What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2026-08-05 compared with 2026-05-20 · 228 added, 86 removed, 273 unchanged (53% of the section changed)

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Sachem Capital Corp., a New York corporation, established in 2010 and completing an initial public offering in 2017, is a self-managed REIT that specializes in originating, underwriting, funding, servicing and managing a portfolio of first mortgage loans.

The Company operates its business as one segment.

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.

We operate its business as one segment.

We offer 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 our loans are generally classified as residential or commercial real estate and, typically, are held for resale or investment.

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 and investments apart from its lending activities.

We do not lend to owner occupants of residential real estate.

Our primary underwriting criterion is a conservative loan to value ratio.

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

Recent Developments

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IRG Master Holdings, together with its subsidiaries, owns and operates a portfolio of industrial real estate assets.

Prior to the closing of the Transaction (the “Closing”), which is expected to be by the end of 2026, we will complete a series of pre-closing reorganization steps (the “Pre-Closing Reorganization”), including (i) forming the Operating Partnership and contributing all or substantially all of our assets thereto, (ii) redomesticating from the State of New York to the State of Delaware, (iii) effecting a 20-to-1 reverse stock split of our issued and outstanding common shares, following which such shares will be redesignated as our Class A common stock (the “Class A Shares”), (iv) authorizing a new class of Class B Common Stock (the “Class B Shares”), (v) adjusting the conversion and anti-dilution rights applicable to our issued and outstanding preferred stock in accordance with the applicable certificate of designations to reflect the reverse stock split, and (vi) changing our corporate name to “IRG Realty Trust, Inc.”

Prior to the closing of the Transaction (the “Closing”), we will complete a series of pre-closing reorganization steps (the “Pre-Closing Reorganization”), including (i) forming the Operating Partnership and contributing all or substantially all of our assets thereto, (ii) redomesticating from the State of New York to the State of Delaware, (iii) effecting a 20-to-1 reverse stock split of our issued and outstanding common shares, following which such shares will be redesignated as our Class A common stock (the “Class A Shares”), (iv) authorizing a new class of Class B Common Stock (the “Class B Shares”), (v) adjusting the conversion and anti-dilution rights applicable to our issued and outstanding preferred stock in accordance with the applicable certificate of designations to reflect the reverse stock split, and (vi) changing our corporate name to “IRG Realty Trust, Inc.”

The number of OP Units and Class B Shares to be issued to IRG Global at the Closing (the “Transferee Consideration Units”) will be calculated based on a formula set forth in the Contribution Agreement, subject to downward adjustment based on the aggregate shortfall in replacement value for any dispositions of IRG Master Holdings’ properties occurring during the Interim Period (as defined in the Contribution Agreement), other than dispositions with an aggregate shortfall of less than $3.0 million.

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Immediately following the Closing, IRG Global is expected to hold approximately 94.1% of the outstanding OP Units, with us retaining the remaining approximately 5.9% of the outstanding OP Units.

Subject to certain

restrictions, a holder of OP Units may require the Operating Partnership to exchange all or a portion of such holder’s OP Units for cash or, at our option, Class A Shares on a one-for-one basis, subject to the ownership, transfer, REIT qualification and other limitations set forth in an Amended and Restated Limited Partnership Agreement, which is expected to be executed in connection with the Closing of the Transaction.

The Closing of the Transaction is expected to occur by the end of 2026, subject to customary closing conditions, including the approval of our shareholders.

For additional information on the Contribution Agreement, see our Current Report on Form 8-K filed with the SEC on May 18, 2026 and Note 21 – Subsequent Events – to our accompanying unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Subject to certain restrictions, a holder of OP Units may require the Operating Partnership to exchange all or a portion of such holder’s OP

Units for cash or, at our option, Class A Shares on a one-for-one basis, subject to the ownership, transfer, REIT qualification and other limitations set forth in an Amended and Restated Limited Partnership Agreement, which is expected to be executed in connection with the Closing of the Transaction.

For additional information on the Contribution Agreement, see our Current Report on Form 8-K filed with the SEC on May 18, 2026 and Note 1 – The Company, Contribution Agreement with Industrial Realty Group Global, LLC – to our accompanying unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Portfolio and Asset Management Updates

Coconut Grove, Florida .

Subsequent to June 30, 2026, one of the loans to the related-party joint venture was repaid in full following the sale of the underlying Coconut Grove, Florida residence.

The residence sold for gross sale proceeds of approximately $ 7.5 million and generated net sale proceeds of approximately $ 7.0 million.

The Company received approximately $ 7.0 million in cash to repay the associated loan in full.

Of the two remaining residences, one is complete and actively marketed for sale, and the other is expected to be completed and placed on the market during the fourth quarter of 2026.

Vela Cove—Naples, Florida .

Through the date of this Report, we completed improvements to the common areas of the completed North Building, including the rooftop and pool, and rebranded the project, formerly known as The Nautilus, as Vela Cove.

We engaged a new marketing and listing team for the three completed North Building residences and for pre-sales of the four planned South Building residences.

We reengaged the South Building architect under a comprehensive agreement covering completion and coordination of the construction plans, and that work is underway.

We also completed negotiations with the selected general contractor and currently expect substantive construction work on the South Building parcel to commence in early fourth quarter 2026.

Urbane Capital, our in-house asset management and development platform, continues to oversee the development and monetization of the project.

Critical Accounting Policies and Use of Estimates

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Actual amounts could differ from those estimates.

Significant estimates include the provisions for current expected credit losses and real estate owned, See Note 2 – Significant Accounting Policies – to our unaudited condensed consolidated financial statements for further details.

Significant estimates include the provisions for current expected credit losses and real estate owned.

See Note 2 – Significant Accounting Policies – to our unaudited condensed consolidated financial statements for further details.

Revenue Recognition

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

In determining the CECL allowance, we consider various factors including (1) historical loss experience in our 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) our current and future view of the macroeconomic environment.

and (3) our current and future view of the macroeconomic environment.

We also utilize a reasonable and supportable forecast period equal to the contractual term of the loan plus any applicable short-term extensions that are reasonably expected for construction loans.

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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 unaudited Condensed Consolidated Statements of Operations.

Our Loan Portfolio

The following table presents certain information regarding our real estate lending activities for the three months ended March 31, 2026:

Three Months Ended March 31, 2026

Our Mortgage Loan Portfolio

The following table presents certain information regarding our real estate lending activities for the three and six months ended June 30, 2026:

Three Months Ended June 30, 2026 Six Months Ended June 30, 2026

(in thousands, except number

Loans disbursed (1)

$ 40,547 $ 75,747

Loans originated 7 11

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Number of loans transferred to real estate owned 1 1

As of March 31, 2026 As of December 31, 2025

As of June 30, 2026 As of December 31, 2025

(in thousands, except number

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(3) Does not give effect to extensions.

The table below presents our loans held for investment by loan size as of March 31, 2026:

The table below presents our loans held for investment by loan size as of June 30, 2026:

Amount Number of

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Total 100 100.0 % $ 337,557 100.0 %

As of March 31, 2026, the primary geographic markets in which we were exposed were Connecticut, Florida, Massachusetts and New York.

The following table presents our loans held for investment by state as of March 31, 2026:

As of June 30, 2026, the primary geographic markets in which we were exposed were Connecticut, Florida, Massachusetts and New York.

The following table presents our loans held for investment by state as of June 30, 2026:

State Number of

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(in thousands)

California 1 1.0 % $ 10,000 2.9 %

Connecticut 41 41.0 % 93,682 27.9 %

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Tennessee 2 2.0 % 16,857 5.0 %

Virginia 1 0.9 % 4,850 1.4 %

Washington D.C.

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Total 100 100.0 % $ 337,557 100.0 %

The following table presents our loans held for investment as of March 31, 2026 by year of origination:

The following table presents our loans held for investment as of June 30, 2026 by year of origination:

Year of Origination Number of

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Total 100 100.0 % $ 337,557 100.0 %

The following table presents additional information regarding the types of properties securing loans held for investment as of March 31, 2026 and December 31, 2025:

March 31, 2026 December 31, 2025

The following table presents additional information regarding the types of properties securing loans held for investment as of June 30, 2026 and December 31, 2025:

June 30, 2026 December 31, 2025

(in thousands)

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Our allowance for credit losses is influenced by historical loss experience, current exposure by geographical region, current expected credit losses on loans in foreclosure based on fair value less cost to sell, non-performing status, and other supportable forecasts of economic conditions.

A loan is considered non-performing once it has been delinquent on its monthly payments more than 90 days.

The following table presents the allowance for credit losses against unpaid principal balance of loans held for investment as of March 31, 2026 and December 31, 2025:

March 31, 2026 December 31, 2025

A loan is considered non-performing once it has been delinquent on its monthly payments 90 days or more.

The following table presents the allowance for credit losses against unpaid principal balance of loans held for investment as of June 30, 2026 and December 31, 2025:

June 30, 2026 December 31, 2025

(in thousands)

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Investment in Developmental Real Estate

As of March 31, 2026, we owned eight properties that were classified as investments in developmental real estate.

As of June 30, 2026, we owned five projects that were classified as investments in developmental real estate.

The projects are in various phases of completion.

The following table details the carry value of our investments in developmental real estate owned property reflected on our unaudited Condensed Consolidated Balance Sheet as of March 31, 2026:

The following table details the carrying value of our investments in developmental real estate owned property reflected on our unaudited Condensed Consolidated Balance Sheet as of June 30, 2026:

Property Type Location Month of

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For further information, see Note 5 – Investment in Developmental Real Estate, Net — to our unaudited condensed consolidated financial statements.

We have fully rebranded the Naples, Florida condominium project included above as Vela Cove and relaunched full-scale marketing for the three completed north building residences currently available for sale.

We have also awarded the architect and construction contracts and expect to break ground on the four-unit south building parcel early fourth quarter 2026.

Presale activity on the south building units is expected to occur alongside of the completed unit marketing efforts.

Real Estate Owned

As of March 31, 2026, we owned twelve properties, each of which previously served as collateral for first mortgage loans.

The following table presents the carrying value of each of our properties reflected on our unaudited Condensed Consolidated Balance Sheet as o f March 31, 2026 :

As of June 30, 2026, we owned eleven properties, each of which previously served as collateral for first mortgage loans.

The following table presents the carrying value of each of our properties reflected on our unaudited Condensed Consolidated Balance Sheet as o f June 30, 2026 :

Property Type Location Month of

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Commercial - Office Windsor, CT December 2024 2,000

Land Marathon, FL January 2025 410

Commercial - Office Baltimore, MD July 2025 741

Commercial - Office Wilton, CT September 2025 1,338

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Residential - Multi Family Daytona Beach, FL October 2025 1,750

Land Lake Worth, FL June 2026 6,500

Total $ 20,968

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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.

Three months ended March 31, 2026 compared to three months ended March 31, 2025

Three Months Ended March 31,

Three months ended June 30, 2026 compared to three months ended June 30, 2025

Three Months Ended June 30,

2026 2025 $ Change % Change

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Other investment income 4 12 (8) (66.7) %

Loss on equity securities (140) (125) 15 12.0 %

Gain on equity securities 7 821 (814) (99.1) %

Other income 134 532 (398) (74.8) %

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Transaction expenses (2,567) — 2,567 100.0 %

Recovery of impairment loss on real estate 97 — 97 100.0 %

Impairment loss on real estate (288) — 288 100.0 %

Gain on sale of investments in developmental real estate, real estate owned, and property and equipment, net 475 131 344 262.6 %

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Preferred stock dividends (1,120) (1,118) 2 0.2 %

Net loss attributable to common shareholders $ (7,197) $ (213) $ (6,984) NM

Basic and diluted loss per common share $ (0.15) $ —

Net (loss) income attributable to common shareholders $ (6,497) $ 769 $ (7,266) NM

Basic and diluted (loss) income per common share $ (0.14) $ 0.02

Basic and diluted weighted average number of common shares outstanding 47,281,931 46,875,187

NM - not meaningful

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

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

Accordingly, we closely monitor the following primary drivers of these metrics:

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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.

Average loans outstanding are calculated using the arithmetic average of the unpaid principal balance of loans held for investment as of the beginning and the end the quarter.

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.

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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 - increased from the corresponding period in the prior year, as further analyzed below.

• Average loans held for investment were $365.5 million and $370.3 million for the three months ended March 31, 2026 and 2025, respectively.

Interest income from loans - decreased from the corresponding period in the prior year, as further analyzed below.

• Average loans held for investment were $346.7 million and $376.3 million for the three months ended June 30, 2026 and 2025, respectively.

The effective yield on total loans held for investment was 8.4% and 8.0%, respectively.

Results are impacted by nonperforming loans and real estate owned, which do not contribute interest income.

• Average total performing loans held for investment were $270.9 million and $275.1 million for the three months ended March 31, 2026 and 2025, respectively.

• Average total performing loans held for investment were $254.3 million and 262.7 million for the three months ended June 30, 2026 and 2025, respectively.

The effective yield on performing loans was 11.4% and 11.4%, 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 $95.7 million and $97.3 million for the three months ended March 31, 2026 and 2025, respectively.

Interest income from limited liability company investments - Interest income generated from our investments in the Shem Creek funds and direct loan co-investment vehicles decreased from the corresponding period in the prior year.

The decrease was primarily attributable to lower average capital deployed within certain direct loan co-investment vehicles during 2026.

• Average nonperforming loans held for investment were $92.4 million and $113.6 million for the three months ended June 30, 2026 and 2025, respectively.

Interest income from limited liability company investments - Interest income generated from our investments in the Shem Creek funds and direct loan co-investment funds decreased from the corresponding period in the prior year.

The decrease was primarily attributable to lower average capital deployed within certain direct loan co-investment funds during 2026.

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

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period depending on repayment activity and redeployment decisions.

Capital returned from these funds 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 unaudited condensed consolidated financial statements for the three and six months ended June 30, 2026.

Interest expense and amortization of deferred financing costs - increased from the corresponding period in the prior year, primarily attributable to similar average borrowings but at higher average interest rates.

During 2025, as a result of maturing unsecured notes payable, we began repositioning our capital structure through the issuance of $100.0 million ($100.0 million and $90.0 million drawn as of June 30, 2026 and December 31, 2025, respectively) 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.

We continue to evaluate refinancing strategies for upcoming maturities late 2026 and into 2027, with a focus on extending duration and optimizing cost of capital.

Access to diversified funding sources remains a strategic priority as we balance liquidity, leverage, and shareholder returns.

Net Interest Margin

Net interest margin in the second quarter of 2026 was 1.9% compared to 2.3% in the second quarter of 2025.

The decrease in net interest margin reflects both structural and cyclical factors.

Structurally, refinancing activity during 2025 increased the weighted average cost of capital.

Cyclically, lower average earning assets reduced interest-earning balances.

While asset yields remained strong on performing loans, 11.4% in second quarter 2026 as compared to 11.4% in the second quarter 2025, overall margin stabilization depends on continued resolution of nonperforming loans, normalization of earning asset levels, and disciplined origination activity at spreads consistent with current funding costs.

Net interest (loss) income after provision for credit losses, 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 - increased from the corresponding period in the prior year primarily due to declines in collateral valuations for loans previously reserved and new nonperforming loans.

The current quarter provision was concentrated in three specific loans, which accounted for approximately $2.7 million of loan-specific provision activity.

This included approximately $0.7 million associated with charge-offs of related receivable balances in connection with the foreclosure process and transfer of the collateral securing one of the loans to real estate owned.

The loan-specific activity was partially offset by an approximately $0.1 million net decrease in the collective reserve for the remaining portfolio and other loan-specific reserves.

We continue to apply a conservative collateral-dependent methodology for loans in foreclosure and pending foreclosure status.

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

Total other income

Total other income decreased from the corresponding period in the prior year.

Fee income on loans - declined from the corresponding period in the prior 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 - no material change from the corresponding period in the prior year.

See Note 19 — Limited Liability Company ("LLC") Investments — to our unaudited condensed consolidated financial statements.

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

Gain on equity securities - The balance includes 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.

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

The decrease from the corresponding period in the prior year reflects rent recognized on the Westport, CT investments in developmental real estate during 2025 which were disposed of in December 2025.

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.

We monitor 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.

We continue to align operating expense levels with portfolio scale while preserving asset management intensity.

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

Total operating expenses increased from the corresponding period in the prior year as further discussed below.

Compensation and employee benefits - increased modestly from the corresponding period in the prior year, reflecting strategic additions to personnel during 2025 and performance-based compensation adjustments including stock-based compensation.

General and administrative expenses - increased modestly from the corresponding period in the prior year due to additional costs associated with our investments in developmental real estate, real estate owned, and increased director fees.

Transaction expenses - expenses in the current year are associated with an announced contribution transaction as described earlier in the Recent Developments section.

Additional material costs are expected to be incurred until that transaction closes.

Impairment loss on real estate owned - increased from the corresponding period in the prior 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 - increased from the corresponding period in the prior year.

Each period reflects gains realized on the disposition of select real estate assets and developmental projects during the period.

Other expenses - decreased from the corresponding period in the prior year and primarily reflect operating costs associated with real estate owned, income taxes, legal matters, public company expenses, and portfolio servicing.

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

Net (loss) income and net (loss) income attributable to common shareholders - Operating results for the second quarter of 2026 were negatively impacted by a decrease in net interest margin, the $2.6 million provision for credit losses described above, which was concentrated in three specific loans, and $2.6 million of transaction expenses associated with the pending contribution transaction..

Book value per common share

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

June 30, 2026 March 31, 2026

Total shareholders’ equity $ 158,792 $ 165,609

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

Total shareholders’ equity, net of preferred stock $ 100,973 $ 107,790

Number of common shares outstanding at period end 47,954,632 47,955,647

Book value per common share $ 2.11 $ 2.25

The decrease in book value per common share is primarily due to cash dividends declared and paid for the three months ended June 30, 2026 on issued and outstanding common shares and shares of Series A Preferred Stock totaling $1.6 million, or $0.03 per common share, and net loss for the three months ended June 30, 2026 of $5.4 million, or $0.11 per common share.

The three month period’s net loss affecting book value per common share was materially driven by (i) the provision for credit losses related to loans held for investment of $2.6 million, or approximately $0.05 per common share, which was concentrated in three specific loans as described above, and (ii) transaction expenses associated with the pending contribution transaction of $2.6 million, or approximately $0.05 per common share.

The aggregate impact of these items was approximately $5.2 million, or $0.10 per common share.

Six months ended June 30, 2026 compared to six months ended June 30, 2025

Six Months June 30,

2026 2025 $ Change % Change

Interest income from loans $ 16,006 $ 15,370 $ 636 4.1 %

Interest income from limited liability company investments 1,608 2,801 (1,193) (42.6) %

Interest expense and amortization of deferred financing costs (12,387) (12,233) 154 1.3 %

Net interest income 5,227 5,938 (711) (12.0) %

Net interest margin 2.9 % 3.2 %

Provision for credit losses related to loans held for investment (7,923) (1,977) 5,946 300.8 %

Change in valuation allowance related to loans held for sale — 1,047 (1,047) (100.0) %

Net interest (loss) income after provision for credit losses related to loans held for investment and changes in valuation allowance related to loans held for sale (2,696) 5,008 (7,704) (153.8) %

Fee income from loans 2,438 3,196 (758) (23.7) %

Income from limited liability company investments 176 229 (53) (23.1) %

Other investment income 7 17 (10) (58.8) %

(Loss) gain on equity securities (133) 696 (829) (119.1) %

Other income 277 604 (327) (54.1) %

Total other income 2,765 4,742 (1,977) (41.7) %

Operating expenses

Compensation and employee benefits (4,075) (3,592) 483 13.4 %

General and administrative expenses (3,413) (2,659) 754 28.4 %

Transaction expenses (4,175) — 4,175 100.0 %

Impairment loss on real estate (191) — 191 100.0 %

Gain on sale of investments in developmental real estate, real estate owned, and property and equipment, net 671 131 540 412.2 %

Other expenses (340) (839) (499) (59.5) %

Total operating expenses (11,523) (6,959) 4,564 65.6 %

Net (loss) income (11,454) 2,791 (14,245) (510.4) %

Preferred stock dividends (2,240) (2,235) 5 0.2 %

Net (loss) income attributable to common shareholders $ (13,694) $ 556 $ (14,250) NM

Basic and diluted (loss) income per common share $ (0.29) $ 0.01

Basic and diluted weighted average number of common shares outstanding 47,230,349 46,830,215

NM - not meaningful

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

Accordingly, we closely monitor the following primary drivers of these metrics:

Net interest income

Net interest income represents the largest component of 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.

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 three most recent fiscal quarters.

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 - increased from the corresponding period in the prior year, as further analyzed below.

• Average loans held for investment were $356.9 million and $376.5 million for the six months ended June 30, 2026 and 2025, respectively.

The effective yield on total loans held for investment was 9.0% and 8.2%, respectively.

Results are impacted by nonperforming loans and real estate owned, which do not contribute interest income.

• Average total performing loans held for investment were $256.2 million and $271.8 million for the six months ended June 30, 2026 and 2025, respectively.

The effective yield on performing loans was 12.5% and 11.3%, 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 $100.7 million and $104.7 million for the six months ended June 30, 2026 and 2025, respectively.

The decrease was primarily attributable to lower average capital deployed within certain direct loan co-investment funds during 2026.

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

In certain vehicles, our 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.

We evaluate 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 unaudited condensed consolidated financial statements for the three months ended March 31, 2026.

Interest expense and amortization of deferred financing costs - consistent with the corresponding period in the prior year, primarily attributable to lower average borrowings but at higher average interest rates.

During 2025, as a result of maturing unsecured notes payable, we began repositioning its capital structure through the issuance of $100.0 million ($100.0 million and $90.0 million drawn as of March 31, 2026 and December 31, 2025, respectively) of Senior Secured Notes due 2030.

See Note 19 — Limited Liability Company ("LLC") Investments — to our unaudited condensed consolidated financial statements for the three and six months ended June 30, 2026.

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

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Net Interest Margin

Net interest margin in the first quarter of 2026 was 3.9% compared to 4.0% in the first quarter of 2025.

Net interest margin in the six month period of 2026 was 2.9% compared to 3.2% in the six month period of 2025.

The decrease in net interest margin reflects both structural and cyclical factors.

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Cyclically, lower average earning assets reduced interest-earning balances.

While asset yields remained strong on performing loans, 13.5% in first quarter 2026 as compared to 11.5% in the first quarter 2025, overall margin stabilization depends on continued resolution of nonperforming loans, normalization of earning asset levels, and disciplined origination activity at spreads consistent with current funding costs.

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

While asset yields remained strong on performing loans, 12.5% in the six month period of 2026 as compared to 11.3% in the six month period of 2025, overall margin stabilization depends on continued resolution of nonperforming loans, normalization of earning asset levels, and disciplined origination activity at spreads consistent with current funding costs.

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

Credit risk management is central to our operating model.

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

This non-cash loss relates to the Naples, Florida loan restructuring where we took control of the three completed condominium units and entitled land for development of four additional condominium units which is treated as a deed in lieu of foreclosure for accounting purposes.

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however, actual recovery will depend on sales prices, timing, completion costs and market conditions.

In addition to the above non-cash Naples, Florida loan loss, the provision includes three specific loans which accounted for approximately $2.7 million of loan-specific provision activity during the second quarter.

We continue to apply a conservative collateral-dependent methodology for loans in foreclosure and pending foreclosure status.

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Total other income

Total other income remained relatively consistent from the corresponding period in the prior year, with underlying components shifting in composition rather than magnitude.

Total other income decreased from the corresponding period in the prior year.

Fee income on loans - declined from the corresponding period in the prior year primarily due to lower new loan origination volume.

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

Loss on equity securities - The balance includes net mark-to-market losses on equity securities held within the investment portfolio.

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

(Loss) gain on equity securities - The balance includes net mark-to-market gains on equity securities held within the investment portfolio.

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

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

The increase from the corresponding period in the prior year reflects rents recognized on certain investments in developmental real estate and real estate owned and certain non-recurring recoveries.

The decrease from the corresponding period in the prior year reflects rent recognized on the Westport, CT investments in developmental real estate during 2025 which were disposed of in December 2025.

Total operating expenses

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Total operating expenses increased from the corresponding period in the prior year as further discussed below.

Compensation and employee benefits - increased from the corresponding period in the prior year, reflecting strategic additions to personnel during 2025 and performance-based compensation adjustments including stock-based compensation.

General and administrative expenses - increased from the corresponding period in the prior year due to additional costs associated with our investments in developmental real estate, real estate owned, increased external audit fees and increased director fees.

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Additional material costs are expected to be incurred until that transaction closes.

Recovery of impairment loss on real estate owned - increased from the corresponding period in the prior 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 period reflects gains realized on the disposition of select real estate assets and developmental projects.

Other expenses - increased from the corresponding period in the prior year and primarily reflect operating costs associated with real estate owned, legal matters, and portfolio servicing.

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

Net (loss) income and net loss attributable to common shareholders - Operating results for the first quarter of 2026 were negatively impacted by increases in valuation allowances, discounted cash flow fair value adjustment on loan restructuring recorded in provision for credit losses related to loans held for investment, and transaction expenses.

Gain on sale of investments in developmental real estate, real estate owned and property and equipment, net - increased from the corresponding period in the prior year.

Each period reflects gains realized on the disposition of select real estate assets and developmental projects during the period.

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

Net (loss) income and net (loss) income attributable to common shareholders - Operating results for the six month period of 2026 were negatively impacted by a decrease in net interest margin, the $6.6 million specific provisions for credit losses described above, which was concentrated in four specific loans, and $4.2 million of transaction expenses associated with the pending contribution transaction..

Book value per common share

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

March 31, 2026 December 31, 2025

June 30, 2026 December 31, 2025

Total shareholders’ equity $ 158,792 $ 174,937

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Book value per common share $ 2.11 $ 2.46

The decrease in book value per common share is primarily due to cash dividends declared and paid for the three months ended March 31, 2026 on issued and outstanding common shares and shares of Series A Preferred Stock totaling $3.5 million, or $0.07 per common share, and net loss attributable to common shareholders for the three months ended March 31, 2026 of $6.1 million, or $0.13 per common share.

This quarter's net loss impacting the book value per common share was materially driven by 1) the non-cash discounted cash flow fair value adjustment on loan restructuring recorded in provision for credit losses related to loans held for investment of $3.9 million, or $0.08 per common share, and 2) contribution transactional expenses of $1.6 million or $0.03 per common share.

The aggregate impact of both events is $5.5 million, or $0.11 per common share of book value decline from year end.

The decrease in book value per common share is primarily due to cash dividends declared and paid for the six months ended June 30, 2026 on issued and outstanding common shares and shares of Series A Preferred Stock totaling $5.1 million, or $0.11 per common share, and net loss for the six months ended June 30, 2026 of $11.5 million, or $0.24 per common share.

This six month period's net loss impacting the book value per common share was materially driven by i) the non-cash discounted cash flow fair value adjustment on loan restructuring recorded in provision for credit losses related to loans held for investment of $3.9 million, or $0.08 per common share, ii) contribution transactional expenses of $4.2 million or $0.09 per common share and iii) the second-quarter provision for credit losses related to loans held for investment of $2.6 million, or approximately $0.05 per common share, which was concentrated in three specific loans as described earlier.

The aggregate impact of these events is $10.7 million, or $0.22 per common share of book value decline from year end.

Liquidity and Capital Resources

Total assets at March 31, 2026 were $473.3 million compared to $460.0 million at December 31, 2025, an increase of $13.3 million, or 2.9%.

The increase was due primarily to increases in investments in developmental real estate of $36.3 million and other assets of $4.0 million offset by decreases in loans held for investment, net of $22.5 million and investments in limited liability companies of $3.9 million.

The increase in investments in developmental real estate and decrease in loans held for investment, net is primarily driven by the Nautilus loan restructuring as described elsewhere in this report.

Total liabilities at March 31, 2026 were $307.7 million compared to $285.1 million at December 31, 2025, an increase of $22.6 million, or 7.9%.

This increase is primarily due to increases in senior secured notes payable of $10.1 million, lines of credit of $10.0 million and advances from borrowers of $1.3 million.

As of March 31, 2026, the Company’s capital structure consisted of a mix of unsecured listed notes, senior secured notes, and revolving credit facilities.

Total assets at June 30, 2026 were $472.9 million compared to $460.0 million at December 31, 2025, an increase of $12.9 million, or 2.8%.

The increase was due primarily to increases in cash of $17.9 million, real estate owned, net of $4.6 million, investments in developmental real estate of $35.8 million and other assets of $3.8 million offset by decreases in loans held for investment, net of $41.4 million, due from borrowers, net of $2.6 million and investments in limited liability companies of $4.9 million.

The increase in investments in developmental real estate and decrease in loans held for investment, net is primarily driven by the Naples, Florida loan restructuring in the first quarter of 2026.

Total liabilities at June 30, 2026 were $314.1 million compared to $285.1 million at December 31, 2025, an increase of $29.0 million, or 10.2%.

This increase is primarily due to increases in senior secured notes payable of $10.3 million, lines of credit of $17.5 million and accounts payable and accrued liabilities of $1.4 million offset by a decrease in advances from borrowers of $0.9 million.

As of June 30, 2026, 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.

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We monitor asset coverage ratios, covenant compliance and refinancing risk associated with upcoming maturities.

Total shareholders’ equity at March 31, 2026 was $165.6 million compared to $174.9 million at December 31, 2025, a decrease of $9.3 million, or 5.3%.

This decrease was due primarily to an aggregate of $3.5 million of dividends paid to holders of Series A Preferred Stock and common shares during the quarter and a net loss of $6.1 million for the period, offset by a $0.3 million increase in additional paid-in capital related to stock-based compensation.

Total shareholders’ equity at June 30, 2026 was $158.8 million compared to $174.9 million at December 31, 2025, a decrease of $16.1 million, or 9.2%.

This decrease was due primarily to an aggregate of $5.1 million of dividends paid to holders of Series A Preferred Stock and common shares during the period and a net loss of $11.4 million for the period (inclusive of $4.2 million of transaction expenses) offset by a $0.4 million increase in additional paid-in capital related to stock-based compensation.

Historically, we have distributed a substantial portion of our earnings to shareholders in order to maintain our REIT qualification.

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

Three Months Ended One Year-Change

Six Months Ended Change

Amount 2026 2025 Amount Percentage

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Cash and cash equivalents, January 1 $ 10,924 $ 18,066 $ (7,142) (39.5) %

Net cash provided by operating activities 835 191 644 337.2 %

Net cash (used in) provided by investing activities (16,504) 5,747 (22,251) (387.2) %

Net cash (used in) provided by operating activities (2,753) 692 (3,445) (497.8) %

Net cash used in investing activities (1,540) (2,658) 1,118 (42.1) %

Net cash provided by financing activities 22,188 6,374 15,814 248.1 %

Cash and cash equivalents, March 31 $ 11,565 $ 24,414 $ (12,849) (52.6) %

For a detailed breakdown of our cash flows during the three months ended March 31, 2026 and 2025, see our Condensed Consolidated Statement of Cash Flows.

Cash and cash equivalents, June 30 $ 28,819 $ 22,474 $ 6,345 28.2 %

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, transaction expenses, dividend payments, interest and principal payments on our indebtedness, including repayment/refinancing of the Notes maturing in December 2026 and March 2027, and payments for usual and customary operating and administrative expenses.

Our short-term cash requirements primarily include funding of loans, transaction expenses, dividend payments, interest and principal payments on our indebtedness, including repayment/refinancing of the Notes maturing in December 2026, March 2027, and June 2027, 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.

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Contractual Obligations

As of March 31, 2026, our contractual obligations include unfunded amounts of any outstanding construction loans and unfunded commitments for loans and limited liability company investments.

As of June 30, 2026, our contractual obligations include unfunded amounts of any outstanding construction loans and unfunded commitments for loans and limited liability company investments.

Total Less than

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Unfunded portions of outstanding construction loans $ 41,393 $ 27,238 $ 14,155 $ — $ —

Unfunded commitments to investments in LLC's 651 651 — — —

Unfunded commitments to investments in LLCs 651 651 — — —

Total contractual obligations $ 42,044 $ 27,889 $ 14,155 $ — $ —

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis