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Item 7. Management’s Discussion and Analysis

2026-03-13 compared with 2025-03-31 · 213 added, 99 removed, 66 unchanged (83% of the section changed)

6 unchanged sentences

The Company operates its business as one segment.

The Company offers short-term ( i.e ., one to three years), secured, non-bank loans (sometimes referred to as “hard money” loans) to real estate owners and investors to fund their acquisition, renovation, development, rehabilitation or improvement of properties located primarily in the northeastern and southeastern sections of the United States.

The Company offers short-term (i.e., one to three years), secured, non-bank loans to real estate owners and investors to fund their acquisition, renovation, development, rehabilitation or improvement of properties located primarily in the northeastern and southeastern sections of the United States.

The properties securing the Company’s loans are generally classified as residential or commercial real estate and, typically, are held for resale or investment.

Each loan is secured by a first mortgage lien on real estate and may also be secured with additional collateral, such as other real estate owned by the borrower or its principals, a pledge of the ownership interests in the borrower by the principals thereof, and/or personal guarantees by the principals of the borrower.

Each loan is typically secured by a first mortgage lien on real estate and may also be secured with additional collateral, such as other real estate owned by the borrower or its principals, a pledge of the ownership interests in the borrower by the principals thereof, and/or personal guarantees by the principals of the borrower.

The Company does not lend to owner occupants of residential real estate.

The Company’s primary underwriting criteria is a conservative loan to value ratio.

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

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

Items Affecting Comparability of Results

Due to a number of factors, our historical financial results may not be comparable from period to period or to future periods.

Key factors that may affect comparability include:

• Changes in average earning assets and portfolio composition, including periods of lower net loan originations, portfolio runoff, and the resolution of loans through repayment, foreclosure, or sale, which may reduce average loans outstanding and interest-earning assets and, as a result, impact interest income and net interest margin.

• Changes in asset yields, including the mix of performing versus nonperforming loans, the timing of loans placed on non-accrual status, the resolution of nonperforming loans, and changes in the composition of loans held for investment versus loans held for sale, all of which may affect the yield on interest-earning assets and the comparability of net interest margin between periods.

• Changes in our funding mix, leverage levels, and cost of funds, including repayments, refinancings, and the issuance of new indebtedness (including senior secured notes, revolving credit facilities, and "baby bond" obligations), which may alter average borrowings outstanding and result in material period-to-period changes in interest expense.

In certain periods, indebtedness has been replaced at interest rates materially higher than retired obligations, including increases of approximately 200 to 300 basis points, which may negatively impact net interest margin.

• Timing differences related to debt deployment and capital availability, including periods where debt capital was outstanding prior to full deployment into interest-earning assets, which may temporarily compress net interest margin and reduce comparability between periods.

• Volatility in credit-related expenses and valuation adjustments, including changes in the provision for credit losses, direct allowances, and valuation allowances on loans held for sale, which, while not components of net interest margin, may materially affect net income and period-to-period comparability of overall operating results.

• Non-recurring or episodic income and expense items, including income generated from owned real estate, such as rental income from specific projects, and the timing of asset sales or similar transactions, which may not be indicative of ongoing net interest margin or core lending performance.

2025 Year in Review

Total revenue decreased 11.2%;

net (loss) income attributable to common shareholders decreased 462.5%;

and earnings per common share decreased $1.20 per share.

● Notwithstanding the decrease in net revenue and the net loss attributable to common shareholders, we reported net positive cash flow from operations of $12.4 million for the year.

● Total dividends declared and paid to common shareholders in 2024 was $11.4 million.

● We raised an aggregate of $7.8 million of additional capital from the sale of Common Shares and Series A Preferred Stock through our at-the-market offering facility.

● We funded $134.3 million of mortgage loans including loan originations, modifications, and construction draws, net of construction holdback.

● We maintained our leverage ratio, thereby mitigating the risks should economic conditions deteriorate.

At December 31, 2024, our capital structure was 62.0% debt and 38.0% equity compared to 60.4% debt and 39.6% equity at December 31, 2023.

● We maintained our strategy to fund larger loans than we have in the past that are secured by what we believe are higher-quality properties that are being developed by borrowers that we deem to be more stable and successful.

We believe migration to larger borrowers and better capitalized sponsors will decrease future problem loans.

● We continued the enhancement of our underwriting guidelines to strengthen our documentation and collateral position on our loans.

● We sold 32 loans, having an aggregate unpaid principal balance of principal balance of $55.8 million, which generated approximately $36.1 million of net proceeds.

Most of the loans sold were categorized as “non-performing”.

During 2025, the Company focused on stabilizing its credit profile and strengthening its capital structure following the portfolio repositioning actions taken in 2024 and 2025.

While average earning assets declined year over year and net interest margin compressed, management prioritized liquidity preservation, resolution of nonperforming assets, and extension of debt maturities over portfolio expansion.

Key developments during 2025 included:

• A significant reduction in credit-related charges compared to 2024, as provisioning reflected loan-specific adjustments rather than broad-based reserve recalibration.

• No comparable large-scale loan sale losses, resulting in improved earnings comparability relative to the prior year.

• Issuance of $100.0 million ($90.0 million drawn as of December 31, 2025) of Senior Secured Notes due 2030 bearing interest at 9.875%, which extended the Company’s weighted average debt maturity profile and diversified funding sources.

• Reduction of certain short-term borrowings and repayment of maturing unsecured notes, decreasing near-term refinancing concentration.

• Successfully completed the sale of its office property located in Westport, Connecticut generating net cash proceeds of approximately $19.9 million and realized a book gain of approximately $4.0 million.

The Westport asset was sourced, managed, and executed through Urbane Capital, the Company’s in-house development and asset management platform.

• Continued disciplined underwriting in a higher interest rate environment, resulting in moderated net loan originations and a focus on sponsor quality and collateral protection.

Although nonaccrual balances remain elevated relative to historical norms, migration trends moderated during the year and reserve coverage reflects updated collateral valuations and expected liquidation timelines.

Management continues to evaluate asset resolution strategies with the objective of improving earning asset mix and reducing nonaccrual exposure over time.

While funding costs remain elevated relative to pre-2024 levels, the Company believes its current capital structure provides improved duration visibility and liquidity flexibility.

Future earnings performance will depend on continued resolution of nonperforming assets, stabilization of net interest margin, disciplined capital allocation, and broader real estate market conditions.

The Company intends to address upcoming unsecured note maturities through a combination of operating cash flow, asset resolutions, and capital market activity, subject to prevailing market conditions.

Recent Developments

Update on Naples, Florida Assets

On February 5, 2026, the Company completed a noncash transaction to acquire 100% of the membership interests of the entity holding the condominium assets associated with its legacy Naples, Florida mortgage loan held for investment having a net book value, principal and accrued interest and fees, of approximately $39.9 million.

The acquired assets include:

• The condominium association,

• Three completed condominium units, which are expected to be remarketed for sale immediately under renewed marketing efforts, and

• The southern parcel, which is entitled for the development of four additional condominium units.

The Company intends to commence construction and marketing activities for these units, with anticipated sales occurring over the next 18 to 24 months, subject to market conditions.

At closing, the transaction did not result in a material gain or loss relative to the Company’s net book value of the related assets.

Following the transaction, Urbane Capital, a subsidiary of the Company, has assumed responsibility for the active management, development, and monetization of the condominium assets described above, consistent with its role in overseeing the Company’s owned real estate and development initiatives.

In addition, the Company has retained and further enhanced its interest in the existing approximate $12.3 million first mortgage secured by a separate and unrelated waterfront development parcel in Naples.

The Company does not control or manage development activities related to the waterfront parcel and is not assuming development responsibility for that asset.

The Company will continue to monitor this loan held for investment with respect to this parcel in its capacity as a senior secured lender, consistent with its objective of protecting principal and maximizing value.

Management believes that consolidating control of the condominium assets while maintaining a secured lender position on the waterfront parcel simplifies the overall capital structure, enhances execution clarity, and positions the Company to actively manage and monetize the assets it directly controls over time.

Needham Credit Facility Update

On January 21, 2026, the Company entered into Amendment No.

2 to its Credit, Security and Guaranty Agreement with Needham Bank, as administrative agent, and the lenders party thereto, with respect to the Company’s $50.0 million revolving credit facility.

The amendment extends the stated maturity of the facility from March 2, 2026 to

March 2, 2028, and provides the Company with the ability to request an additional one-year extension to March 2, 2029, subject to lender consent and customary conditions.

All other material terms of the credit facility remain unchanged.

The extension enhances the Company’s liquidity profile and provides additional balance sheet flexibility as it continues to manage its portfolio and capital allocation strategy.

Critical Accounting Policies and Use of Estimates

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Actual amounts could differ from those estimates.

See Note 2 – Significant Accounting Policies for further details.

Significant estimates include the provisions for current expected credit losses and real estate owned, See Note 2 – Significant Accounting Policies for further details.

Revenue Recognition

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The change in the balances during the reporting period are recorded in the Consolidated Statements of Operations under the provision for credit losses.

Real Estate Owned (“REO”)

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 or recoveries are included in the Consolidated Statements of Operations.

Results of Operations

Our results of operations depend primarily on net interest income, the credit performance of our loan portfolio, and the effectiveness of our operating platform.

These results are affected by a variety of factors, including demand for commercial real estate loans, competitive conditions in loan origination, the cost, structure, and availability of financing, operating expense levels, and the performance of the collateral securing our loans.

Years ended December 31, 2025 and 2024

Total revenue

Total revenue for the year ended December 31, 2024, was $57.5 million compared to $64.7 million for the year ended December 31, 2023, a decrease of $7.2 million, or 11.2%.

The decrease in revenue was primarily due to a reduction in the number of loan originations and a decline in net loans held for investment over the year.

For 2024, interest income was $43.2 million compared to $49.3 million for 2023, representing a decrease of $6.1 million or 12.4%.

Fee income from loans decreased to $8.6 million for 2024 compared to $10.7 million for 2023, a decrease of $2.1 million, or 19.7% due to lower origination volume as compared to 2023.

Income from limited liability company investments increased to $5.2 million for 2024 compared to $3.5 million for 2023, an increase of $1.7 million, or 48.8%.

Other investment income was $0.4 million for 2024 compared to $1.2 million for 2023, a decrease of $0.8 million, or 67.7%.

Operating costs and expenses

Total operating costs and expenses for the year ended December 31, 2024, were $75.3 million compared to $49.7 million for 2023, an increase of $25.6 million, or 51.5%.

This net increase was attributable to (i) a $21.3 million increase in provision for credit losses related to loans and (ii) a $1.9 million increase in general and administrative expenses as a result of increased legal and professional fees during the second and third quarters of the year related to matters outside of our ordinary course of business;

all of which was offset by a $1.4 million decrease in interest and amortization expense.

Other (loss) income

Total other loss for the year ended December 31, 2024 was $21.8 million compared to other income of $0.9 million the year ended December 31, 2023, a decrease of $22.7 million.

This decrease was driven by the $22.0 million loss on the sale of loans, and a decrease in gain on equity securities of $0.7 million.

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

Net loss attributable to common shareholders for the year ended December 31, 2024 was $43.9 million compared to net income attributable to common shareholders of $12.1 million for the year ended December 31, 2023.

Accordingly, net loss per weighted average Common Share outstanding for the year ended December 31, 2024 was $0.93 compared to net income per weighted average Common Share outstanding for the year ended December 31, 2023 of $0.27.

Comprehensive (loss) income

For the year ended December 31, 2024, we reported a reclass of realized losses on certain equity securities of $0.3 million reflecting the recognition of unrealized losses on securities sold, as well as a reversal of losses on debt securities from unrealized to realized following the sale of such securities.

For the year ended December 31, 2023, we reported a reclassification of unrealized losses to provision for credit losses of $0.8 million reflecting the recognition of unrealized losses on securities held for over one year, which were not considered temporary losses, as well as an unrealized gain on investment securities of $0.1 million.

Year Ended December 31,

2025 2024 $ Change % Change

Interest income from loans 32,222 43,154 (10,932) (25.3) %

Interest income from limited liability company investments 4,838 5,127 (289) (5.6) %

Interest expense and amortization of deferred financing costs (25,390) (27,798) (2,408) (8.7) %

Net interest income 11,670 20,483 (8,813) (43.0) %

Net interest margin

Provision for credit losses related to loans held for investment (3,280) (26,928) (23,648) (87.8) %

Gain (loss) on sale of loans 121 (21,973) 22,094 100.5 %

Change in valuation allowance related to loans held for sale 1,014 (4,880) 5,894 120.8 %

Net interest income (loss) after provision for credit losses related to loans held for investment, gain (loss) on sale of loans, and changes in valuation allowance related to loans held for sale 9,525 (33,298) 42,823 128.6 %

Fee income from loans 5,978 8,594 (2,616) (30.4) %

Income from limited liability company investments 467 112 355 317.0 %

Other investment income 141 391 (250) (64.0) %

Gain on investment securities 1,566 178 1,388 779.8 %

Other income 1,726 122 1,604 1,314.8 %

Total other income 9,878 9,397 481 5.1 %

Operating expenses

Compensation and employee benefits (7,661) (6,824) 837 12.3 %

General and administrative expenses (6,482) (6,841) (359) (5.2) %

Impairment loss on real estate owned (1,060) (492) 568 115.4 %

Gain on sale of investments in developmental real estate, real estate owned, and property and equipment, net 4,055 439 3,616 823.7 %

Other expenses (1,947) (1,952) (5) (0.3) %

Total operating expenses (13,095) (15,670) (2,575) (16.4) %

Net income (loss) 6,308 (39,571) 45,879 115.9 %

Preferred stock dividends (4,472) (4,304) 168 3.9 %

Net income (loss) attributable to common shareholders 1,836 (43,875) 45,711 104.2 %

Basic and diluted earnings (losses) per Common Share $ 0.04 $ (0.93)

Basic and diluted weighted average Common Shares outstanding 46,893,413 47,413,012

Net income (loss) and Net income (loss) attributable to common shareholders are the primary metrics by which we assess our business performance.

Accordingly, we closely monitor the primary drivers which consist of the following:

Net interest income

Net interest income represents the largest component of our net income and is evaluated on both an absolute basis and relative to our provision for credit losses and operating expenses.

Net interest income is generated when the yield earned on our loan portfolio exceeds the cost of financing those assets, which we primarily achieve through short- and long-term financing arrangements.

Accordingly, we actively monitor financing market conditions and maintain ongoing dialogue with investors and financial institutions as we evaluate funding sources and cost of capital.

In evaluating net interest income, management monitors:

(1) portfolio loan yields, (2) funding costs, (3) net interest spread, and (4) net interest margin.

Net interest spread reflects the difference between the yield earned on our loans and the interest rates paid on our funding sources.

Net interest margin represents net interest income, calculated as annualized interest income less annualized interest expense, expressed as a percentage of average loans outstanding for the applicable period.

Average loans outstanding are calculated using the arithmetic average of the unpaid principal balance of loans held for investment as of the end of each of the five most recent fiscal quarters.

Changes in net interest income are primarily driven by origination activity, changes in average outstanding loan balances (total, performing and nonperforming), and fluctuations in interest rates affecting asset yields and funding costs.

Historically, portfolio growth driven by loan originations has been the primary contributor to increases in net interest income.

Net interest income is evaluated both before and after interest expense associated with corporate debt and before and after provisions for credit losses.

Interest income from loans - decreased year over year, primarily reflecting continuing lower net loan originations over the past eighteen months since our historical peak balance in loans held for in investment of $508.9 million in June 2024, which reduced the average unpaid principal balance of loans held for investment.

• Average loans held for investment were $376.4 million and $468.8 million for the years ended December 31, 2025 and 2024, respectively.

The effective yield on total loans held for investment was 8.6% and 9.2%.

respectively.

Results were also impacted by a higher level of nonperforming loans and real estate owned, which do not contribute interest income.

• Average total performing loans held for investment were $269.3 million and $366.6 million for the years ended December 31, 2025 and 2024, respectively.

The effective yield on performing loans was 12.0% and 11.8%, respectively.

The difference between total portfolio yield and performing loan yield reflects the impact of nonaccrual loans, which do not generate current interest income.

• Average nonperforming loans held for investment were $107.1 million and $102.2 million for the years ended December 31, 2025 and 2024, respectively.

Interest income from limited liability company investments - Interest income generated from the Company’s investments in the Shem Creek funds and direct loan co-investment vehicles decreased year over year.

The decrease was primarily attributable to lower average capital deployed within certain direct loan co-investment vehicles during 2025.

As underlying mortgage loans repaid, capital was returned to the Company and not redeployed at prior levels within those structures.

In certain vehicles, the Company’s ownership percentage also declined during the period, further reducing its effective exposure.

The decrease in interest income was driven by lower average invested balances rather than changes in underlying loan yields or credit performance.

The Shem Creek portfolios continue to consist primarily of short-duration, first mortgage loans, and there were no material changes in the contractual economics of those investments during the period.

The Company evaluates these minority investments as part of its broader capital allocation framework.

Given the short-term nature of the underlying assets and the return of capital upon loan repayment, investment balances may fluctuate

period to period depending on repayment activity and redeployment decisions.

Capital returned from these vehicles may be redeployed into other investment opportunities or retained to support liquidity and balance sheet objectives.

See Note 19 — Limited Liability Company ("LLC") Investments — to our consolidated financial statements for the year ended December 31, 2025.

Interest expense and amortization of deferred financing costs - decreased year over year, primarily attributable to lower average borrowings, $277.8 million and $301.2 million actual at December 31, 2025 and 2024, respectively, resulting from a decline in average earning assets.

The reduction in average earning assets reduced funding requirements and corresponding interest expense.

During 2025, the Company, as a result of maturing unsecured notes payable, began repositioning its capital structure through the issuance of $100.0 million ($90.0 million drawn as of December 31, 2025) of Senior Secured Notes due 2030.

The secured notes replaced a portion of lower rate unsecured notes and reduced reliance on repurchase agreements and lines of credit.

Management continues to evaluate refinancing strategies for upcoming maturities, with a focus on extending duration and optimizing cost of capital.

Access to diversified funding sources remains a strategic priority as the Company balances liquidity, leverage, and shareholder returns.

While funding costs remained elevated relative to pre-2024 levels, lower average debt outstanding drove the overall reduction in interest expense year over year.

Net Interest Margin

Net interest margin in 2025 was 3.1% compared to 4.4% in 2024.

The 130 basis point decline in net interest margin reflects both structural and cyclical factors.

Structurally, refinancing activity during the year increased the weighted average cost of capital.

Cyclically, lower average earning assets and a higher concentration of nonaccrual loans reduced interest-earning balances.

While asset yields remained strong on performing loans, 12.0% in 2025 as compared to 11.8% in 2024, overall margin compression occurred due to balance sheet contraction and capital structure repositioning.

Management expects margin stabilization to depend on continued resolution of nonperforming loans, normalization of earning asset levels, and disciplined origination activity at spreads consistent with current funding costs.

Net interest income (loss) after provision for credit losses, loss on sale of loans, and changes in valuation allowance

Credit risk management is central to our operating model.

We seek to minimize credit losses through disciplined underwriting, active life-of-loan portfolio management, and targeted special servicing.

We closely monitor portfolio credit performance, including delinquency trends and expected and realized credit losses, as a key indicator of overall operating results.

Provision for credit losses related to loans held for investment - declined year over year primarily due to (i) charge-offs and resolution of certain non-performing exposures, (ii) stabilization in collateral valuations for loans previously reserved, and (iii) changes in portfolio composition, including reductions in higher-risk exposures through loan restructurings.

The Company continues to apply a conservative collateral-dependent methodology for loans in foreclosure and pending foreclosure status.

Management evaluates the allowance quarterly based on updated appraisals, liquidation cost assumptions and macroeconomic forecasts under the CECL framework.

While provision levels were significantly elevated in 2024, the lower provision in 2025 reflects resolution activity rather than a change in underwriting standards or risk tolerance.

Gain (Loss) on sale of loans - The current year reflects only nominal loan sale activity of $5.1 million , while the prior year included the strategic disposition of $55.8 million of a concentrated group of nonperforming loans.

year transaction was executed to (i) reduce exposure to certain collateral types and borrower profiles, (ii) redeploy capital into performing assets, and (iii) improve forward credit metrics.

Change in valuation allowance related to loans held for sale - The valuation allowance adjustment reflects updated fair value estimates on loans classified as held for sale.

The prior year included mark-to-market adjustments associated with loans moved to nonaccrual and pending foreclosure status.

In 2025, collateral values stabilized and certain assets were resolved or reclassified, resulting in a net improvement in the valuation allowance position relative to the prior year.

Total other income

Total other income remained relatively consistent year over year, with underlying components shifting in composition rather than magnitude.

Fee income on loans - declined year over year primarily due to lower new loan origination volume.

Origination and modification fees are recognized over the contractual life of the loan, and the decrease reflects the smaller average portfolio growth and reduced refinancing activity relative to the prior year.

Income from limited liability company investments - increased year over year due to reflecting a full year of earnings from the Shem Creek manager investment compared to a partial year in 2024.

See Note 19 to the consolidated financial statements.

Other investment income - Other investment income varies based on the timing of realizations and performance of non-core investment holdings.

The year-over-year change reflects reduced activity relative to the prior period.

Gain on equity securities - The current year includes both realized gains on disposition and net mark-to-market gains on equity securities held within the investment portfolio.

These gains reflect changes in fair value and are inherently subject to market volatility.

The prior year included smaller net gains due to less favorable equity market conditions during the period.

Other income - Other income consists primarily of ancillary revenue streams, including property-related income and miscellaneous recoveries.

The increase year over year reflects rents recognized on certain investments in developmental real estate and real estate owned and certain non-recurring recoveries.

Total operating expenses

Our operating expenses primarily include compensation and benefits for our employees, general and administrative expense including occupancy costs, professional fees for legal, consulting, and advisory services, costs related to investments in developmental real estate, foreclosure pursuits and the resolution and disposition of real estate owned.

Management monitors operating expenses in relation to profitability and the scale of our loan portfolio.

Because origination volume and portfolio size influence the level and impact of operating expenses, we also closely monitor loan origination activity and key loan characteristics, including interest rates, loan-to-value ratios, estimated credit losses, and expected loan duration.

Management continues to align operating expense levels with portfolio scale while preserving asset management intensity.

As origination activity and earning asset levels increase, the Company expects to benefit from operating leverage as fixed overhead costs are absorbed over a larger asset base.

Total operating expenses declined year over year due to lower credit-related charges and improved expense discipline relative to portfolio size.

Compensation and employee benefits - increased modestly year over year, reflecting strategic additions to personnel and performance-based compensation adjustments.

Management continues to align staffing levels with portfolio scale and operational complexity.

General and administrative expenses - decreased year over year due to reduced professional fees and cost management focus during the prior year’s market slowdown.

Impairment loss on real estate owned - increased year over year and relates to specific property-level valuation adjustments following updated market data and liquidation timelines.

Gain on sale of investments in developmental real estate, real estate owned and property and equipment, net - The current year reflects gains realized on the disposition of select real estate assets and developmental projects.

These gains were driven by improved execution relative to carrying value and successful asset repositioning.The prior year included more limited disposition activity.

See Note 5 to the consolidated financial statements.

Other expenses - were consistent year over year and primarily reflect operating costs associated with real estate owned, legal matters, and portfolio servicing.

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

Net income (loss) - The return to profitability in 2025 was driven by:

• Lower credit provisioning

• Absence of large realized loan sale losses

• Stabilization of valuation allowances

• Improved capital structure positioning

In contrast, 2024 results were significantly impacted by elevated credit costs, loan sale losses, and valuation adjustments.

While current results reflect a stabilized operating environment, earnings remain influenced by portfolio seasoning, asset resolution timing, and funding costs.

Net income (loss) attributable to common shareholders - After preferred dividends, income attributable to common shareholders reflects the combined impact of improved operating performance and reduced extraordinary credit-related charges relative to the prior year.

Book value per common share

The following table sets forth the calculation of our book value per common share (in thousands, except share and per share data):

At December 31,

Total shareholders’ equity 174,937 $ 181,651

Series A Preferred Stock ($25 aggregate liquidation preference)

Series A Preferred Stock ($25 liquidation preference per share) (57,819) (57,669)

Total shareholders’ equity, net of preferred stock $ 117,118 $ 123,982

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Book value per common share $ 2.46 $ 2.64

Book value per common share as of December 31, 2024, was $2.64, a decrease of $1.19 from our book value per common share as of December 31, 2023 of $3.83.

Such decrease is primarily due to the net effect of the sum of the following:

● Non-cash allowances and losses of (i) provision for credit losses related to loans totaling $26.9 million;

(ii) valuation allowance related to loans held for sale totaling $4.9 million;

(iii) loss on sale of loans totaling $22.0 million during the year ended December 31, 2024, all of which total $53.8 million, or $1.15 per share decrease in book value;

● Net loss available to common shareholders for the year ended December 31, 2024 adjusted for excluding the non-cash allowances and losses above of $9.8 million, or $0.20 per share increase in book value:

● Cash dividends declared and paid for year ended December 31, 2024 on Common Shares totaling $11.4 million, or $0.24 per share decrease in book value.

Book value per common share decreased $0.18 year over year.

The decrease is primarily due to aggregate cash dividends declared and paid for the year ended December 31, 2025 on issued and outstanding common shares and shares of Series A Preferred Stock totaling $14.0 million, partially offset by net income for the year ended December 31, 2025 of $6.3 million.

The calculation is also impacted by an increase in the liquidation preference for the Series A Preferred stock as we issued 6,010 shares during the year ended December 31, 2025 as well as an increase in common shares outstanding of approximately 720,000 shares.

Liquidity and Capital Resources

Total assets at December 31, 2025 were $460.0 million compared to $492.0 million at December 31, 2024, a decrease of $(32.0) million, or (6.5)%.

The decrease was due primarily to note sale that closed during December 2024, lower originations during the year as a result of utilizing principal repayments and cash received for the redemption of the unsubordinated unsecured note payable that was due in December 2024, and sale of $36.2 million of investments in securities.

The decrease was due primarily to utilizing cash generated from investing activities to reduce long term debt by $23.4 million.

Total liabilities at December 31, 2025 were $285.1 million compared to $310.3 million at December 31, 2024, a decrease of $25.2 million, or 8.1%.

This decrease was principally due to repaying in full two tranches of our unsecured unsubordinated five-year notes that matured in June and December of 2024.

The total amount repaid was $58.2 million.

In addition, we closed our Wells Fargo line of credit, which had an outstanding balance of $27.3 million.

Finally, there was a decrease in advances from borrowers of $7.0 million.

These decreases were partaially offset by our outstanding balance on the Churchill Credit Facility which increased by $7.2 million.

This decrease was principally due to repaying in full our unsecured unsubordinated five-year notes that matured in September 2025 of $56.3 million, terminating the Churchill Credit Facility of $33.7 million, and reducing the balance on the Needham Credit Facility by $21.0 million.

These decreases were partially offset by the five-year senior secured notes payable issued in June 2025 which totaled $86.6 million at year end.

As of December 31, 2025, the Company’s capital structure consisted of a mix of unsecured listed notes, senior secured notes, and revolving credit facilities.

The increase in secured financing during 2025 reflects management’s strategy to diversify funding sources.

While secured borrowings increased asset encumbrance, they also provide longer-term capital stability and improved liquidity flexibility.

Management actively monitors asset coverage ratios, covenant compliance and refinancing risk associated with upcoming maturities.

Total shareholders’ equity at December 31, 2025 was $174.9 million compared to $181.7 million at December 31, 2024, a decrease of $6.8 million, or (3.7)%.

This decrease was attributable to the $22.0 million loss on the sale of loans that occurred in December 2024, the $26.9 million provisions related to loans mandated by CECL, and the $4.9 million valuation allowance on loans held for sale, all of which contributed to the result of a $39.6 million net loss for the year ended December 31, 2024.

This decrease was attributable to common stock dividends of $9.5 million and Series A Preferred stock dividends of $4.5 million partially offset by net income of $6.3 million and stock compensation expense of $0.8 million.

Historically, the Company has distributed a substantial portion of its earnings in order to maintain its REIT qualification.

Dividend levels are determined by the Board of Directors based on taxable income, capital needs, liquidity, market conditions and regulatory requirements.

Accordingly, dividend levels may fluctuate from period to period depending on operating performance, credit trends, asset repositioning activity and capital market access.

Sources and Uses of Funds

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These sources and uses of cash are reflected in our Consolidated Statements of Cash Flows as summarized below:

Year Ended December 31,

One Year Change

Amount 2025 2024 Amount Percentage

(in thousands)

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Net cash provided by operating activities 2,662 12,890 (10,228) (384.2) %

Net cash provided by (used in) investing activities

Net cash (used in) provided by financing activities

Net cash provided by investing activities 29,350 79,910 (50,560) (172.3) %

Net cash used in financing activities (39,154) (87,332) 48,178 (123.0) %

Cash and cash equivalents, December 31 $ 10,924 $ 18,066 $ (7,142) (65.4) %

1 unchanged sentence

We project anticipated cash requirements for our operating needs as well as cash flows generated from operating activities available to meet these needs.

Our short-term cash requirements primarily include funding of loans, dividend payments, interest and principal payments on our indebtedness, including repayment/refinancing of the Notes maturing in September 2025, and payments for usual and customary operating and administrative expenses, such as employee compensation and sales and marketing expenses.

Our short-term cash requirements primarily include funding of loans, dividend payments, interest and principal payments on our indebtedness, including repayment/refinancing of the Notes maturing in December 2026, and payments for usual and customary operating and administrative expenses.

Based on this analysis, we believe that our current cash balances, availability on our debt facilities, and our anticipated cash flows from operations will be sufficient to fund the operations for the next 12 months.

Our long-term cash needs will include principal and interest payments on outstanding indebtedness maturing late in 2026 and early 2027, preferred stock dividends and funding of new mortgage loans.

Funding for long-term cash needs will come from unused net proceeds from financing activities, operating cash flows, refinancing existing debt, and proceeds from sales of real estate owned.

On March 20, 2025, we terminated our existing Needham Credit Facility and replaced it with a new Needham Credit Facility.

Except as described below, the new Needham Credit Facility is identical to the old Needham Credit Facility in all material respects:

● First, the borrower under the new Needham Credit Facility is SN Holdings LLC, a Connecticut limited liability company formed and wholly owned by Sachem for the sole purpose of acting as the borrower under the new agreement.

Sachem is the guarantor of all SN Holdings’ obligations under the new Needham Credit Facility.

● 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 two times the outstanding balance on the new Needham 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 new Needham Credit Facility.

● Third, Sachem, 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 by Sachem and subsidiaries level.

● Fourth, the new Needham 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.

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 Needham Credit Facility, Sachem 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 Needham Credit Facility covenants.

On April 1, 2025, SN Holdings is required to make a principal payment of $9.9 million, further reducing the outstanding indebtedness to $26.2 million.

A copy of the Credit, Security and Guaranty Agreement, dated as of March 20, 2025, among SN Holdings, Sachem and Needham, is filed as Exhibit 10.8 to this Report.

Our long-term cash needs will include principal and interest payments on outstanding indebtedness including notes payable in the principal amount of $173.2 million maturing late in 2026 and in 2027, preferred stock dividends and funding of new mortgage loans.

Specific to the maturing notes payable, management believes the Company will address these maturities through a combination of operating cash flow, credit facility capacity, secured financing alternatives and potential capital markets transactions, subject to market conditions.

There can be no assurance that refinancing will occur on terms similar to existing obligations.

The Company continues to proactively evaluate capital market access and balance sheet positioning in advance of these maturities.

In general, funding for long-term cash needs will come from unused net proceeds from financing activities, operating cash flows, refinancing existing debt, and proceeds from sales of investment in developmental real estate and real estate owned.

Subsequent Events

On February 24, 2025, the Board authorized and the Company declared a dividend of $0.484375 per share on the Company’s 7.75% Series A Preferred Stock payable on March 31, 2025 to Series A Preferred Stock 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 Board 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, our 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 $500,000;

and (ii) a one-time bonus grant of 20,000 restricted Common Shares to each of our non-employee directors, Arthur Goldberg, Brian Prinz, Leslie Bernhard and Jeffery Walraven.

Each of our non-employee directors, with the exception of 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 our 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.

We identified subsequent to the above March 10, 2025 action of the Company’s Compensation Committee regarding authorization of issuance of 420,168 of restricted Common Shares 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 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.

As a 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 Common 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 remediation of this matter, on March 24, 2025, John L.

Villano voluntarily forfeited the 420,168 Common Shares that were granted on March 10, 2025.

See Needham Credit Facility subsequent event as disclosed above in the “Liquidity” section.

Management has evaluated subsequent events through March 31, 2025, the date on which the consolidated financial statements were available to be issued.

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

In addition to the items noted above in Recent Developments, see Note 21 - Subsequent Events.

Off-Balance Sheet Arrangements

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As of December 31, 2025, our contractual obligations include unfunded amounts of any outstanding construction loans and unfunded commitments for loans and limited liability company investments.

(in thousands)

(in thousands) Total Less than

years More than

Unfunded portions of outstanding construction loans $ 37,156 $ 24,718 $ 12,438 $ — $ —

Unfunded commitments

Unfunded commitments - investments in limited liability companies 1,371 1,371 — — —

Total contractual obligations $ 38,527 $ 26,089 $ 12,438 $ — $ —

2 unchanged sentences

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 7. Management’s Discussion and Analysis