, respectively.

The dollar amounts reflected in the table are the aggregate grant date fair value for the Common Shares awarded computed in accordance with FASB ASC Topic 718.

The information required by Item 11 is hereby incorporated by reference from our definitive Proxy Statement relating to our 2025 Annual Meeting of Shareholders, to be filed with the Securities and Exchange Commission not later than 120 days following the end of our fiscal year.

Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters

The following table, together with the accompanying footnotes, sets forth information, as of March 28, 2024, regarding stock ownership of all persons known by us to own beneficially more than 5% of our outstanding Common Shares, Named Executives, all directors, and all directors and officers of Sachem Capital as a group:

Number of Common

Shares Beneficially

Percentage of

Name of Beneficial Owner (1)

Executive Officers and Directors

Leslie Bernhard (5)

All officers and directors as a group (4 persons)

*Less than 1%.

(1) Unless otherwise provided, the address of each of the individuals above is c/o Sachem Capital Corp., 568 East Main Street, Branford, CT 06405.

(2) A person is deemed to be a beneficial owner of securities that can be acquired by such person within 60 days upon the exercise of options and warrants or conversion of convertible securities.

Each beneficial owner’s percentage ownership is determined by assuming that options, warrants and convertible securities that are held by such person (but not held by any other person) and that are exercisable or convertible within 60 days have been exercised or converted.

Except as otherwise indicated, and subject to applicable community property and similar laws, each of the persons named has sole voting and investment power with respect to the shares shown as beneficially owned.

(3) All percentages are determined based on 47,446,051 Common Shares outstanding as of March 28, 2024.

(4) Includes 231,926 restricted Common Shares which are subject to vesting including:

(i) 113,725 shares vest on January 1, 2025;

(ii) 80,916 shares vest on January 1, 2026;

and 37,285 shares vest on January 1, 2027.

Also includes 6,827 Common Shares owned by Mr.

Villano’s wife.

Villano disclaims ownership of the 6,827 Common Shares owned by his wife for the purposes of section 13(d) or 13(g) of the Exchange Act.

(5) Includes 8,250 restricted Common Shares that vest as follows:

(i) 1,500 shares vest on each of September 7, 2024, 2025 and 2026;

(ii) 2,500 shares vest on October 13, 2024;

and (iii) 1,250 shares vest on October 13, 2025.

Equity Compensation Plan Information

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

The basis of participation in the Plan is upon discretionary grants of awards by the Board.

The Plan is administered by the Compensation Committee.

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

Approximately 35 individuals are eligible to participate in the Plan including, our executive officer, 31 other employees and our three independent directors.

Number of securities

remaining available for

Number of securities

Weighted-average

future issuance under

to be issued upon

exercise price of

equity compensation

plans (excluding

outstanding options,

options, warrants

securities reflected in

Plan category

warrants and rights

Equity compensation plans approved by security holders

Not applicable

During the fiscal year ended December 31, 2023, we granted an aggregate of 196,056 restricted Common Shares under the Plan.

Types and Terms of Awards

Awards under the Plan may take the form of stock options (either incentive stock options or non- qualified stock options) or restricted shares.

Subject to restrictions that are set forth in the Plan, the Compensation Committee has complete and absolute authority to set the terms, conditions and provisions of each award, including the size of the award, the exercise or base price, the vesting and exercisability schedule (including provisions regarding acceleration of vesting and exercisability) and termination and forfeiture provisions.

The Compensation Committee is subject to the following specific restrictions regarding the types and terms of awards:

● The exercise price for a stock option may not be less than 100% of the fair market value of the stock on the date of grant.

● No award may be granted after the expiration of the Plan (more than ten years after the Plan adoption date).

No stock option can be “repriced” without the consent of the shareholders and of the option holder if the effect would be to reduce the exercise price per share.

Amendment and Termination of the Plan

The Plan expires on the tenth anniversary of the date of its adoption by the Board.

Prior to the expiration date, the board of directors may at any time, and from time to time, suspend or terminate the Plan in whole or in part or amend it from time to time;

provided, however, that unless otherwise determined by the Board, an amendment that requires shareholder approval in order for the Plan to continue to comply with Section 162(m) or any other law, regulation or stock exchange requirement shall not be effective unless approved by the requisite vote of shareholders.

Notwithstanding the foregoing, no amendment to or termination of the Plan shall affect adversely any of the rights of any grantee under any outstanding award granted under the Plan without such grantee’s consent.

Exercise Price of an Option Granted Under the Plan

The exercise price of an option granted under the Plan may be no less than the fair market value of a common share on the date of grant, unless, with respect to nonqualified stock options that are not intended as incentive stock options within the meaning of Section 422 of the Code from time to time, otherwise determined by the Compensation Committee.

However, incentive stock options granted to a ten percent (10%) shareholder must be priced at no less than 110% of the fair market value of our Common Shares on the date of grant and their term may not exceed five years.

All options granted under the Plan are for a term of no longer than ten years unless otherwise determined by the Compensation Committee.

The Compensation Committee also determines the exercise schedule of each option grant.

Federal Income Tax Consequences

The following is a summary of the effect of federal income taxation upon the recipients and us with respect to the shares under the Plan and does not purport to be complete.

Non-qualified Stock Options.

The grant of non-qualified stock options will have no immediate tax consequences to us or the grantee.

The exercise of a non-qualified stock option will require a grantee to include in his gross income the amount by which the fair market value of the acquired shares on the exercise date (or the date on which any substantial risk of forfeiture lapses) exceeds the option price.

Upon a subsequent sale or taxable exchange of the shares acquired upon exercise of a non-qualified stock option, a grantee will recognize long or short-term capital gain or loss equal to the difference between the amount realized on the sale and the tax basis of such shares.

We will be entitled (provided applicable withholding requirements are met) to a deduction for Federal income tax purposes at the same time and in the same amount as the grantee is in receipt of income in connection with the exercise of a non-qualified stock option.

Incentive Stock Options.

The grant of an incentive stock option will have no immediate tax consequences to us or our employee.

If the employee exercises an incentive stock option and does not dispose of the acquired shares within two years after the grant of the incentive stock option nor within one year after the date of the transfer of such shares to him (a “disqualifying disposition”), he will realize no compensation income and any gain or loss that he realizes on a subsequent disposition of such shares will be treated as a long-term capital gain or loss.

For purposes of calculating the employee’s alternative minimum taxable income, however, the option will be taxed as if it were a non-qualified stock option.

Restricted Shares.

Generally, unless the participant elects, pursuant to Section 83(b) of the Code to recognize income in the taxable year in which restricted shares have been awarded, the participant is required to recognize income for federal income tax purposes in the first taxable year during which the participant’s rights over the restricted shares are transferable or are not subject to a substantial risk of forfeiture, whichever occurs earlier.

At such time, we will be entitled (provided applicable withholding requirements are met) to a deduction for Federal income tax purposes except to the extent that such participant’s total compensation for the taxable year exceeds $1.0 million, in which case such deduction may be limited by Section 162(m) of the Code unless any such grant of restricted shares is made pursuant to a performance-based benchmark established by the Compensation Committee.

As of December 31, 2023, there were no options granted under the Plan.

The information required by Item 12 is hereby incorporated by reference from our definitive Proxy Statement relating to our 2025 Annual Meeting of Shareholders, to be filed with the Securities and Exchange Commission not later than 120 days following the end of our fiscal year.

Certain Relationships and Related Transactions and Director Independence.

We have adopted a policy that prohibits any transaction between us and a related party unless the terms of that transaction are no less favorable to us than if we had entered into the same transaction with an unrelated party and the transaction is approved by our Audit Committee or other independent committee of the board of directors, in the case where it is inappropriate for our Audit Committee to review such a transaction due to a conflict of interest.

During the years ended December 31, 2023 and 2022:

(i) the wife of our chief executive officer was paid $-0- and $63,168, respectively, for accounting and financial reporting services provided to us.

She retired in the third quarter of 2022;

and (ii) the daughter of our chief executive officer was paid $192,346 and $141,652, respectively, for internal audit and compliance services provided to us.

The information required by Item 13 is hereby incorporated by reference from our definitive Proxy Statement relating to our 2025 Annual Meeting of Shareholders, to be filed with the Securities and Exchange Commission not later than 120 days following the end of our fiscal year.

Principal Accounting Fees and Services

The aggregate fees billed by Hoberman & Lesser, CPA’s, LLP , our principal accounting firm, for the fiscal years ended December 31, 2023 and 2022, are set forth below.

All other fees

● In 2023, the audit fees include fees for professional services rendered for (i) the review of our quarterly financial statements and (ii) other services that are normally provided in connection with statutory and regulatory filings.

● In 2022, the audit fees include fees for professional services rendered for (i) the review of our quarterly financial statements, (ii) the review of our shelf registration statement (File No.

333-262859) on Form S-3 under the Securities Act of 1933, as amended, which was declared effective by the SEC on February 25, 2022, (iii) the review of four separate prospectus supplements to the aforementioned shelf registration statement on Form S-3 and (iv) other services that are normally provided in connection with statutory and regulatory filings.

Audit Committee Pre-Approval Policies and Procedures

The Audit Committee charter provides that the Audit Committee will pre-approve audit services and non- audit services to be provided by the independent auditors before the accountant is engaged to render these services.

The Audit Committee may consult with management in the decision-making process but may not delegate this authority to management.

The Audit Committee may delegate its authority to preapprove services to one or more committee members, provided that the designees present the pre-approvals to the full committee at the next committee meeting.

All audit and non-audit services performed by the independent accountants must be pre-approved by the Audit Committee to assure that such services do not impair the auditors’ independence from us.

The information required by Item 14 is hereby incorporated by reference from our definitive Proxy Statement relating to our 2025 Annual Meeting of Shareholders, to be filed with the Securities and Exchange Commission not later than 120 days following the end of our fiscal year.

Exhibits and Financial Statement Schedules

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Certificate of Amendment to Certificate of Incorporation filed on August 23, 2022 (20)

Amended and Restated Bylaws, effective as of November 25, 2019(3)

Amended and Restated Bylaws, effective as of March 25.

Indenture, dated as of June 21, 2019, between Sachem Capital Corp.

Bank National Association, as Trustee (4)

First Supplemental Indenture, dated as of June 25, 2019, between Sachem Capital Corp.

Bank National Association, as Trustee (4)

Form of 7.125% Notes due 2024(4)

Second Supplemental Indenture between Sachem Capital Corp.

Bank National Association, as Trustee (2)

Form of 6.875% Notes due 2024(6)

Third Supplemental Indenture between Sachem Capital Corp.

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Agreement and General Release, dated as of January 14, 2022, between Sachem Capital Corp.

Final Form of the Restrictive Stock Grant Agreement dated April 2022 under the Sachem Capital Corp.

2016 Equity Compensation Plan between Sachem Capital Corp.

Final Form of the Restrictive Stock Grant Agreement dated October 13, 2021 under the Sachem Capital Corp.

2016 Equity Compensation Plan between Sachem Capital Corp.

and each of Leslie Bernhard, Arthur Goldberg and Brian Prinz (19)

Final Form of the Restrictive Stock Grant Agreement dated July 19, 2022 under the Sachem Capital Corp.

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and each of Leslie Bernhard, Arthur Goldberg and Brian Prinz (18)

Credit and Security Agreement, dated as of March 2, 2023, among Sachem Capital Corp., the lenders party thereto and Needham Bank, as administrative agent (22)

First Amendment to the Credit and Security Agreement, dated as of September 8, 2023, among Sachem Capital Corp., the lenders party thereto and Needham Bank, as administrative agent (24)

Final Form of the Restrictive Stock Grant Agreement dated February 17, 2023 under the Sachem Capital Corp.

Credit and Security Agreement, dated as of March 20, 2025, among SN Holdings, LLC, as the borrower, Sachem Capital Corp., as the guarantor, the lenders party thereto and Needham Bank, as administrative agent (27)

Fin al Form of the Restrictive Stock Grant Agreement dated February 17, 2023 under the Sachem Capital Corp.

2016 Equity Compensation Plan between the Company and John L.

Separation Agreement and General Release, dated as of May 5, 2023, between Sachem Capital Corp.

Final Form of the Restricted Stock Grant Agreement dated March 19, 2024 under the Sachem Capital Corp.

2016 Equity Compensation Plan between the Company and John L.

Cooperation Agreement, dated August 20, 2024, between Sachem Capital Corp.

and Blackwells Capital LLC, Blackwells Onshore I LLC and Jason Aintabi (24)

Final Form of the Restrictive Stock Grant Agreement dated September 7, 2023 under the Sachem Capital Corp.

2016 Equity Compensation Plan between Sachem Capital Corp.

and each of Leslie Bernhard, Arthur Goldberg and Brian Prinz (25)

Letter Agreement, dated December 13, 2024, between the Company and Jeffery C.

Walraven (a portion of the exhibit has been excluded from the exhibit because it both (i) is not material and (ii) is the type that the company treats as private or confidential) (26).

Final Form of the Restrictive Stock Grant Agreement dated March 10, 2025 under the Sachem Capital Corp.

2016 Equity Compensation Plan between Sachem Capital Corp.

and each of Arthur Goldberg, Brian Prinz and Jeffery Walraven*

Code of Ethics(7)

Insider Trading Policy of the Company*

List of Subsidiaries*

Consent of Baker Tilly US, LLP, dated March 31, 2025*

Consent of Hoberman & Lesser CPA’s, LLP, dated March 31, 2025*

Chief Executive and Financial Officer Certification as required under section 302 of the Sarbanes Oxley Act *

Chief Executive and Financial Officer Certification pursuant to 18 U.S.C.

Chief Executive Officer Certification as required under section 302 of the Sarbanes Oxley Act *

Chief Financial Officer Certification as required under section 302 of the Sarbanes Oxley Act *

Chief Executive Officer Certification pursuant to 18 U.S.C.

section 1350 as adopted pursuant to section 906 of the Sarbanes Oxley Act ***

Chief Financial Officer Certification pursuant to 18 U.S.C.

section 1350 as adopted pursuant to section 906 of the Sarbanes Oxley Act ***

Policy Relating to Recovery of Erroneously Awarded Compensation (23)

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Intentionally omitted.

(6) Previously filed as an exhibit to the Current Report on Form 8-K on November 6, 2019 and incorporated herein by reference.

Previously filed as an exhibit to the Current Report on Form 8-K on September 9, 2020, and incorporated herein by reference.

4 unchanged sentences

Previously filed as an exhibit to the Current Report on Form 8-K on July 27, 2021, and incorporated herein by reference.

Intentionally omitted.

Previously filed as an exhibit to the Current Report on Form 8-K on March 9, 2022, and incorporated herein by reference.

8 unchanged sentences

Previously filed as an exhibit to the Quarterly Report on Form 10-Q for the period ended March 31, 2023, and incorporated herein by reference.

Previously filed as an exhibit to the Annual Report on Form 10-K for the year ended December 31, 2023, and incorporated herein by reference.

Previously filed as an exhibit to the Current Report on Form 8-K on August 26, 2024, and incorporated herein by reference.

Previously filed as an exhibit to the Quarterly Report on Form 10-Q for the period ended September 30, 2024, and incorporated herein by reference.

Previously filed as an exhibit to the Current Report on Form 8-K on December 16, 2024, and incorporated herein by reference.

Previously filed as an exhibit to the Current Repoty on Form 8-K on March 27, 2025, and incorporated herein by reference.

No financial statement schedules are included because the information is either provided in the financial statements or is not required under the related instructions or is inapplicable and such schedules therefore have been omitted.

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SACHEM CAPITAL CORP.

President, Chief Executive Officer and Interim Chief Financial Officer

(Principal Executive, Accounting and Financial Officer)

April 1, 2024

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on April 1, 2024:

Chairman, Chief Executive Officer, President, Interim Chief Financial Officer and Director

(Principal Executive, Accounting and Financial Officer)

President and Chief Executive Officer

(Principal Executive Officer)

March 31, 2025

Chairman, Chief Executive Officer and President

(Principal Executive Officer)

/s/ Jeffery C.

Interim Chief Financial Officer and Director

(Principal Accounting and Financial Officer)

/s/ Leslie Bernhard

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FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023

Reports of Independent Registered Public Accounting Firms ( PCAOB ID 694 )

Report of Independent Registered Public Accounting Firm (PCAOB ID 23 )

Report of Predecessor Auditor (PCAOB ID 694 )

Consolidated Financial Statements:

Consolidated Balance Sheets

Consolidated Statements of Comprehensive Income

Consolidated Statements of Operations

Consolidated Statements of Comprehensive (Loss) Income

Consolidated Statements of Changes in Shareholders’ Equity

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the board of directors of Sachem Capital Corp.:

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Sachem Capital Corp.

(the “Company”) as of December 31, 2024, the related statements of operations, comprehensive loss, changes in shareholders’ equity, and cash flows, for the year ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for the year ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Allowance for Credit Losses

Critical Audit Matter Description

As described in Note 2, the Company records an allowance for credit losses in accordance with the current expected credit loss standard on the Company’s loan portfolio, including unfunded construction commitments, on a collective basis by assets with similar risk characteristics.

The Company utilizes a vintage loss-rate method for estimating current expected credit losses.

The vintage loss-rate method involves applying a loss rate to a pool of loans with similar risk characteristics to estimate the expected credit losses on that pool of loans.

In determining the allowance for credit losses, the Company considers various factors including (1) historical loss experience and unrealized forecasted losses in its portfolio, (2) loan specific losses for loans deemed collateral dependent based on excess amortized cost over the fair value of the underlying collateral, and (3) its current and future view of the macroeconomic environment.

Management estimates the allowance for credit losses using relevant information, from internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts.

The allowance for credit losses is maintained at a level sufficient to provide for expected credit losses over the life of the loans based on evaluating historical credit loss experience and to make adjustments to historical loss information for differences in the specific risk characteristics in the current loan portfolio.

We identified the allowance for credit losses as a critical audit matter as auditing the allowance for credit losses required significant auditor judgment as amounts determined by management rely on analysis that is highly subjective and includes significant estimation uncertainty.

How the Critical Audit Matter was Addressed in the Audit

The primary procedures we performed to address this critical audit matter included:

● Evaluated management’s allowance for credit losses methodology, including the vintage loss-rate method, and concluded it was appropriate and consistently applied.

● Tested the completeness and accuracy of key internal data sources and verified external data inputs used in the model.

● Assessed key assumptions such as segmentation by region and vintage, historical loss rates, and the lookback period by recalculating rates and performing sensitivity analysis.

● Evaluated qualitative adjustments by reviewing macroeconomic indicators and tested the consistency and supportability of applied basis point allocations.

Classification, Valuation, and Disclosure of Investments in Limited Liability Companies

Critical Audit Matter Description

As described in Notes 2 and 17, the Company has certain investments in limited liability companies, consisting of limited liability membership equity investments in real estate note-on-note mortgage investment vehicles, direct investments in real estate, and a direct investment in a real estate asset manager.

The Company accounts for its investments in limited liability companies based on the level of ownership, control, and influence in accordance with ASC 810, Consolidations , ASC 323, Equity Method and Joint Ventures, and ASC 321 , Investments in Equity Securities .

These investments require a detailed analysis of the type of investment on an investment-by-investment basis to determine the appropriate classification of the investment as to whether the investment should be reported using the cost basis, the equity method or whether the investment should be consolidated based on the accounting literature.

Management evaluated the operating agreements and concluded that the Company does not have control over the investees as defined in ASC 810, Consolidations .

Management further evaluated their investments in limited liability companies, and determined the Company does not have significant influence over the investees as defined in ASC 323, Equity Method and Joint Ventures.

As such, management elected to apply the measurement alternative in accordance with ASC 321, Investments in Equity Securities, and carry the investments at cost less impairment.

We identified management’s assessment of whether the operating agreements for investments in limited liability companies provide the Company with a controlling financial interest or significant influence as a critical audit matter due to the complexity of applying the accounting principles of ASC 810, ASC 323, and ASC 321 to the various operating agreements.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the assessment of whether the investments in limited liability companies provide the Company with a controlling financial interest or significant influence included the following, among others:

● Read and evaluated the terms of the various operating agreements and inquired of management to understand the legal entities involved, the rights and responsibilities of each party, and the related commercial terms.

● Evaluated management’s analysis of significant activities of the investee and which equity holders have the power to direct such activities.

We considered the purpose and design of the entity, the composition of the board of directors and other legal rights of the parties, including the significance of the decision-making rights of each party in assessing which party has the power to direct the activities that most significantly affect the performance of the investee, as well as the substance of the arrangements.

● Compared the rights of each party to underlying executed legal documents and discussed with management the purpose and design of the investee entity.

● Evaluated the Company’s conclusion that it does not have either a controlling financial interest or significant influence as a result of the terms of the limited liability operating agreements.

/s/ Baker Tilly US, LLP

We have served as the Company’s auditor since 2024.

Philadelphia, Pennsylvania

March 31, 2025

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders

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Opinion on the Financial Statements

We have audited the accompanying balance sheets of Sachem Capital Corp.

(the “Company”) as of December 31, 2023 and 2022, and the related statements of comprehensive income, changes in shareholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2023, and the related notes (collectively referred to as the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying balance sheet of Sachem Capital Corp.

(the “Company”) as of December 31, 2023 and the related statements of comprehensive income, changes in shareholders’ equity, and cash flows for the year ended December 31, 2023, and the related notes (collectively referred to as the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for the year ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

Change in Accounting Principle

5 unchanged sentences

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

2 unchanged sentences

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

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Estimates of expected credit losses are based on historical experience, adjusted for management’s evaluation of current conditions and reasonable and supportable forecasts.

The impact of adoption of this standard on January 1, 2023 was a $2.0 million increase to the allowance for credit losses, a $0.5 million increase to the allowance for unfunded commitments, and an increase of $2.5 million to accumulated deficit for the cumulative effect adjustment recorded upon adoption.

The impact of adoption of this standard on January 1, 2023, was a $2.0 million increase to the allowance for credit losses, a $0.5 million increase to the allowance for unfunded commitments, and an increase of $2.5 million to cumulative net earnings for the cumulative effect adjustment recorded upon adoption.

The Company’s measurement of expected credit losses of loans on a pooled basis, when the loans share similar risk characteristics, is based on historical data that is adjusted, as necessary, for both internal and external qualitative factors where there are differences in the historical loss data of the Company and current or projected future conditions.

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We also evaluated managements significant judgments applied in determining whether indicators of impairment were present, with respect to the Company ’ s loan portfolio and the underlying collateral, by obtaining evidence to corroborate such judgments and searching for evidence contrary to such judgments, which included consideration of evidence obtained after the balance sheet date but before the issuance of this report.

We have served as the Company’s auditor since 2015.

We have served as the Company’s auditor from 2015 to 2024.

New York , New York

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CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

Cash and cash equivalents

Investment securities, net (at fair value)

Mortgages receivable

Investment securities (at fair value)

Loans held for investment (net of deferred loan fees of $ 1,950 and $ 4,647 )

Allowance for credit losses

( 7,523,160 )

Mortgages receivable, net of allowance for credit losses

Investments in rental real estate, net

Loans held for investments, net of allowances for credit losses

Loans held for sale (net of valuation allowance of $ 4,880 and $ 0 )

Interest and fees receivable, net

Due from borrowers, net

Real estate owned

Investments in partnerships

Real estate owned, net

Investments in limited liability companies

Investments in rental real estate, net

Property and equipment, net

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Notes payable (net of deferred financing costs of $ 3,713 and $ 6,048 )

Repurchase facility

Repurchase agreements

Mortgage payable

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Below market lease intangible

Deferred revenue

Total liabilities

Commitments and Contingencies

Commitments and Contingencies – Note 12

Shareholders’ equity:

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200,000,000 shares authorized;

46,765,483 and 41,093,536 issued and outstanding at December 31, 2023 and December 31, 2022

Paid-in capital

Accumulated other comprehensive income (loss)

Accumulated deficit

( 20,115,496 )

( 7,995,143 )

46,965,306 and 46,765,483 issued and outstanding at December 31, 2024 and December 31, 2023, respectively

Additional paid-in capital

Accumulated other comprehensive income

Cumulative net earnings

Cumulative dividends paid

Total shareholders’ equity

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SACHEM CAPITAL CORP.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

Interest income from loans

Investment gain, net

Income from partnership investments

Origination and modification fees, net

Fee and other income

Unrealized gain (loss) on investment securities

( 2,963,760 )

Total revenue

Operating costs and expenses:

Fee income from loans

Income from limited liability company investments

Other investment income

Total revenues

Operating expenses

Interest and amortization of deferred financing costs

Compensation, fees and taxes

Compensation and employee benefits

General and administrative expenses

Other expenses

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

Provision for credit losses related to loans

Provision for credit losses related to available-for-sale debt securities

Impairment loss

Total operating costs and expenses

Provision for credit losses related to loans held for investment

Change in valuation allowance related to loans held for sale

Impairment loss on real estate owned

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

Other expenses

Total operating expenses

Operating (loss) income before other (loss) income

Other (loss) income

Gain on equity securities

Loss on sale of loans

Total other (loss) income, net

Net (loss) income

Preferred stock dividend

( 3,795,389 )

( 3,687,062 )

Net income attributable to common shareholders

Other comprehensive income

Unrealized gain (loss) on investment securities, net

Total Comprehensive income

Basic and diluted net income per common share outstanding:

Weighted average number of common shares outstanding:

Net (loss) income attributable to common shareholders

Basic (loss) earnings per Common Share

Diluted (loss) earnings per Common Share

Basic weighted average Common Shares outstanding

Diluted weighted average Common Shares outstanding

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

SACHEM CAPITAL CORP.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(in thousands, except share and per share data)

Net (loss) income

Other comprehensive (loss) income:

Unrealized holding gains on available for sale (“AFS”) securities

Reclassification adjustment for gains / losses realized in net (loss) income

Reclassification of losses from unrealized to provision for credit losses

Other comprehensive (loss) income

Comprehensive (loss) income, net

Preferred stock dividend

Total comprehensive (loss) income attributable to common shareholders

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

SACHEM CAPITAL CORP.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(in thousands, except share data)

FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023

Preferred Stock

Preferred Shares

Common Shares

Comprehensive

Income (Loss)

Balance, December 31, 2021

( 4,992,450 )

Dividends Paid

Balance, January 1, 2023

Cumulative effect of adoption of new accounting principle (ASU 2016-13)

Issuance of Series A Preferred Stock, net of expenses

Issuance of Common Shares, net of expenses

Acquisition of Urbane Capital, LLC

Exercise of warrants

Stock buyback

Stock-based compensation

Unrealized loss on investments

Dividends paid on Common Shares

( 14,882,122 )

Reclassification of losses from unrealized to provision for credit losses

Unrealized holding gains on AFS securities

Dividends paid on Series A Preferred Stock

( 3,687,062 )

Dividends declared

( 5,342,160 )

Dividends paid on Common Shares

Dividends declared on Common Shares

Balance, December 31, 2023

( 7,995,143 )

Cumulative effect of adoption of new accounting principle (ASU 2016-13)

( 2,489,574 )

Issuance of Series A Preferred Stock, net of expenses

Issuance of Common Shares, net of expenses

Repurchase of Common Shares

Stock based compensation

Unrealized gain on investments

Dividends paid on Common Shares

( 16,590,340 )

Stock buyback

Stock-based compensation, less shares forfeited

Reclassification adjustment for gains / losses realized in net loss

Dividends paid on Series A Preferred Stock

( 3,795,389 )

Dividends declared

( 5,144,203 )

Dividends paid on Common Shares

Balance, December 31, 2024

( 20,115,496 )

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

SACHEM CAPITAL CORP.

CONSOLIDATED STATEMENTS OF CASH FLOW

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES

Adjustments to reconcile net income to net

cash provided by operating activities:

Amortization of deferred financing costs and bond discount

Net (loss) income

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

Amortization of deferred financing costs

Depreciation expense

Write-off of failed deal expenses

Write-off of other assets - pre-offering costs

Stock-based compensation

Provision for credit losses related to loans

Provision for credit losses related to available-for-sale debt securities

Impairment loss

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

Unrealized (gain) loss on investment securities

Gain on sale of investment securities

Provision for credit losses related to loans held for investment

Change in valuation allowance related to loans held for sale

Loss on sale of Loans

Impairment loss on real estate owned

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

(Gain) on equity securities

Deferred loan fees revenue

Changes in operating assets and liabilities:

(Increase) decrease in operating assets:

Interest and fees receivable, net

( 2,285,064 )

( 2,616,200 )

Other assets - miscellaneous

( 3,504,390 )

( 3,599,779 )

Due from borrowers, net

( 1,605,951 )

Accrued dividends payable

( 1,414,560 )

Other assets - prepaid expenses

(Decrease) increase in operating liabilities:

Accrued Interest

Accounts payable and accrued liabilities

Deferred revenue

Advances from borrowers

( 5,173,950 )

Total adjustments

( 7,760,291 )

Total adjustments and operating changes

NET CASH PROVIDED BY OPERATING ACTIVITIES

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Purchase of investment securities

( 30,415,304 )

( 51,651,930 )

Proceeds from the sale of investment securities

Purchase of interests in investment partnerships, net

( 12,235,563 )

( 24,775,342 )

Purchase of interests in limited liability companies

Proceeds from limited liability companies returns of capital

Proceeds from sale of real estate owned

Acquisitions of and improvements to real estate owned, net

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

( 1,581,350 )

Investment in rental real estate, net

( 10,845,107 )

Principal disbursements for mortgages receivable

( 204,884,592 )

( 300,277,303 )

Principal collections on mortgages receivable

Other assets - pre-offering costs

NET CASH USED FOR INVESTING ACTIVITIES

( 72,488,176 )

( 159,538,623 )

Acquisitions of and improvements to real estate owned

Proceeds from sale of property and equipment

Purchase of property and equipment

Improvements in investment in rental real estate

Principal disbursements for loans

Principal collections on loans

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES

CASH FLOWS FROM FINANCING ACTIVITIES

Net proceeds from (repayment of) lines of credit

( 29,590,137 )

Net proceeds from (repayment of) repurchase facility

( 16,072,368 )

Proceeds from mortgage

Accounts payable and accrued liabilities - principal payments on other notes

Proceeds from lines of credit

Repayments on lines of credit

Proceeds from repurchase agreements

Repayments of repurchase agreements

(Repayment of) proceeds from mortgage payable

Dividends paid on Common Shares

( 21,932,500 )

( 18,809,722 )

Dividends paid on Series A Preferred Stock

( 3,795,389 )

( 3,687,062 )

Proceeds from issuance of common shares, net of expenses

1 unchanged sentence

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

Gross proceeds from issuance of fixed rate notes

Financings costs incurred in connection with fixed rate notes

( 4,516,931 )

NET CASH PROVIDED BY FINANCING ACTIVITIES

NET DECREASE IN CASH AND CASH EQUIVALENTS

( 11,114,841 )

( 18,225,800 )

CASH AND CASH EQUIVALENTS- BEGINNING OF YEAR

CASH AND CASH EQUIVALENTS - END OF YEAR

Repayment of notes payable

NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD

CASH AND CASH EQUIVALENTS - END OF PERIOD

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

SACHEM CAPITAL CORP.

CONSOLIDATED STATEMENTS OF CASH FLOW (Continued)

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(in thousands)

SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION

Cash paid during the year for interest

SUPPLEMENTAL SCHEDULE OF NON-CASH

Dividends declared and payable

Real estate acquired in connection with the foreclosure of certain mortgages, inclusive of interest and other fees receivable, during the years ended December 31, 2023 and 2022 totaled $ 1,756,125 and $ 1,376,733 , respectively.

Increase in mortgage receivable from sale of real estate owned during the year ended December 31, 2023 was $ 2,576,855 .

Cash paid during the period for interest

Real estate acquired in connection with foreclosure of certain mortgages

Loans held for investment from sale of real estate owned

Loans transferred from held to investment to held for sale

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

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

Sachem Capital Corp.

8 unchanged sentences

In addition, the Company may make opportunistic real estate purchases apart from its lending activities.

Segment Reporting

The Company uses the management approach to determine reportable operating segments.

The Company operates through a single operating and reporting segment with an investment objective to generate both current income and capital appreciation through its investments in real estate mortgage loans and real estate.

The management approach considers the internal organization and reporting used by the Company’s Chief Executive Officer, whom serves as the chief operating decision maker (“CODM”) for making decisions, allocating resources and assessing performance.

The CODM assesses the performance and makes operating decisions of the Company on a consolidated basis primarily based on the Company’s net income.

In addition to other factors and metrics, the CODM utilizes net income as a key determinant of the amount of dividends to be distributed to the Company's stockholders.

As the Company’s operations comprise of a single reporting segment, the segment assets are reflected on the accompanying consolidated balance sheet as “total assets” and the significant segment expenses are listed on the accompanying consolidated statement of operations.

Significant Accounting Policies

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generally accepted accounting principles (“GAAP”).

The consolidated financial statements of the Company include the accounts of all subsidiaries in which the Company has control over significant operating, financial and investing decisions of the entity.

As of December 31, 2024, the accounts and activities of these subsidiaries were not material to warrant separate disclosure or segment reporting.

As a result, the Company has only one reportable segment for financial reporting purposes.

All intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates in the Preparation of Consolidated Financial Statements

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

1 unchanged sentence

Actual amounts could differ from those estimates.

All intercompany accounts and transactions have been eliminated in consolidation.

Significant estimates include the provisions for current expected credit losses, loans held for sale at fair value, and real estate owned.

Concentration of Credit Risks

Financial instruments that may subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, loans and related receivables.

Concentration of credit risk relating to loans and related receivables are managed by the Company through robust portfolio monitoring and performing due diligence prior to origination or acquisition, when and where available and appropriate.

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Cash and Cash Equivalents

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

Investment Securities

Investment Securities (at fair value)

Debt investments are classified as available-for-sale and realized gains and losses are recorded using the specific identification method.

Changes in fair value, excluding credit losses and impairments, are recorded in other comprehensive income.

Changes in fair value, excluding credit losses and impairments, are recorded in other comprehensive (loss) income.

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 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.

To determine credit losses, management employs a 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 investee.

1 unchanged sentence

If market, industry, and/or investee conditions deteriorate, the Company may incur future losses and/or impairments.

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

Equity investments without readily determinable fair values are measured using the equity method or measured at cost with adjustments for observable changes in price or impairments (referred to as the measurement alternative).

Management performs a qualitative assessment on a periodic basis and

Marketable equity investments with readily determinable fair values are measured at fair value and are classified as trading securities with changes in value recorded in net income.

Investment in Limited Liability Companies (“LLCs”)

The Company accounts for its investments in limited liability companies based on the level of ownership, control, and influence in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 323 (Investments – Equity Method and Joint Ventures) and FASB ASC 810 (Consolidation).

Investments in LLCs are classified into the following categories based on the Company’s level of influence and control:

Fair Value Method (FASB ASC 321) – Passive Investments (Less than 20% Ownership, No Significant Influence)

o Investments in LLCs where the Company does not exercise significant influence are accounted for under FASB ASC 321 (Investments – Equity Securities) and recorded at fair value, with changes in fair value recognized in earnings.

o If fair value is not readily determinable, the Company applies the measurement alternative, recording the investment at cost less impairment, adjusted for observable price changes.

Equity Method (FASB ASC 323) – Significant Influence (20% – 50% Ownership)

o The Company applies the equity method of accounting for investments where it has significant influence over the operating and financial policies of the LLC.

o Under the equity method, the Company recognizes its proportionate share of the LLC’s net income or loss in earnings and adjusts the carrying amount of the investment accordingly.

o Distributions received from equity method investments are recorded as a reduction of the investment unless they represent a return on investment, in which case they are recognized as income.

o The investment is assessed for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable.

Consolidation (FASB ASC 810) – Variable Interest Entities (“VIEs”) or Controlling Interest

o Voting Interest Model:

The Company holds greater than 50% of the voting interests and has the power to direct the significant activities of the LLC.

o Variable Interest Entity (VIE) Model:

If the LLC qualifies as a Variable Interest Entity, the Company consolidates the LLC when it is deemed to be the primary beneficiary of the VIE.

In accordance with FASB ASC 810, the Company evaluates whether:

The LLC is a VIE (i.e., lacks sufficient equity to finance its operations without additional support or the equity holders do not have the power to direct significant activities);

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

recognize an impairment if there are sufficient indicators that the fair value of the investment is less than carrying value.

Changes in value are recorded in net income.

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

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

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

This methodology replaces the probable incurred loss impairment methodology.

In addition, interest and fees receivable and amounts included in due from borrowers, other than reimbursements, which include origination, modification and other fees receivable are also analyzed for credit losses in accordance with the CECL standard, as they represent a financial asset that is subject to credit risk.

The Company has both:

The power to direct the activities of the VIE that most significantly affect its economic performance, and the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant.

When both conditions are met, the Company consolidates the VIE in its financial statements, including the entity’s assets, liabilities, and operations.

Noncontrolling interests in consolidated LLCs, if any, are presented separately within the financial statements.

The Company reassesses its conclusions about VIE status and primary beneficiary determination on an ongoing basis, particularly when events occur that may change the underlying structure or governance of the investee.

For investments accounted for under the equity method or the measurement alternative cost method, the Company evaluates whether indicators of impairment exist.

If an investment is determined to be other-than-temporarily impaired, the carrying value is written down to its estimated fair value, with the impairment loss recognized in earnings.

Loans held for investment

Loans that are originated and serviced by the Company, that management has the intent and ability to hold for the foreseeable future are reporting at their outstanding balances, net of an allowance for credit losses and unamortized deferred fees.

The net amount of nonrefundable loan origination fees and certain direct costs associated with the lending process are deferred and amortized to fee income over the contractual lives of the loans using the interest method which reflects a constant yield.

Interest income on loans is accrued based on the unpaid principal balance outstanding and the contractual terms of the loan agreements.

Loans held for sale

Loans are classified as held for sale if there is an intent to sell in the near-term.

These loans are recorded at the lower of amortized cost or fair value.

If the fair value of a loan is determined to be less than its amortized cost, a non-recurring fair value adjustment will be recorded through a valuation allowance.

When a loan is transferred into the held for sale category, any previously recorded allowance for credit losses is reversed in the provision for credit losses related to loans and the loan is recorded at its amortized cost basis.

If the amortized cost basis exceeds the loan’s fair value at the date of transfer, a valuation allowance equal to the difference between amortized cost basis and fair value is recorded.

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 delay 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.

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Transfer of Financial Assets

Transfers of financial assets are accounted for as sales when control over the assets has been surrendered.

Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets.

Transfers of agreements that meet the sale criteria under FASB ASC 860 (Transfers and Servicing) are derecognized from the Consolidated Balance Sheets at the time of transfer.

If the transfer of loans does not meet the sale criteria or participating interest criteria under FASB ASC 860, the transfer is accounted for as a secured borrowing and the loan is not de-recognized and a participating liability is recorded in the Consolidated Balance Sheets.

Allowance for Credit Losses

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

The initial CECL 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 cumulative net earnings 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 held for investment”.

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 “estimated expected lifetime losses,” 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 CECL standard, 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 including unpaid interest and other charges, as of December 31, 2023 and December 31, 2022 was approximately $ 68.1 million and $ 24.0 million, respectively.

The aggregate gross outstanding principal of loans in pending/pre-foreclosure as of December 31, 2024, and December 31, 2023, was $ 52.1 million and $ 63.7 million, respectively.

As of December 31, 2024, and December 31, 2023, the Company had directly reserved against these loans in foreclosure in the amounts of $ 6.1 million and $ 5.1 million, respectively.

Further, the Company had direct reserves against non-performing loans held for investment that experienced declines in fair value of $ 7.3 million and $ 0 , respectively.

As of December 31, 2024, the aggregate outstanding principal amount of non-performing loans held for investment with direct allowances was $ 57.8 million.

Such allowances are presented net in “Loans held for investment, net” and “Loans held for sale, net” on the consolidated balance sheets included in the accompanying consolidated financial statements based on their respective classification.

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

The Company utilizes a loss-rate method for estimating current expected credit losses.

The loss rate method involves applying a loss rate to a pool of loans with similar risk characteristics to estimate the expected credit losses on that pool of loans.

In determining the CECL allowance, the Company considers various factors including (1) historical loss experience in its portfolio, (2) loan specific losses for loans deemed collateral dependent based on excess amortized cost over the fair value of the underlying collateral, and (3) its current and future view of the macroeconomic environment.

The Company utilizes a forecast of three years which approximates its longer-term loans, which are often the construction loans.

The CECL allowance related to the principal outstanding is presented within “Mortgages receivable, net” and for unfunded commitments is within accounts payable and accrued liabilities in the Company’s consolidated balance sheets.

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

The below table represents the financial statement line items that are impacted by the CECL allowance:

Provision for

credit losses on

Provision for credit

Adoption as of January 1, 2023

losses related to loans

Balance as of December 31, 2023

Mortgages receivable

Interest receivable

Due from borrower

Unfunded commitments

Total CECL allowance

The Company utilizes a vintage loss-rate method for estimating current expected credit losses.

The vintage loss rate method involves applying a vintage loss rate to a pool of loans with similar risk characteristics to estimate the expected credit losses on that pool of loans.

In determining the CECL allowance, the Company considers various factors including (1) historical loss experience and unrealized forecasted losses in its portfolio, (2) loan specific losses for loans deemed collateral dependent based on excess amortized cost over the fair value of the underlying collateral, and (3) its current and future view of the macroeconomic environment.

The Company’s estimate of expected credit losses includes a review of charge-off experience factors, contractual delinquency, historical collection rates, the value of underlying collateral and other information to make the necessary judgments as to allowance for credit losses expected in the portfolio as of the reporting date.

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

The Company’s charge-off policy is determined by a review of each delinquent loan.

The Company has an accounting policy to not place loans on nonaccrual status unless they are more than 90 days delinquent.

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

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

In addition, CECL made changes to the accounting for available-for-sale debt securities.

One such change is to require credit losses to be presented as an allowance rather than as a write-down on available-for-sale debt securities if management does not intend to sell and does not believe that it is more likely than not, they will be required to sell.

As of December 31, 2023 and 2022 the Company had a CECL allowance of $ 808,561 and $ 0 , respectively, which is presented in “Investment securities, net” on the Company’s consolidated balance sheets.

In connection with the allowance, during the years December 31, 2023 and 2022, the Company had a provision for credit losses related to available-for-sale debt securities of $ 808,561 and $ 0 , respectively, which is presented on the Company’s consolidated statements of comprehensive income.

As of December 31, 2023 and 2022, fair market value of these securities was $ 839,280 and $ 813,650 , respectively.

The cost basis of these securities were $ 1,647,841 .

The implementation of the CECL standard’s effect on the Company’s earnings per share, for the year ended December 31, 2023, was $ 0.15 .

In the year ended December 31, 2024, the Company updated its methodology for estimating the CECL factors on its portfolio of financial assets related to loans.

This update reflects the Company incorporating its current unrealized losses on individually evaluated loans into its historical loss data, as this change is believed to provide sufficient coverage to forecast estimated expected lifetime losses.

The Allowance for credit losses is maintained at a level sufficient to provide for expected credit losses over the life of the loans based on evaluating historical credit loss experience and to make adjustments to historical loss information for differences in the specific risk characteristics in the current loan portfolio.

The “Allowance for credit losses” related to the principal outstanding is presented within “Loans held for investment, net” and for unfunded commitments is within accounts payable and accrued liabilities in the Company’s consolidated balance sheets.

The “Allowance for credit losses” related to the late payment fees are presented in “Interest and fees receivable, net”, and “Due from borrowers, net” in the Company’s consolidated balance sheets.

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.

See Note 4 – Loans and Allowance for Credit Losses for further details.

Fair Value Measurements

1 unchanged sentence

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”) 820 are described as follows:

The three levels of the fair value hierarchy under FASB ASC 820 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.

7 unchanged sentences

Property and Equipment

Land and building acquired in December 2016 to serve as the Company’s office facilities is stated at cost.

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

Expenditures for repairs and maintenance are charged to expense as incurred.

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

On August 14, 2023 this property was sold.

The Company realized a loss of approximately $ 183,000 on the sale, which is included in (gain) loss on sale of real estate and property and equipment, net in the consolidated statements of comprehensive income, for the year ended December 31, 2023.

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

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

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

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

The land is carried at cost.

The building is stated at cost less accumulated depreciation.

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

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

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

Further, furniture and fixtures, computer hardware and software, and vehicles are stated at cost less accumulated depreciation.

Depreciation is computed by the straight-line method over the estimated useful lives of the assets.

Furniture and fixtures are depreciated using an estimated useful life of three to five years .

Computer hardware and software are depreciated using an estimated useful life of two to three years .

Vehicles are depreciated using an estimated useful life of five years .

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

The following tables represent the Company’s Property and Equipment, Net as of December 31, 2023 and 2022:

The following tables represent the Company’s property and equipment, net:

Year ended December 31, 2024

1 unchanged sentence

Property and Equipment, Net

(in thousands)

Furniture and fixtures

4 unchanged sentences

Property and Equipment, Net

(in thousands)

Furniture and fixtures

Computer hardware and software

Construction in progress

Total property and equipment, net

9 unchanged sentences

Acquisitions of integrated sets of assets and activities that do not meet the definition of a business are accounted for as asset acquisitions.

Acquisitions of real estate generally will not meet the definition of a business because substantially all of the fair value is concentrated in a single identifiable asset or group of similar identifiable assets (i.e.

Acquisitions of real estate generally will not meet the definition of a business because substantially all the fair value is concentrated in a single identifiable asset or group of similar identifiable assets (i.e.

land, buildings, and related identified intangible assets).

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

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

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

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

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

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

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

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

2 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

2023 Acquisition

On June 23, 2023, the Company entered into a purchase and sale contract (the “Westport Purchase Agreement”) for $ 10,600,000 to acquire a commercial office building in Westport, CT (the “Westport Asset”).

On June 23, 2023, the Company entered into a purchase and sale contract (the “Westport Purchase Agreement”) to acquire a commercial office building in Westport, CT (the “Westport Asset”) for $ 10.6 million.

The transaction was completed on August 31, 2023.

1 unchanged sentence

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

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

The following table summarizes the allocation for the acquisition:

Site improvements

Tenant improvements

Below market lease intangible

Lease in-place intangible (included in other assets)

Deferred leasing costs (included in other assets)

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

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

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 year ended December 31, 2023, depreciation and amortization related to the asset was approximately $ 30,800 .

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

Years Ending December 31,

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

Years Ending December 31,

Estimated annual amortization of deferred leasing costs is as follows:

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

Years Ending December 31,

In addition, the Westport Purchase Agreement contains a provision requiring the payment of an Additional Purchase Price, as defined, upon the earlier to occur of:

● The Company closing on any construction financing on the Project, as defined, or

● Twelve months following receipt of all zoning and other State and municipal permits and approvals necessary to construct certain residential units, as defined.

These payments represent contingent consideration in connection with this acquisition, requiring accrual when the payments are deemed probable and reasonably estimable.

The Company notes that neither of these events which would give rise to a payment of Additional Purchase Price is considered probable or estimatable as of the acquisition date and as of December 31, 2023.

Accordingly, no accrual for these payments has been made in the consolidated balance sheet.

The agreed payment is $ 75,000 per approved and sold or permitted market rate residential units.

As of January 2024, the Company submitted a proposal to the town of Westport for 8 market rate residential units and 2 affordable rate units.

Those units were approved in March of 2024, subject to a 30 day appeal period, which extends into April 2024.

This indicates the potential payment could be as high as $ 600,000 , as of the date of this filing.

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 December 31, 2024.

Real Estate Owned (“REO”)

REO is initially measured at fair value and is thereafter subject to an ongoing impairment analysis.

REO acquired through foreclosure is initially measured at fair value and is thereafter subject to an ongoing impairment analysis.

After an REO acquisition, events or circumstances may occur that result in a material and sustained decrease in the cash flows generated from the property or other market indicators including listing data may signal a decline in the liquidation value.

REO is evaluated for recoverability when impairment indicators are identified.

Any impairment losses are included in the consolidated statements of comprehensive income.

Any impairment losses or recoveries are included in the consolidated statements of operations.

Impairment of Long-Lived Assets

The Company continually monitors events or changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable.

The Company continually monitors events or changes in circumstances that could indicate the carrying amounts of long-lived assets may not be recoverable.

When such events or changes in circumstances occur, the Company assesses the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows.

If the undiscounted cash flows 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.

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

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.

Goodwill is tested for impairment annually as of the balance sheet date or more frequently if events or changes in circumstances indicate potential impairment.

Goodwill at December 31, 2024 represents the excess of the consideration paid over the fair value of net assets acquired from Urbane New Haven, LLC in October 2022.

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If the qualitative assessment determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying value including goodwill, then no impairment is determined to exist for the reporting unit.

However, if the

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

As of and during the years ended December 31, 2024, and 2023, there was no impairment to goodwill.

Deferred Financing Costs

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

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 using the effective interest method.

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

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 December 31, 2023, and 2022 Goodwill was approximately $ 0.4 million.

As of December 31, 2023, and 2022 there was no impairment to goodwill.

Deferred Financing Costs

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

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

Revenue Recognition

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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 December 31, 2023, but collected prior to the issuance of this report is included in income for the year ended December 31, 2023.

Origination, modification fee and other 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 FASB ASC 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.

Origination, modification, extension, and construction servicing 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 FASB ASC 310 (Receivables).

Interest Reserves

The Company utilizes interest reserves on certain loans which are applied to future interest payments.

Such reserves are established at the time of loan origination.

The interest reserve is recorded as a liability as it represents unearned interest revenue.

The interest reserve is relieved when the interest on the loan is earned, and interest income is recorded in the period when the interest is earned in accordance with the credit agreement.

The interest payment is deducted from the interest reserve deposit balance on the date when the interest payment is due.

The decision to establish an interest reserve is made during the underwriting process and considers the creditworthiness and expertise of the borrower, the feasibility of the project, and the debt coverage provided by the real estate and other pledged collateral.

It is the Company’s policy to recognize income for this interest component as long as the borrower is progressing as originally projected and if there has been no deterioration in the financial condition of the borrower or the underlying project.

The Company’s standard accounting policies for interest income recognition are applied to all loans, including those with interest reserves.

Interest expense, in accordance with the Company’s financing agreements, is recorded on an accrual basis.

General and administrative expenses, including professional fees, are expensed as incurred.

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

It made the election to be taxed as a REIT on its 2017 Federal income tax return.

The Company’s qualification as a REIT depends on its ability to meet on a continuing basis, through actual investment and operating results, various complex requirements under the Internal Revenue Code of 1986, as amended, relating to, among other things, the sources of its income, the composition and values of its assets, its compliance with the distribution requirements applicable to REITs and the diversity of ownership of its outstanding capital stock.

The Company’s qualification as a REIT depends on its ability to meet on a continuing basis, through actual investment and operating results, various complex requirements under the Internal Revenue Code of 1986, as amended (the “Code”), relating to, among other things, the sources of its income, the composition and values of its assets, its compliance with the distribution requirements applicable to REITs and the diversity of ownership of its outstanding capital stock.

So long as it qualifies as a REIT, the Company, generally, will not be subject to U.S.

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federal income tax at regular corporate rates and may also be subject to various penalties and may be precluded from re-electing REIT status for the four taxable years following the year during in which it lost its REIT qualification.

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”).

Other than taxes incurred by the Company’s taxable REIT subsidiary (“TRS”), the Company does not expect to incur any corporate federal income tax liability outside of the TRS, as it believes it has maintained its qualification as a REIT.

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

In general, a TRS may hold assets that the Company cannot hold directly and generally may engage in any real estate or non-real estate related business.

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

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

During the years ended December 31, 2023 and 2022, the Company recognized a provision for federal and state income taxes in the amount of $ 90,440 and $ 0 , respectively.

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

During the year ended December 31, 2024, the Company’s TRSs recognized provisions for federal and state income tax of $ 0.2 million, which is represented in Other expenses on the Company’s consolidated statements of operations.

During the year ended December 31, 2023, there were no recognized provisions for federal income tax nor state tax.

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

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

FASB 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.

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The Company has determined that there are no uncertain tax positions requiring accrual or disclosure in the accompanying consolidated financial statements as of December 31, 2024 and 2023.

Earnings Per Share

Basic and diluted earnings per share are calculated in accordance with ASC 260 — “ Earnings Per Share.

” Under ASC 260, basic earnings per share is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding for the period.

The computation of diluted earnings per share is similar to basic earnings per share, except that the denominator is increased to include the potential dilution from the exercise of stock options and warrants for common shares using the treasury stock method.

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

The computation of diluted earnings per common share is based on the weighted average number of participating securities outstanding plus the incremental shares that would be outstanding assuming exercise of the warrants.

As of December 31, 2023 the Company had basic and diluted weighted average shares of 44,244,988 outstanding, resulting in basic and diluted earnings per share of $0.27 , respectively.

As of December 31, 2022, the Company had basic weighted averages shares of 37,741,657 and a weighted average of 7,512 outstanding warrants resulting diluted weighted average shares of 37,749,169 .

Both basic and diluted earnings per share were $ 0.46 .

(Losses) Earnings Per Share

Basic and diluted (losses) earnings per share are calculated in accordance with FASB ASC 260 (Earnings Per Share).

Under FASB ASC 260, basic earnings per share is computed by dividing income available to common shareholders by the weighted-average number of common shares, $ .001 par value per share, (“Common Shares”) outstanding for the period.

The computation of diluted (losses) earnings per share is similar to basic (losses) earnings per share, except that the denominator is increased to include the potential dilution from our unvested restricted stock awards, that contain non-forfeitable rights to dividends so therefore deemed to participating, for Common Shares using the treasury stock method.

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

For the year ended December 31, 2024 , the Company had basic and diluted weighted average shares of 47,413,012 outstanding, resulting in basic and diluted loss per share of $ 0.93 .

As the Company incurred a net loss attributable to common shareholders for the year ended December 31, 2024 all restricted shares would be deemed antidilutive.

For the year ended December 31, 2023, the Company had basic and diluted weighted average shares of 44,244,988 outstanding, resulting in basic and diluted earnings per share of $ 0.27 .

While the Company had net income attributable to common shareholders for the year ended December 31, 2023, the Company did not adjust the dilutive share calculation based on even if the Company assumed all 222,836 shares of unvested restricted stock at December 31, 2023 were deemed dilutive under the treasury method, the resulting diluted earnings per share would remain unchanged at $ 0.27 .

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU No.

2016-13, “Measurement of Credit Losses on Financial Instruments”, (ASU 2016-13), which changes accounting requirements for the measurement and recognition of expected credit losses from an incurred or probable methodology to a current expected credit loss methodology.

Mortgages receivable, unfunded loan commitments, interest and fees receivable and amounts included in due from borrowers, other than reimbursements, which include origination, modification and other fees receivable are the only items currently held by the Company that are within the scope of ASU 2016-13.

The Company adopted this ASU effective January 1, 2023 and applied a modified retrospective approach through a cumulative-effect adjustment to retained earnings upon adoption.

At transition on January 1, 2023, the cumulative effect of adopting this ASU resulted in a decrease in retained earnings of $ 2,489,574 and an increase in the allowance for credit losses.

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

In March 2022, the FASB issued ASU 2022-02, “Financial Instruments-Credit Losses (FASB ASC 326), Troubled Debt Restructurings and Vintage Disclosures.” ASU 2022-02 addresses areas identified by the FASB as part of its post-implementation review of the credit losses standard (ASU 2016-13) that introduced the current expected credit loss (“CECL”) model.

The amendments eliminate the accounting guidance for troubled debt restructurings by creditors that have adopted the CECL model and enhance the disclosure requirements for loan refinancings and restructurings made with borrowers experiencing financial difficulty.

In addition, the amendments require a public business entity to disclose current-period gross write-offs for financing receivables and net investment in leases by year of origination in the vintage disclosures.

This guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

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

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

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

restrictions that are measured at fair value in accordance with FASB 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.

Early adoption is permitted.

The Company is evaluating the accounting and disclosure requirements of ASU 2022-03 and plans to adopt this new guidance on January 1, 2024.

The Company does not anticipate that this update will have a material impact on its 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 (FASB ASC 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.

The Company does not anticipate that this update will have a material impact on its consolidated financial statements.

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 did not have a material impact on the Company’s consolidated financial statements.

See Note 1 – The Company for further information.

In November 2024, the FASB issued ASU 2024-03, “Income Statement – Reporting Comprehensive Income (FASB ASC 220-40):

Expense Disaggregation Disclosures” (“ASU 2024-03”).

ASU 2024-03 requires additional disclosure in the notes to the financial statements of specified information about certain costs and expenses.

The ASU is effective in reporting periods beginning after December 15, 2026, and interim periods within annual periods beginning December 15, 2027, on a prospective or retrospective basis.

Early adoption is permitted, and the Company is currently assessing the impact upon adoption of this standard on the 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 consolidated financial statements.

Reclassifications

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

Certain amounts included in the Company’s December 31, 2023 consolidated financial statements have been reclassified to conform to the December 31, 2024 presentation.

These reclassifications had no effect on the year ended December 31, 2023 net income.

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fair Value Measurement

The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair market value measurement.

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 fair value of the Company’s assets as of December 31, 2023:

The Company uses estimated of fair value in applying various accounting standards for its consolidated financial statements on either a recurring or non-recurring basis.

Fair value is defined as the price to sell an asset or transfer a liability in an orderly transaction between willing and able market participants.

The Company groups its assets and liabilities measured at fair value in three hierarchy levels, based on the observability and transparency of the inputs.

The fair value hierarchy is as follows:

Level 1 - Inputs that represent quoted prices for identical instruments in active markets.

Level 2 - Inputs that represent quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability.

Level 3 - Inputs that are largely unobservable, as little or no market data exists for the instrument being valued.

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.

The following tables illustrate the assets and liabilities measured at fair value on a recurring basis and reported on the Consolidated Balance Sheets:

December 31, 2024

(in thousands)

Stocks and ETF’s

Debt securities

Total investment securities

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

Preferred/Fixed rate cap securities

Loans held for sale, net

December 31, 2023

(in thousands)

Stocks and ETF’s

Debt securities

Total investment securities

Following is a description of the methodologies used for assets measured at fair value:

Stocks and ETFs (Level 1 and 2):

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

Preferred/Fixed rate cap securities

Loans held for sale, net

Certain financial assets and financial liabilities are measured at fair value on a nonrecurring basis;

that is, the instruments are not measured at fair value on an ongoing basis, but are subject to fair value adjustments in certain circumstances (for example, upon their acquisition or when there is evidence of impairment).

The following table illustrates financial instruments measured at fair value on a nonrecurring basis:

December 31, 2024

(in thousands)

Individually evaluated loans, net of allowance for credit losses

Real estate owned, net

December 31, 2023

(in thousands)

Individually evaluated loans, net of allowance for credit losses

Real estate owned, net

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

Mutual funds (Level 1 and 2):

Carrying amounts and fair values of financial instruments that are not carried at fair value at December 31, 2024 and December 31, 2023 in the Consolidated Balance Sheets are as follows:

Carrying Amount

Fair Value Measurement

(in thousands)

Cash and cash equivalents

Notes payable (listed) – fixed rate debt

Lines of credit and repurchase agreements – variable rate debt

Loans held for investment, net

Loans held for sale, net

Interest and fees receivable and due from borrowers

Investments in limited liability companies

Advances from borrowers

Mortgage payable

Following is a description of the methodologies used for assets measured at fair value:

Stocks and ETFs (Level 1):

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

Mutual funds (Level 1):

Valued at the daily closing price reported by the fund.

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

Impact of Fair Value of AFS Securities on OCI

The carrying value of the Company’s financial instruments approximates fair value generally due to the relative short-term nature of such instruments.

Our other financial assets and financial liabilities have fair value that approximate their carrying value.

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

As of December 31, 2023 and 2022, the Company had continuous unrealized losses over 12 months in Available-For-Sale debt securities (AFS’s) of $ 808,561 and $ 530,987 , respectively.

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

As such, during the year ended December 31, 2023, the Company has recorded an allowance for credit losses regarding AFS’s debt securities totaling $ 808,561 , which is included in net income on the Company’s consolidated statements of comprehensive income.

The remaining available-for-sale debt securities with a fair market value of $ 35.2 million had an unrealized gain of $ 315,614 at December 31, 2023.

The following table presents the impact of the Company’s Available-For-Sale (AFS) securities – debt securities on its Other Comprehensive Income (OCI) for the years ended December 31, 2023 and 2022:

OCI from AFS securities – debt securities:

Unrealized (losses) on AFS-debt securities at beginning of period

Reversal of losses from unrealized to realized

Preferred/Fixed rate cap securities:

The company classifies preferred/fixed rate cap securities as Level 2 in the fair value hierarchy because their fair value is determined using observable inputs such as interest rates and credit spreads.

These inputs are based on market data or pricing models rather than quoted prices for identical assets.

Since the securities are not actively traded, the company uses observable inputs to estimate their value, making Level 2 the appropriate classification.

Loans held for investment and related interest and fees receivables and due from/advances from borrowers :

The fair value of mortgage loans held for investment and related receivable/liability balances is based on credit risk and discount rates that are not observable in the marketplace and therefore represents a Level 3 measurement.

Loans held for sale:

The fair value of loans held for sale is determined by the lower of cost or market approach, where cost represents the carrying value of the loans, and market represents the fair value derived from a collateral analysis.

Since this analysis involves significant judgment, including assumptions regarding the value of underlying collateral and potential recovery, it constitutes a Level 3 measurement.

These assumptions are not readily observable in the market and require significant management estimation.

Individually evaluated loans, net of allowance for credit losses:

This category consists of loans that were individually evaluated for credit losses, net of the related allowance for credit losses, and have been classified as Level 3 assets.

All of the Company’s individually evaluated loans for 2024 and 2023, whether reporting a specific allowance allocation or not, are considered collateral-dependent.

The Company utilized Level 3 inputs such as independent appraisals of the underlying collateral, which generally includes various Level 3 inputs which are not observable.

Appraisals may be adjusted downward by management for qualitative factors such as economic conditions and estimated liquidation expenses.

The Company estimates liquidation as a selling cost percentage in connection with the asset, which typically ranges from 1 - 8 %.

Please note this category is inclusive of foreclosed loans not held for sale, and is included in loans held for investment.

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Real estate owned, net :

Real estate owned, net, is classified as a Level 3 asset in the fair value hierarchy due to the significant use of unobservable inputs in determining its fair value.

These unobservable inputs typically include estimates based on management’s judgment, such as the anticipated market value, property condition, location, and projected income potential.

The Company may adjust such values downward for qualitative factors such as economic conditions and estimated liquidation expenses.

The Company estimates liquidation as a selling cost percentage in connection with the asset, which typically ranges from 1 - 8 %.

As no active markets or observable inputs exist for these assets, the valuation process involves a higher degree of subjectivity and relies on internal assumptions, appraisals, and models that are not directly observable.

Investments in Limited Liability Companies (LLCs):

The Company holds noncontrolling interests in various LLCs accounted for using the measurement alternative under FASB ASC 321.

These investments are carried at cost, less impairment, and adjusted for observable price changes.

Fixed rate debt :

Fixed rate debt is classified as Level 1 and its fair value is based on quoted prices for similar instruments or calculated utilizing model derived valuations in which significant inputs are observable in active markets.

Variable rate debt :

Variable rate debt is classified as Level 2 and the fair values of our borrowings under our revolving credit facility and other variable rate debt are reasonably estimated at their notional amounts due to the predominance of floating interest rates, which generally reflect market conditions.

Mortgage payable:

Mortgage payable is classified as Level 3 and the fair value of our borrowings are primarily based on unobservable inputs that effect the Company’s own assumptions about the factors that market participants would use in pricing the mortgage.

The mortgage payable does not have a quoted market price in an active market, and significant inputs such as the interest rate, the probability of default, and the estimated repayment terms are not readily observable in the market.

Impact of Fair Value of Available-for-sale Securities on Other Comprehensive (Loss) Income

The following table presents the impact of the Company’s debt securities on its Other Comprehensive Income (“OCI”) for the years ended December 31, 2024 and 2023:

(in thousands)

OCI from AFS debt securities:

Unrealized gain (losses) on debt securities at beginning of period

Unrealized holding gains on AFS securities

Reclassification adjustment for gains / losses realized in net (loss) income

Reclassification of losses from unrealized to provision for credit losses

Unrealized (losses) on securities available-for-sale – debt securities

Unrealized gain (loss) on investment securities, net

Change in OCI from AFS debt securities

Balance at end of period

As of December 31, 2023 and 2022, the investment securities cost basis were approximately $ 40.5 million and $ 40.0 million, respectively.

Mortgages Receivable, net

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

During the year ended December 31, 2024, the Company sold all of its debt securities, as such, as of December 31, 2024, the balance of these securities was $ 0 .

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

The cost basis of these securities was $ 1.6 million.

Loans and Allowance for Credit Losses

Loans include loans held for investment that are accounted for at amortized cost net of allowance for credit losses and loans held for sale that are accounted for at the lower of cost or market net of a valuation allowance.

The classification for a loan is based on management’s strategy for the loan.

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Loans held for investment

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 Connecticut, New York and Florida.

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

These factors include the additional collateral provided by the borrower, the credit profile of the

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

borrower, the Company’s previous relationship, if any, with the borrower, the nature of the property, the geographic market in which the property is located and any other information the Company deems appropriate.

These factors include the additional collateral provided by the borrower, the credit profile of the borrower, the Company’s previous relationship, if any, with the borrower, the nature of the property, the geographic market in which the property is located and any other information the Company deems appropriate.

The loans are generally for a term of one to three years .

1 unchanged sentence

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 December 31, 2023 and 2022, loans on nonaccrual status had an outstanding principal balance of $ 84,592,411 and $ 55,691,857 , respectively.

The nonaccrual loans are inclusive of loans pending foreclosure.

For the year ended December 31, 2023 and 2022, $ 598,109 and $ 350,861 of interest income was recorded on nonaccrual loans due to payments received, respectively.

For the years ended December 31, 2023 and 2022, the aggregate amounts of loans funded by the Company were $ 204,884,592 and $ 300,277,303 , respectively, offset by principal repayments of $ 167,036,071 and $ 131,840,244 , respectively.

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

As of December 31, 2024, and 2023, the Company had 157 and 311 loans held for investment, respectively.

Loans held for sale

The Company offers mortgage notes receivable to be sold in real estate capital markets.

The Company does not originate loans for the use of loans held for sale, as these loans were a part of a non-recurring event of being transferred from loans held for investment to loans held for sale.

As of December 31, 2024, the Company maintained 11 loans held for sale with a gross outstanding principal balance of $ 15.9 million, of which had an aggregate valuation allowance of $ 4.9 million in connection with pricing based on lower of cost or market.

As of December 31, 2024, such loans were on nonaccrual status and in pending/pre-foreclosure.

There were no such loans held for sale as of December 31, 2023.

In October 2024.

the Company retained Mission Capital, a subsidiary of Marcus and Millichap, which is a real estate capital markets firm, as our sole and exclusive advisor for the proposed sale of a pool of mortgage loans.

A majority of these loans were classified as “non-accrual,” meaning payments of interest owed are more than 90 days overdue.

In December 2024, the Company entered into certain Purchase and Sale Agreements with three third party purchasers related to certain non-performing loans that were held for sale.

The Company accounted for the transfer of financial assets as a sale, recognizing a loss on sale of $ 22.0 million, with total net cash proceeds from the sale of $ 36.1 million and the derecognition of loans held for sale of $ 55.8 million.

The Company has no continuing involvement with the transferred loan assets after the date of transfer and did not retain any interest in the transferred assets.

The loans were sold to the purchasers without recourse.

In connection with the sale, the Company incurred a loss of $ 19.7 million on principal and $ 2.3 million on charges due from such loans, which is presented on the consolidated statement of operations in loss on sale of loans.

During the sale process, the Company removed $ 15.9 million of loans that were initially included in the sale, and these remain as loans held for sale as noted above.

Loan portfolio

As of December 31, 2024, and 2023, loans held for investment on nonaccrual status had an outstanding principal balance of $ 87.0 million and $ 84.6 million, respectively.

The nonaccrual loans are inclusive of loans pending foreclosure and loans held for sale.

For the year ended December 31, 2024 and 2023, $ 0.7 million and $ 0.6 million of interest income was recorded on nonaccrual loans due to payments received, respectively.

As of December 31, 2024, and 2023, the Company had direct reserves on outstanding principal of $ 13.3 million and $ 5.2 million, respectively.

The below table summarizes the Company’s loan portfolio by the past due status:

Loans held for investment

(in thousands)

30-59 days past due

60-89 days past due

Greater than 90 days

As of December 31, 2024

As of December 31, 2023

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2024 and 2023, the aggregate amounts of loans funded by the Company were $ 134.3 million and $ 204.9 million, respectively, offset by principal repayments of $ 191.0 million and $ 167.0 million, respectively.

As of December 31, 2024, the Company’s mortgage loan portfolio includes loans ranging in size up to $ 42.9 million with stated interest rates ranging from 6.5 % to 15.0 %.

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

As of December 31, 2023 the Company had one borrower representing 10.1 % of the outstanding mortgage loan portfolio, or approximately $ 50.4 million.

As of December 31, 2022, no such borrower represented more than 10 % of the outstanding loan portfolio.

As of December 31, 2024 and 2023, the Company had one borrower representing 14.0 % and 10.1 % of the outstanding mortgage loan portfolio, or $ 55.0 million and $ 50.4 million, respectively.

Deferred loan fees

As of December 31, 2024 and 2023, the Company had $ 2.0 million and $ 4.6 million of deferred loan fee revenue relating to loans held for investment, respectively.

There were no such deferred fees for loans held for sale as of December 31, 2024 and 2023.

In-line with the Company’s accounting policy for revenue recognition, origination, modification, extension and construction servicing fee revenue is collected at loan funding and is recognized ratably over the contractual life of the loan in accordance with FASB ASC 310 (Receivables).

In accordance with FASB ASC 310-20-45-1, the Company has presented deferred loan fees net of the related loan balance on its consolidated balance sheets.

This presentation reflects the net amount of revenue that is expected to be recognized after considering the outstanding loan balance associated with certain customer arrangements.

This presentation aligns with the guidance in FASB ASC 310-20, which permits the net presentation of loan balances with deferred loan fees when the loan is associated with the future performance obligations of the Company.

The loan is considered an integral part of the transaction, and as such, the net amount more accurately reflects the remaining obligations of the Company to the customer, as well as the revenue to be recognized.

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 underwriting requirements.

4 unchanged sentences

Allowance for credit loss

Allowance for credit losses (“CECL Allowance”) 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.

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

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

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

The Company’s estimate of expected credit losses includes a reasonable and supportable forecast period equal to the contractual term of the loan plus any applicable short-term extensions that are reasonably expected for construction loans.

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

The Company’s charge-off policy is determined by a review of each delinquent loans.

The Company has an accounting policy to not place loans on nonaccrual status unless they are more than 90 days delinquent.

Accrual of interest income is generally resumed when the

The below table represents the financial statement line items that are impacted by the Allowance for Credit Losses for the year ended December 31, 2024:

Balance as of

Provision for credit

Balance as of

December 31, 2023

losses related to loans

December 31, 2024

(in thousands)

Interest and fees receivable

Due from borrower

Unfunded commitments

Total Allowance for credit losses

The below table represents the financial statement line items that are impacted by the CECL allowance:

Allowance for

credit losses on

Provision for credit

Balance as of

of January 1, 2023

losses related to loans

December 31, 2023

(in thousands)

Interest receivable

Due from borrower

Unfunded commitments

Total CECL allowance

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

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

In assessing the CECL Allowance, the Company considers historical loss experience, current conditions, and a reasonable and supportable forecast of the macroeconomic environment.

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

The following table summarizes the activity in the Mortgages receivable allowance for credit losses from adoption on January 1, 2023 through December 31, 2023:

The following table summarizes the activity in the loans held for investment allowance for credit losses for the year ended December 31, 2024:

Allowance for credit losses

1 unchanged sentence

Provision for credit losses

(in thousands)

Geographical Location

The following table summarizes the activity in the loans held for investment allowance for credit losses from adoption on January 1, 2023, through December 31, 2023:

Allowance for credit losses

Provision for credit losses

Adoption of ASU

(dollars in thousands)

loans pending foreclosure

credit losses

(in thousands)

loans held for investment

Geographical Location

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

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

The following table presents charge-offs by fiscal year of origination as of the year ended December 31, 2024:

(in thousands)

Current period charge-offs

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

December 31, 2024

December 31, 2023

(dollars in thousands)

(in thousands)

Carrying Value

3 unchanged sentences

Geographical Location

Less, Allowance for credit losses

Carrying value, net

Presented below are the carrying values by property type:

December 31, 2023

December 31, 2022

(dollars in thousands)

% of Portfolio

Property Type

Pre-Development Land

Less, Allowance for credit losses

Carrying value, net

Loans held for investment:

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

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

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

December 31, 2024

Year Originated (1)

FICO Score (2) (dollars in thousands)

Less, Allowance for credit losses

Carrying value, net

FICO Score (2) (in thousands)

Loans held for investment:

(1) Represents the year of origination or amendment where the loan was subject to a full re-underwriting.

2 unchanged sentences

Year Originated (1)

FICO Score (2) (dollars in thousands)

Less, Allowance for credit losses

Carrying value, net

FICO Score (2) (in thousands)

(1) Represents the year of origination or amendment where the loan was subject to a full re-underwriting.

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

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

The following is the maturities of mortgages receivable as of December 31,2023:

Years Ending December 31, (Dollars in thousands)

2023 and prior

Less, Allowance for credit losses

At December 31, 2023, of the 311 mortgage loans in the Company’s portfolio, 56 were the subject of foreclosure proceedings.

The aggregate outstanding principal balance of these loans and the accrued but unpaid interest and borrower charges, as of December 31, 2023 was approximately $ 68.1 million.

As of December 31, 2023 and 2022, the Company has taken an allowance against loans subject to foreclosure proceedings of approximately $ 6.2 million and $- 0 -, respectively.

At December 31, 2022, of the 444 mortgage loans in the Company’s portfolio, 40 were the subject of foreclosure proceedings.

The aggregate outstanding principal balance of these loans and the accrued but unpaid interest and borrower charges as of December 31, 2022 was approximately $ 24.0 million.

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

Loan modifications made to borrowers experiencing financial difficulty

1 unchanged sentence

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

The Company generally receives additional collateral as part of extending the terms of the loan for loans experiencing financial difficulty.

The Company generally receives additional collateral as part of extending the terms of the loan for borrowers experiencing financial difficulty.

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

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

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

3 unchanged sentences

Carrying Value

Loans held for investment, net

Financial Effect

2 unchanged sentences

A weighted average of 11.5 months were added to the life of the loans

Principal modification, with no term extension

Unpaid interest/taxes/charges added to principal balance

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

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

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

Year Ended December 31, 2024

(in thousands)

90-119 days past due

120+ days past due

Loans modified during the period ended

Term extension

Principal modification, with no term extension

The Company has committed to lend additional amounts totaling approximately $ 23.1 million to borrowers experiencing financial difficulty.

Of the loans that were modified that experienced financial difficulties during the year, six loans defaulted within twelve months of the modification.

These loans had an aggregate outstanding balance of $ 5.7 million which represented 1.6 % of the portfolio.

Of the loans that were modified that experienced financial difficulties during the year, ten loans with an outstanding principal balance of $ 12.2 million, experienced rate decreases due to the modification.

The change in the rate was taking the loans off default rate.

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

Year Ended December 31, 2023

Carrying Value of

(in thousands)

Carrying Value

Loans held for investment, net

Financial Effect

Loans modified during the period ended

Term extension

A weighted average of 16.7 months were added to the life of the loans

Principal modification, with no term extension

Unpaid interest/taxes/charges added to principal balance

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

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

7 unchanged sentences

Term extension

The Company has committed to lend additional amounts totaling approximately $ 18.7 million to borrowers experiencing financial difficulty.

Principal modification, with no term extension

As of December 31, 2023, the Company had committed to lend additional amounts totaling approximately $ 18.7 million to borrowers experiencing financial difficulty.

Of the loans that were modified that experienced financial difficulties during the year, one loan defaulted within twelve months of the modification.

This loan had an outstanding balance of $ 1.6 million, which represented 0.3 % of the portfolio.

Of the loans that were modified that experienced financial difficulties during the year, fourteen loans with an aggregate outstanding principal balance of $ 29.1 million, experienced rate decreases due to the modification.

The change in the rate was taking the loans off default rate.

Investment in Rental Real Estate, net

At December 31, 2023, investment in rental real estate, net consisted of the following:

Building, net

Site improvements, net

For the years ended December 31, 2024 and 2023, investment in rental real estate, net consisted of the following:

Investment in Rental

Year Ending December 31, 2024

Accumulated Depreciation

Real Estate, Net

(in thousands)

Site improvements

Tenant improvements

Construction in progress

Investment in Rental

Year Ending December 31, 2023

Accumulated Depreciation

Real Estate, Net

(in thousands)

Site improvements

Tenant improvements

Construction in progress

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

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

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 year ended December 31, 2024, depreciation and amortization related to the asset was $ 0.1 million , which is presented in “Other expenses” on the Company’s consolidated Statements of Operations.

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

Additionally, the Company leases space to a tenant under an operating lease.

The lease provides for the payment of fixed base rent payable monthly in advance and periodic step-ups in rent over the term of the lease and a pass through to tenants their share of increases in real estate taxes and operating expenses over a base year.

The lease also provides for free rent and a tenant improvement allowance of approximately $ 1.8 million.

The lease also provides for free rent and a tenant improvement allowance of $ 2.7 million.

The lease commences February 2025 with a cash rent abatement period of 425 days.

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2024, future minimum rents under non-cancelable operating leases were as follows:

Years Ending December 31,

Real Estate Owned

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

As of December 31, 2023 and 2022, real estate owned totaled $ 3,461,519 and $ 5,216,149 .

During the year ended December 31, 2023, the Company’s real estate owned portfolio recorded an impairment loss of $ 794,462 compared to an impairment loss of $ 799,909 in 2022, which is considered a level 3 non-recurring fair market value adjustment.

(in thousands)

As of December 31, 2024, estimated annual amortization of acquired below-market lease intangible is as follows:

Years Ending December 31,

(in thousands)

As of December 31, 2024, estimated annual amortization of acquired in-place lease intangible is as follows:

Years Ending December 31,

(in thousands)

As of December 31, 2024, estimated annual amortization of deferred leasing costs is as follows:

Years Ending December 31,

(in thousands)

In addition, the Westport Purchase Agreement contains a provision requiring the payment of an Additional Purchase Price, as defined, upon the earlier to occur of:

● the Company closing on any construction financing on the Project (as defined);

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

● twelve months following receipt of all zoning and other state and municipal permits and approvals necessary to construct certain residential units (as defined).

These payments represent contingent consideration in connection with this acquisition, requiring accrual when the payments are deemed probable and reasonably estimable.

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 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 is $ 0.6 million and has been accrued as of December 31, 2024 and is included in Accounts payable and accrued liabilities on the consolidated balance sheets included in the accompanying consolidated financial statements.

Real Estate Owned (REO)

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

As of December 31, 2024, and 2023, real estate owned, net totaled $ 18.6 million and $ 3.5 million, respectively.

During the year ended December 31, 2024, the Company’s real estate owned portfolio recorded an impairment loss of $ 0.5 million compared to an impairment loss of $0.8 million in 2023, which is considered a level 3 non-recurring fair market value adjustment.

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

(in thousands)

Real estate owned at the beginning of year

Principal basis transferred to real estate owned

Charge-off’s on principal transferred

Charges and building improvements

Proceeds from sale of real estate owned

( 3,027,275 )

( 2,090,880 )

Impairment loss

1 unchanged sentence

Balance at end of year

As of December 31, 2023, REO included $ 800,000 of properties held for rental and $ 2,661,519 of properties held for sale.

As of December 31, 2022, REO included $ 801,394 of properties for rental and $ 4,414,755 of properties held for sale.

As of December 31, 2024, REO included $ 0.8 million of real estate held for rental and $ 17.8 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 year ended December 31, 2023, the Company sold seven properties held for sale and recognized an aggregate gain of $ 87,633 .

During the year ended December 31, 2022, the Company sold five properties held for sale and recognized an aggregate loss of $ 44,752 .

During the year ended December 31, 2024, the Company sold seven properties held for sale and recognized an aggregate gain of $ 0.4 million.

During the year ended December 31, 2023, the Company sold seven properties held for sale and recognized an aggregate gain of $ 0.1 million.

Such gains are included in, “Loss (gain) on sale of real estate owned and property and equipment, net” on the Compnay’s consolidated Statements of Operations.

Properties Held for Rental

1 unchanged sentence

The tenant signed a 5-year lease that commenced on August 1, 2021.

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2024, future minimum rents under this lease were as follows:

Years Ending December 31,

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

(in thousands)

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

December 31, 2024

December 31, 2023

(in thousands)

Prepaid expenses

Other receivables

Deferred financing costs, net

Notes receivable

Deferred leasing cost

1 unchanged sentence

Intangible asset – trade name

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

Line of Credit, Mortgage Payable, and Churchill Facility

1 unchanged sentence

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

The Wells Fargo credit line bears interest at a rate equal to 1.75 % below the prime rate ( 6.77 % at December 31, 2023 and 5.75 % at December 31, 2022) after certain minor adjustments.

As of December 31, 2023 and December 31, 2022 the total outstanding balance on the Wells Fargo credit line was $ 26,792,330 and $ 3,587,894 respectively.

The credit line bears interest at a rate equal to 1.75 % below the prime rate.

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

As such, the balance of the line of credit as of December 31, 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 (“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 had 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.

As of September 8, 2023, the Needham Credit Facility was increased to $ 65 million.

As of December 31, 2024 and December 31, 2023, the total outstanding principal balance on the Needham Credit Facility was $ 40.0 million and $ 35.0 million, respectively, with an interest rate of 7.25 % and 8.25 %, respectively.

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Loans under the Needham Credit Facility accrue interest at the greater of (i) the annual rate of interest equal to the “prime rate,” as published in the “Money Rates” column of The Wall Street Journal minus one-quarter of one percent ( 0.25 %), and (ii) four and one-half percent ( 4.50 %).

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 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:

(A) a ratio of Adjusted EBITDA (as defined in the Credit Agreement) to Debt Service (as defined in the Credit Agreement) of not less than 1.40 to 1.0 , tested on a trailing-twelve-month basis at the end of each fiscal quarter;

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

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

As of December 31, 2024, the Company was not in compliance with the debt service coverage ratio covenant described above.

On March 20, 2025, we terminated our existing Needham Credit Facility and replaced it with a new Credit Facility with Needham.

Except as described below, the new Credit Facility is identical to the old Credit Facility in all material respects:

● First, under the new agreement the borrower is SN Holdings LLC, a Connecticut limited liability company formed and wholly owned by Sachem Capital Corp.

for the sole purpose of acting as the borrower under the new agreement.

Sachem Capital Corp.

is the guarantor of all SN Holdings’ obligations under the new agreement.

● Second, SN Holdings, in its capacity as borrower, granted Needham a lien on all its assets.

SN Holdings is required to maintain assets equal to 2 times of the outstanding balance on the new credit facility.

In addition, SN Holdings is required to collaterally assign to Needham mortgage loans having an outstanding principal balance in an amount no less than the greater of (i) $ 30 million and (ii) the aggregate principal outstanding principal balance on the facility.

● Third, Sachem Capital Corp., in its capacity as guarantor, agreed to grant Needham a blanket lien on all its assets.

However, Needham is required to release its lien at Sachem’s request to facilitate other financing at the Sachem Capital Corp.

and subsidiaries level.

● Fourth, the size of the new credit facility is a committed facility of up $ 50 million, subject to borrowing base limitations and facility covenant compliance.

● Fifth, the new Needham Credit Facility retained the same maturity of March 2, 2026 as original term with the option to extend one year provided we are in compliance with all the covenants and other terms and conditions of the new Needham Credit Facility.

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Simultaneously with the execution and delivery of the Credit, Security and Guaranty Agreement, dated as of March 20, 2025, among SN Holdings, Sachem and Needham, which governs the new Credit Facility, Sachem Capital Corp.

repaid the entire outstanding balance on the old credit facility, $ 39.6 million, and SN Holdings drew $ 36.1 million on the new credit facility, reducing our outstanding indebtedness by $ 3.5 million.

As of March 20, 2025, the Company was no longer in violation of any Credit Facility covenants.

Mortgage Payable

In 2021, the Company obtained a $ 1.4 million adjustable-rate mortgage loan from New Haven Bank (the “NHB Mortgage”) of which $ 750,000 was funded at closing and remained outstanding as of December 31, 2022.

The NHB Mortgage accrued interest at an initial rate of 3.75 % per annum for the first 72 months and was due and payable in full on December 1, 2037.

During the first 12 months , from December 1, 2021 to November 30, 2022, only interest was due and payable.

Beginning on December 1, 2022 principal and interest on the NHB Mortgage were to be due and payable on a monthly basis.

All payments under the NHB Mortgage was to be amortized based on a 20 -year amortization schedule.

The interest rate was to be adjusted on each of December 1, 2027 and 2032 to the then published 5 -year Federal Home Loan Bank of Boston Classic Advance Rate, plus 2.60 %.

The NHB Mortgage was a non-recourse loan, secured by a first mortgage lien on each of the properties, located at 698 Main Street, Branford, Connecticut, and 568 East Main Street, Branford, Connecticut.

The $ 750,000 of proceeds funded at closing were used to reimburse the Company for out-of-pocket costs relating to the acquisition of the East Main Street property.

On February 28, 2023, the Company refinanced the NHB Mortgage with a new $ 1.66 million adjustable-rate mortgage loan from New Haven Bank (the “New NHB Mortgage”).

The new loan accrues interest at an initial rate of 5.75 % per annum for the first 60 months .

In 2021, the Company obtained a $ 1.4 million adjustable-rate mortgage loan from New Haven Bank (the “Old NHB Mortgage”) of which $ 750,000 was funded at closing to reimburse the Company for out-of-pocket costs relating to the acquisition of the property located at 568 East Main Street, Branford, Connecticut, which now serves as the Company’s headquarters.

The Old NHB Mortgage accrued interest at an initial rate of 3.75 % per annum for the first 72 months and was due and payable in full on December 1, 2037.

The Old NHB Mortgage was a non-recourse loan, secured by a first mortgage lien on the Company’s prior headquarters, which was located at 698 Main Street, Branford, Connecticut and the property located at 568 East Main Street, Branford, Connecticut.

On February 28, 2023, the Company refinanced the Old NHB Mortgage with an adjustable-rate mortgage loan from New Haven Bank (the “NHB Mortgage”) in the original principal amount of $ 1.66 million.

The loan accrues interest at an initial rate of 5.75 % per annum for the first 60 months .

The interest rate will be adjusted on each of March 1, 2028, and March 1, 2033, to the then published 5-year Federal Home Loan Bank of Boston Classic Advance Rate, plus 1.75 %.

Beginning on April 1, 2023, and through March 1, 2038, principal and interest will be due and payable on a monthly basis.

All payments under the new loan are amortized based on a 20-year amortization schedule.

All payments under the loan are amortized based on a 20-year amortization schedule.

Over the next five years, the Company is scheduled to make principal payments ranging from $ 47,000 to $ 59,000 annually, with the remaining balance due thereafter.

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

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

The 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 December 31, 2024 and 2023, the total outstanding principal balance on the NHB Mortgage was $ 1.0 million and $ 1.1 million, respectively.

Churchill MRA Funding I LLC Repurchase Financing Facility

On July 21, 2021, the Company consummated a $ 200 million master repurchase financing facility (“Facility”) with Churchill MRA Funding I LLC (“Churchill”), a subsidiary of Churchill Real Estate, a vertically integrated real estate finance company based in New York, New York.

Under the terms of the Facility, the Company has the right, but not the obligation, to sell mortgage loans to Churchill, and Churchill has the right, but not the obligation, to purchase those loans.

On July 21, 2021, the Company consummated a $ 200 million master repurchase financing facility (“Churchill Facility”) with Churchill MRA Funding I LLC (“Churchill”), a subsidiary of Churchill Real Estate, a vertically integrated real estate finance company based in New York, New York.

Under the terms of the Churchill Facility, the Company has the right, but not the obligation, to sell mortgage loans to Churchill, and Churchill has the right, but not the obligation, to purchase those loans.

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

2 unchanged sentences

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

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

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

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 December 31, 2024 and 2023, the effective interest rate charged under the facility was 8.69 % 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.

Under one such covenant, the Company (A) is prohibited from (i) paying any dividends or making distributions in excess of 90% of its taxable income, (ii) incurring any indebtedness or (iii) purchasing any of its capital stock, unless, it has an asset coverage ratio of at least 150 %;

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 Facility

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

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

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 Facility to finance the continued expansion of its lending business and for general corporate purposes.

At December 31, 2023, the total amount outstanding under the Facility was $ 26,461,098 .

The collateral pledged to Churchill at December 31, 2023 was 14 mortgage loans that in the aggregate had unpaid principal balance of approximately $ 50.6 million.

As of December 31, 2023 the effective rate charged under the Facility was 9.47 %.

The collateral pledged to Churchill at December 31, 2022 was 32 mortgage loans that in the aggregate had unpaid principal balance of approximately $ 77.8 million.

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

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”).

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.

As of September 8, 2023, the Needham Credit Facility was increased to $ 65 million.

All amounts borrowed under the Needham Credit Facility are secured by a first priority lien on virtually all 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.

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

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

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

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

At December 31, 2023, the total amount outstanding under the Needham Credit Facility was $ 35.0 million, and the interest rate was 8.25 %.

Unsecured Notes Payable

At December 31, 2023, the Company had an aggregate of $ 282,353,260 of unsecured, unsubordinated notes payable outstanding, net of $ 6,048,490 of deferred financing costs (collectively, the “Notes”).

(i) Notes having an aggregate principal amount of $ 23,663,000 bearing interest at 7.125 % per annum and maturing June 30, 2024 (“the June 2024 Notes”);

(ii) Notes having an aggregate principal amount of $ 34,500,000 bearing interest at 6.875 % per annum and maturing December 30, 2024 (the “December 2024 Notes”);

(iii) Notes having an aggregate principal amount of $ 56,363,750 bearing interest at 7.75 % per annum and maturing September 30, 2025 (the “September 2025 Notes”);

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

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the outstanding balances under the Churchill Facility agreement:

December 31, 2024

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

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

(vi) Notes having an aggregate principal amount of $ 30,000,000 bearing interest at 7.125 % per annum and maturing June 30, 2027 (the “June 2027 Notes”);

(vii) Notes having an aggregate principal amount of $ 40,250,000 bearing interest at 8.00 % per annum and maturing September 30, 2027 (the “September 2027 Notes”).

The Notes were sold in underwritten public offerings, were issued in denomination of $ 25.00 each and are listed on the NYSE American and trade under the symbols “SCCB,” “SACC,” “SCCC,” “SCCD,” “SCCE,” “SCCF” and “SCCG,” respectively.

December 31, 2023

(in thousands)

Repurchase Agreement

The following table summarizes loans held for investment pledged as collateral under the Churchill Facility agreement:

December 31, 2024

December 31, 2023

Total Carrying Value

(in thousands)

Loans Pledged

Number of Loans

Loans Pledged

Number of Loans

Loans held for investment sold under the repurchase agreement

The following table summarizes the contractual maturities for loans held for investment sold under the repurchase agreement:

December 31, 2024

December 31, 2023

(in thousands)

Maturing within 1 year

After 1 but within 2 years

The NHB Mortgage and the Churchill Facility contain cross-default provisions.

Unsecured Notes Payable

At December 31, 2024, the Company had an aggregate of $ 230.2 million of unsecured, unsubordinated notes payable outstanding, net of $ 3.7 million of deferred financing costs (collectively, the “Notes”).

(i) Notes having an aggregate principal amount of $ 56.4 million bearing interest at 7.75 % per annum and maturing September 30, 2025 (the “September 2025 Notes”);

(ii) Notes having an aggregate principal amount of $ 51.8 million bearing interest at 6.0 % per annum and maturing December 30, 2026 (the “December 2026 Notes”);

(iii) Notes having an aggregate principal amount of $ 51.9 million bearing interest at 6.0 % per annum and maturing March 30, 2027 (the “March 2027 Notes”);

(iv) Notes having an aggregate principal amount of $ 30.0 million bearing interest at 7.125 % per annum and maturing June 30, 2027 (the “June 2027 Notes”);

(v) Notes having an aggregate principal amount of $ 40.3 million bearing interest at 8.00 % per annum and maturing September 30, 2027 (the “September 2027 Notes”).

The Notes were sold in underwritten public offerings, were issued in denomination of $ 25.00 each and are listed on the NYSE American and trade under the symbols “SCCC,” “SCCD,” “SCCE,” “SCCF” and “SCCG,” respectively.

All the Notes were issued at par except for the last tranche of the September 2025 notes, in the original principal amount of $ 28 million, which were issued at $ 24.75 each.

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

The June 2027 Notes will be callable at any time after May 11, 2024, and the September 2027 Notes will be callable at any time after August 23, 2024.

Currently, all the Notes are callable at any time.

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following are the future principal payments on the notes payable as of December 31, 2024:

Years ending December 31,

(in thousands)

Total principal payments

Deferred financing costs

( 6,048,490 )

Total notes payable, net of deferred financing costs

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Years ending December 31,

(in thousands)

Total deferred costs

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

Accounts Payable and Accrued Liabilities

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

Accounts payable and accrued liabilities include the following:

December 31, 2024

December 31, 2023

(in thousands)

Accounts payable and accrued expenses

Allowance for unfunded contractual obligation credit losses

Allowance for credit losses on unfunded commitments

Accrued interest

Fee and Other Income

For the years ended December 31, 2023 and 2022, fee and other income consists of the following:

Fee Income from Loans

For the years ended December 31, 2024 and 2023, fee income from loans consists of the following:

(in thousands)

Origination and modification fees

Extension fees

Late and other fees

Processing fees

Rental income, net

Extension fees

Construction servicing fees

Commitments and Contingencies

Origination, Modification, and Construction Servicing Fees

Loan origination, modification and construction servicing fees generally range from 1 %- 3 % of the original loan principal or the modified loan balance and, generally, are payable at the time the loan is funded or modified.

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

At December 31, 2023, deferred revenue was $ 4,647,302 , which will be recorded as income as follows:

Years ending December 31,

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

Employment Agreements

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

(i) the employment term is five years with extensions for successive one-year periods unless either party provides written

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

notice at least 180 days prior to the next anniversary date of its intention to not renew the agreement;

(ii) a base salary of $ 260,000 , which was increased in April 2018, April 2021 and April 2022 to $ 360,000 , $ 500,000 and $ 750,000 , respectively;

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

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

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

(vi) a two-year non-competition period following the termination of employment without cause;

and (vii) payments upon termination of employment or a change in control.

In April 2021, the Company granted 89,928 restricted common shares (having a market value of approximately $ 500,000 ) to Mr.

All shares pursuant to this grant were fully vested on January 1, 2024.

In April 2022, the Company granted 98,425 restricted common shares (having a fair market value of approximately $ 500,000 ) to Mr.

One -third of such shares vested on January 1, 2023 and 2024, and the remaining one -third will vest on January 1, 2025.

In February 2023, the Company granted 130,890 restricted common shares (having a fair market value of approximately $ 506,000 ) to Mr.

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

As of December 31, 2023, there were 120,068 restricted common shares that remain unvested and $ 743,885 of future stock compensation expense.

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

Warch, the material terms of which are as follows:

(i) the employment term commenced on August 1, 2022 and will continue until terminated by either party;

(ii) a base salary of $ 325,000 ;

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

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

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

and (vi) payments upon termination of employment or a change in control.

In February 2023, the Company granted 8,000 restricted common shares (having a fair market value of approximately $ 30,000 ) to Mr.

One -third of such shares vested on February 9, 2023, and an additional one -third were to vest on each of February 9, 2024 and 2025.

In connection with the termination of Mr.

Warch’s employment effective May 4, 2023, the 5,333 unvested restricted common shares were forfeited to the Company.

Commitments and Contingencies

Unfunded Commitments

At December 31, 2023, the Company had future funding obligations totaling approximately $ 97.9 million, which can be drawn by the borrowers when the conditions relating thereto have been satisfied.

At December 31, 2024, the Company had future funding obligations on loans held for investment totaling $ 49.9 million and obligations relating to investments in limited liability companies totaling $ 4.4 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.

In the normal course of its business, the Company is named as a party-defendant because it is a mortgagee having interests in real properties that are being foreclosed upon, primarily resulting from unpaid property taxes.

The Company’s unfunded commitments are subject to allowances under the scope of CECL, see Note 4 – Loans and Allowance for Credit Losses for further details.

The Company is subject to various pending and threatened legal proceedings or other matters arising out of the normal conduct of business in which claims for monetary damages are asserted.

As of the date of this report, management, after consultation with legal counsel, does not anticipate that the aggregate ultimate liability arising out of such pending or threatened matters will be material to the Company’s consolidated financial position.

On at least a quarterly basis, the Company assesses its liabilities and contingencies in connection with such matters.

For those matters where it is probable that the Company will incur losses and the amounts of the losses can be reasonably estimated, the Company records an expense and corresponding liability in its consolidated financial statements.

To the extent such matters could result in exposure in excess of that liability, the amount of such excess is not currently estimable.

The range of losses for matters where an exposure is not currently estimable or considered probable is not believed to be material in the aggregate.

This is based on information currently available to the Company and involves elements of judgment and significant uncertainties.

While the Company does not believe that the outcome of pending or threatened litigation or other matters will be material to the Company’s consolidated financial position, it cannot rule out the possibility that such outcomes will be material to the consolidated results of operations for a particular reporting period in the future.

In addition, regardless of the ultimate outcome of any such legal proceeding, inquiry or investigation, any such matter could cause the Company to incur additional expenses, which could be significant, and possibly material, to the Company’s results of operations in any future period.

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 December 31, 2023, there were three such properties.

The unpaid principal balance on the properties that are subject to this proceeding was approximately $ 0.8 million.

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

Any future payments will be expensed.

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

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

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

The balance of the purchase price is due at closing.

As of the date of this report, the Company expects the closing to occur during the second quarter of 2024.

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

At December 31, 2024, there were two such properties.

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

Related Party Transactions

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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 December 31, 2023, and 2022, loans to known shareholders totaled $ 25,551,356 and $ 23,545,094 , respectively.

Interest income earned on these loans totaled $ 2,447,943 and $ 1,896,834 for the years ended December 31, 2023 and 2022, respectively.

Until the third quarter of 2022, the wife of the Company’s chief executive officer was employed by the Company as its director of finance.

For 2023 and 2022, she received compensation of $- 0 - and $ 63,168 , respectively.

She retired in the third quarter of 2022.

As of December 31, 2024, and 2023, loans to known shareholders totaled $ 17.2 million and $ 25.6 million, respectively, which is included in loans held for investment, net in the Company’s accompanying consolidated balance sheets.

Of the $ 17.2 million and $ 25.6 million loans to known shareholders as of December 31, 2024, and 2023, $ 17.0 million and $ 25.0 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.

All of such loans are performing, and interest income earned on all related party loans for the years ended December 31, 2024 and 2023 totaled $ 1.4 million and $ 2.4 million, respectively.

In December 2021, the Company hired the daughter of the Company’s Chief Executive Officer to perform certain internal audit and compliance services.

For 2023 and 2022, she received compensation of $ 192,346 and $ 141,652 , respectively.

For the years ended December 31, 2024 and 2023, she received compensation of $ 0.2 million and $ 0.2 million, respectively.

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents, investments in securities, investments in partnerships, and mortgage loans.

The Company maintains its cash and cash equivalents with various financial institutions.

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

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

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

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

SIPC protects clients against the custodial risk of a member investment firm becoming insolvent by replacing missing securities and cash up to $500,000, including up to $250,000 in cash, per client in accordance with SIPC rules.

The Company makes loans that are secured by first mortgage liens on real property located primarily in Connecticut (approximately 39.8 %), Florida (approximately 25.4 %) and New York (approximately 13.8 %).

This concentration of credit risk may be affected by changes in economic or other conditions of the particular geographic area.

Credit risks associated with the Company’s mortgage loan portfolio and related interest receivable are described in Note 4 - Mortgages Receivable.

Concentrations of credit risk related to loans geographical location and property type may be affected by changes in economic or other conditions of the particular geographic area or particular asset type that collateralize the Company’s mortgage loans.

For further details see Note 4 – Loans and Allowances for Credit Losses.

Credit risks associated with the Company’s mortgage loan portfolio and related interest receivable are described in Note 4 – Loans and Allowance for Credit Losses.

Stock-Based Compensation and Employee Benefits

4 unchanged sentences

The number of securities remaining available for future issuance under the Plan as of December 31, 2024 was 781,262 .

During the years ended December 31, 2023 and 2022, the Company granted an aggregate of 196,056 and 163,967 restricted common shares (including CEO granted restricted common shares, see Note 12) under the Plan, respectively.

With respect to the

The number of shares issuable to any one individual in a plan year is also limited to 100,000 shares, subject to adjustment as provided for in the Plan.

The table below summarizes the Company’s awards granted, forfeited, or vested under the 2016 Plan during the years ended December 31, 2024 and 2023:

Restricted Stock

Weighted Average

Number of Shares

Grant Date Fair Value

Unvested shares at December 31, 2022

Unvested shares at December 31, 2023

Unvested shares at December 31, 2024

During the years ended December 31, 2024 and 2023, the Company granted an aggregate of 212,857 and 196,056 , respectively, of restricted Common Shares under the Plan, including restricted Common Shares granted to the Company’s Chief Executive Officer (see Note 12).

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

With respect to the restricted Common Shares granted during the year ended December 31, 2024, (i) 33,666 shares vested on May 9, 2024;

(ii) 37,285 shares vested on January 1, 2025;

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

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

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

restricted common shares granted in 2023, (i) an aggregate of 23,500 shares vested immediately on the date of grant, an additional aggregate of 20,833 shares will vest on each of the first and second anniversaries of the date of grant, (ii) 43,630 shares vested on January 1, 2024, and (iii) 43,630 shares will vest on each of January 1, 2025 and 2026, respectively.

Stock-based compensation for the years ended December 31, 2023 and 2022 was $ 822,231 and $ 495,015 , respectively.

As of December 31, 2023, there were 120,068 restricted common shares that remain unvested and $ 743,885 of future stock compensation expense.

Stock-based compensation for the years ended December 31, 2024 and 2023, was $ 0.9 million and $ 0.8 million, respectively.

As of December 31, 2024, there was unrecognized stock-based compensation expense of $ 0.7 million.

Additionally, during the years ended December 31, 2024 and 2023, the Company had 333 and 5,333 , respectively, of unvested restricted Common Shares forfeited to the Company as a result of the ending of the relationship with former employees.

Employee Benefits

On April 16, 2018, the Company’s Board of Directors approved the adoption of the Sachem Capital Corp.

On April 16, 2018, the Board approved the adoption of the Sachem Capital Corp.

401(k) Profit Sharing Plan (the “401(k) Plan”).

1 unchanged sentence

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 years ended December 31, 2023 and 2022, the 401(k) Plan expense was $ 170,973 and $ 92,831 , respectively and is included under Compensation, fees and taxes in the Consolidated Statements of Comprehensive Income.

Equity Offerings

On August 24, 2022, the Company filed a prospectus supplement to its Form S-3 Registration Statement covering the sale of up to $ 75,000,000 of its common shares and shares of its Series A Preferred Stock (as defined in Note 19 below) with an aggregate liquidation preference of up to $ 25,000,000 in an “at-the market” offering, which is ongoing.

During the year ended December 31, 2023, the Company sold an aggregate of 126,923 shares of Series A Preferred Stock having an aggregate liquidation preference of $ 3,173,075 and an aggregate of 5,546,891 common shares, realizing net proceeds of approximately $ 20.5 million.

During the year ended December 31, 2022, the Company did not sell any shares of Series A Preferred Stock and sold an aggregate of 7,879,907 common shares, realizing net proceeds of approximately $ 39.3 million.

At December 31, 2023, approximately $ 45.4 million of common shares and shares of Series A Preferred Stock having a liquidation preference of $ 22.4 million were available for future sale under the ongoing “at-the market” offering.

Partnership Investments

As of December 31, 2023, the Company had invested an aggregate of approximately $ 43.0 million in five limited liability companies in which it held non-controlling interests.

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

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

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

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

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.

For the years ended December 31, 2024, and 2023, the 401(k) Plan expense was $ 0.1 million and $ 0.2 million, respectively, and is included under Compensation and employee benefits in the 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 shares of 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 terminated in February 2025 by its own terms (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.

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

During the year ended December 31, 2024, the Company sold 568,711 Common Shares with gross proceeds of $ 2.1 million and sold an aggregate of 276,825 shares of Series A Preferred Stock having an aggregate liquidation preference of $ 6.9 million, realizing gross proceeds of $ 5.8 million (representing a discount of 15.9 % from the liquidation preference).

The Company’s issuance costs for both Common Shares and Series A Preferred Stock shares sold during the year ended December 31, 2024 were $ 0.1 million.

During the year ended December 31, 2023, the Company sold an aggregate of 126,923 shares of Series A Preferred Stock having an aggregate liquidation preference of $ 3.2 million, realizing gross proceeds of $ 2.6 million (representing a discount of 17.6 % from the liquidation preference) and an aggregate of 5,546,891 Common Shares, realizing net proceeds of $ 20.5 million.

At December 31, 2024, $ 49.9 million of Common Shares and shares of Series A Preferred Stock having a liquidation preference of $ 16.6 million were available for future sale under the ongoing “at-the market” offering.

In February 2025, the ATM Offering terminated by its own terms.

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 $ 7.5 million 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.

The Original Repurchase Plan expired on October 9, 2024.

Effective on October 10, 2024, the Board replaced the Original Repurchase Plan with a new stock repurchase plan (the “New Repurchase Plan”).

Under the New Repurchase Plan, the Company may repurchase up to an aggregate of $ 5,802,959 (the amount remaining under the Original Purchase Plan) of Common Shares and 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 Exchange Act.

During the years ended December 31, 2024 and 2023, the Company repurchased an aggregate of 581,745 and 71,000 Common Shares at a total cost of $ 1.5 million and $ 0.2 million, respectively.

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Limited Liability Company Investments

The following table details the carrying value of each investment reflected on our consolidated balance sheets as of December 31, 2024:

(in thousands )

Shem Creek Capital Fund V LLC

Shem Creek Capital Fund VI LLC

Shem Creek Capital Fund VII LLC

Shem Creek Sachem V LLC

Shem Creek Sachem VI LLC

Shem Creek Sachem 100 LLC

Shem Creek Capital, LLC

Cordo CLT Investors LLC

Shem Creek (“Shem”)

As of December 31, 2024, the Company had invested an aggregate of $ 51.4 million in seven limited liability companies (“LLC’s”) (all of which have elected to be taxed as partnerships).

The Company’s interest in each of these entities is both “non-controlling” and lacks the ability for “significant influence” as considered under FASB ASC 810, 321 and 323.

The Shem LLC’s are commercial real estate finance companies that provide first mortgage debt capital solutions to local and regional commercial multi-family real estate owners in the Northeastern United States.

The Company has no management or voting rights in the operations of any of the Shem Creek LLC’s.

In September 2024, the Company acquired the seventh ownership interest, a 20 % membership interest in Shem Creek Capital, LLC, the management company of all Shem Creek investment vehicles.

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.

In February 2025, the Company paid the remaining $ 2.5 million in cash to complete the acquisition of the 20 % membership interest.

In addition, the Company has the right to acquire an additional 10 % interest (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 has no management or voting rights of any significance in the operation of the entity, nor any board representation, but is allowed one of three investment committee members of Shem Creek Capital, LLC.

The remaining two of three members of the investment committee is comprised of the two members who are also the sole manager of the Shem Creek Capital, LLC entity.

The Company accounts for the funds and the manager investments at the measurement alternative of at cost less impairment, adjusted for observable price changes, because the Company does not manage the fund or management entities in which it holds an interest.

The Company has no control by contract or influence over operating and financial policies through member voting rights or deemed to have significant influence over the investments, even though FASB ASC 323-10-30-299-1 would presume such based on membership percentage owned levels being greater than 3 – 5%.

The Company has assessed FASB ASC 321, 323 and 810 and has concluded that Predominant Evidence to the Contrary does exist in accordance with FASB ASC 323-10-15-10 based on full context and operations of all the individual LLC operating agreements.

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

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 of an additional year.

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

The Company’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 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.

SACHEM CAPITAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

For the year ended December 31, 2023 and 2022, the partnerships generated $ 3,521,721 and $ 1,809,564 , respectively, of income for the Company.

At December 31, 2023, the Company had unfunded partnership commitments totaling approximately $ 3.9 million.

Special Purpose Acquisition Corporation

During the year ended December 31, 2023, the Company expensed its investment in Sachem Acquisition Corp., a special purpose acquisition company as it no longer deemed it a viable investment.

The amount was $ 477,047 and is reflected in general and administrative expenses in the Consolidated Statements of Comprehensive Income.

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 years ended December 31, 2024 and 2023, the Shem investments generated $ 5.1 million and $ 3.5 million, respectively, of income for the Company.

At December 31, 2024, the Company had unfunded commitments totaling $ 4.4 million in the Shem entities.

Cordo CLT Investors LLC

In September 2024, the Company, through its wholly owned subsidiary Urbane Capital, LLC, initially acquired a 21.6 % interest in Cordo CLT Investors LLC for one time contribution of $ 2.5 million.

As the remainder of committed common member equity is received by Cordo CLT Investors LLC, the Company’s membership interest will decline to an expected 7.2 % of total, but as of December 31, 2024, the Company was 11.33 % of total.

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 also accounts for this member investment at FASB ASC 321 measurement alternative at cost, less impairment, because the Company does not manage the entity in which it holds an interest and has no contractual control, voting powers or significant influence over the entity’s operating and financial policies of any kind by contract of the operating agreement.

Series A Preferred Stock

10 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

Subsequent Events

The Company evaluated subsequent events from January 1, 2025 until the financial statements were issued.

On January 10, 2024, the Company paid a dividend of $ 0.11 per share, or $ 5,342,160 in the aggregate, to common shareholders of record as of December 29, 2023.

Between January 2, 2024 and January 24, 2024, through its at-the-market offering facility, the Company sold an aggregate of 568,711 Common Shares, realizing gross proceeds of approximately $ 2.1 million and 79,034 shares of its Series A Preferred Stock having an aggregate liquidation preference of $ 1,975,850 , realizing gross proceeds of $ 1,587,954 (representing a discount of approximately 20 % from the liquidation preference.) There were no sales of capital stock pursuant to the Company’s at -the- market offering facility subsequent to January 24, 2024.

On January 12, 2024, the Company’s tenant in the Westport Asset exercised their option to upsize the lease from approximately 33 % to approximately 50 % occupancy of the leasable square footage, pursuant to the terms outlined in the original lease agreement.

In January 2024, the Company submitted a proposal to the town of Westport for 8 market rate residential units and 2 affordable rate units.

Those units were approved in March of 2024, subject to a 30 day appeal period, which extends into April 2024.

On March 19, 2024, the Company’s Board of Directors authorized a one time bonus of a restricted grant of 111,857 shares to John L.

The fair market value on the date of the grant was approximately $ 500,000 .

On February 24, 2025 , the board of directors authorized and the Company declared a dividend of $ 0.484375 per share on the Company’s 7.75 % Series A Cumulative Redeemable Preferred Stock (“Series A Preferred”) payable on March 31, 2025 to Series A Preferred shareholders of record on March 15, 2025 .

The payment represents the full amount of the dividend accruing from December 30, 2024 through and including March 29, 2025.

On March, 5, 2025 , the Company’s board of directors authorized and declared a quarterly dividend of $ 0.05 per common share to be paid to shareholders of record as of the close of trading on the NYSE American on March 17, 2025 .

The dividend is payable on March 31, 2025 .

On March 10, 2025, the Company’s Compensation Committee authorized (i) a grant of 420,168 restricted Common Shares to John L.

Villano, which shares had a fair market value on the date of grant of approximately $ 0.5 million;

and (ii) a one-time bonus grant of 20,000 restricted Common Shares to each of the Company’s non-employee directors, Arthur Goldberg, Brian Prinz, Leslie Bernhard and Jeffery Walraven.

Each of the Company’s non-employee directors, with the except for Mr.

Walraven, also had the option, at his or her election, to receive the fair market value equivalent of his or her grant in a lump sum cash payment of $ 23,800 .

An aggregate of 60,000 restricted Common Shares were granted to the Company’s non-employee directors, which shares had an aggregate fair market value on the date of grant of approximately $ 71,400 .

Bernhard elected to receive the lump sum cash payment.

The Company identified subsequent to the above March 10, 2025 action of the Company’s Compensation Committee regarding authorization of issuance of 420,168 share of restricted stock to John L.

Villano under the effective 2016 Equity Compensation Plan that it had over authorized on the total issuance by 320,168 shares.

The over issuance is a result of a specified limitation in the Plan that no more than 100,000 shares of restricted Common Shares may be made subject to awards to a single individual in a single plan year, subject to adjustments as provided.

No identified adjustment provisions were deemed applicable.

In result of this identification it was also determined that in calendar 2023 and 2024 there were additional similar over issuances of 30,890 and 11,857 , respectively.

In total there were 362,915 restricted shares which have been issued in excess of Plan limitations, all of which still remain unvested and restricted.

No other plan years have identified any additional over issuances.

In an immediate full and in excess of necessary remediation of this matter on March 25, 2025 John L.

Villano voluntarily forfeited the 420,168 shares that were granted on March 10, 2025.

See the Needham Credit Facility subsequent event as disclosed in Note 8 – Line of Credit, Mortgage Payable, and Churchill Facility.

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-K

Item 9A. Controls and Procedures