Sachem Capital Corp. (NYSE:SACH) Q2 2023 Earnings Conference Call August 15, 2023 8:00 AM ET Company Participants Kevin Reed - ICR John Villano - CEO and Interim CFO Nick Marcello - VP, Finance and Operations Conference Call Participants Tyler Batory - Oppenheimer & Co. Christopher Nolan - Ladenburg Thalmann Matthew Erdner - Jones Trading Chris Muller - JMP Securities Operator Greetings, and welcome to the Sachem Capital Corp. Second Quarter 2023 Earnings Conference Call. [Operator Instructions] As a remind ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-37997 SACHEM CAPITAL CORP. (Exact name of registrant as specified in its charter) New York 81-3467779 (State o ...

Sachem Capital Corp. (NYSE:SACH) Q1 2023 Earnings Conference Call May 15, 2023 8:00 AM ET Company Participants Kevin Reed - ICR John Villano - Chief Executive Officer and Interim Chief Financial Officer Nick Marcello - Vice President, Finance and Operations Conference Call Participants Gaurav Mehta - EF Hutton Tyler Batory - Oppenheimer Christopher Nolan - Ladenburg Thalmann Matthew Erdner - JonesTrading Operator Good morning ladies and gentlemen, and welcome to the Sachem Capital Corp. First Quarter 2023 E ...

[PART I. FINANCIAL INFORMATION](index=5&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents Sachem Capital Corp.'s unaudited consolidated financial statements and management's discussion and analysis for Q1 2023 [Item 1. FINANCIAL STATEMENTS (unaudited)](index=5&type=section&id=Item%201.%20FINANCIAL%20STATEMENTS) This section presents Sachem Capital Corp.'s unaudited consolidated financial statements, including the balance sheets, statements of comprehensive income, changes in shareholders' equity, and cash flows, along with detailed notes explaining accounting policies, financial instruments, and operational specifics for the periods ended March 31, 2023, and December 31, 2022 [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) The consolidated balance sheets show the company's financial position, with total assets increasing by 5.5% and total liabilities by 5.8% from December 31, 2022, to March 31, 2023, primarily driven by growth in mortgages receivable and financing activities Consolidated Balance Sheet Highlights | Metric | March 31, 2023 | December 31, 2022 | | :-------------------------------- | :------------- | :---------------- | | Total Assets | $596,997,042 | $565,661,862 | | Mortgages receivable, net | $476,469,464 | $460,633,268 | | Total Liabilities | $368,000,987 | $347,954,508 | | Total Shareholders' Equity | $228,996,055 | $217,707,354 | | Cash and cash equivalents | $20,332,516 | $23,713,097 | - Total assets increased by approximately **$31.3 million**, or **5.5%**, from December 31, 2022, to March 31, 2023[14](index=14&type=chunk) - Total liabilities increased by approximately **$20.0 million**, or **5.8%**, from December 31, 2022, to March 31, 2023[14](index=14&type=chunk) [Consolidated Statements of Comprehensive Income](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) The consolidated statements of comprehensive income show a 42.8% increase in total revenue for Q1 2023 compared to Q1 2022, driven by higher interest income from loans and partnership investments, despite a 61.1% rise in operating costs and expenses Consolidated Statements of Comprehensive Income Highlights | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change (%) | | :------------------------------------ | :-------------------------------- | :-------------------------------- | :--------- | | Total Revenue | $14,707,759 | $10,301,375 | 42.8% | | Interest income from loans | $10,983,326 | $8,511,375 | 29.0% | | Income from partnership investments | $549,723 | $272,488 | 101.7% | | Unrealized gain (loss) on investment securities | $716,389 | $(1,052,230) | N/A | | Total operating costs and expenses | $9,587,537 | $5,949,909 | 61.1% | | Net income attributable to common shareholders | $4,195,460 | $3,429,700 | 22.3% | | Basic and diluted net income per common share | $0.10 | $0.10 | 0.0% | - Unrealized gain on investment securities was **$716,389** in Q1 2023, a significant improvement from an unrealized loss of **$1,052,230** in Q1 2022[15](index=15&type=chunk) [Consolidated Statements of Changes in Shareholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity) Shareholders' equity increased from $217.7 million at January 1, 2023, to $229.0 million at March 31, 2023, influenced by net income and common share issuances, partially offset by the cumulative effect of adopting the CECL accounting standard and preferred stock dividends Shareholders' Equity Changes (Q1 2023) | Item | Amount | | :---------------------------------------------------- | :------------- | | Balance, January 1, 2023 | $217,707,354 | | Cumulative effect of change in accounting principle - Adoption of ASU 2016-13 | $(2,489,574) | | Issuance of common shares, net of expenses | $9,181,158 | | Net income for the period ended March 31, 2023 | $5,120,222 | | Dividends paid on Series A Preferred Stock | $(924,762) | | Balance, March 31, 2023 | $228,996,055 | - The adoption of ASU 2016-13 resulted in a cumulative-effect adjustment of **$(2,489,574)** to accumulated deficit[17](index=17&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Cash flows from operating activities decreased by 33.7% in Q1 2023 compared to Q1 2022, while net cash used for investing activities decreased by 29.9%. Net cash provided by financing activities also saw a significant decrease of 55.0%, leading to an overall net decrease in cash and cash equivalents Consolidated Statements of Cash Flows Highlights | Cash Flow Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change (%) | | :------------------------------------ | :-------------------------------- | :-------------------------------- | :--------- | | Net cash provided by operating activities | $5,009,391 | $7,555,123 | -33.7% | | Net cash used for investing activities | $(33,955,040) | $(48,442,632) | -29.9% | | Net cash provided by financing activities | $25,565,068 | $56,812,081 | -55.0% | | Net increase (decrease) in cash and cash equivalents | $(3,380,581) | $15,924,572 | N/A | | Cash and cash equivalents - End of Period | $20,332,516 | $57,863,469 | -64.9% | - Principal disbursements for mortgages receivable were **$58,883,818** in Q1 2023, offset by principal collections of **$39,884,300**[19](index=19&type=chunk) - Net proceeds from line of credit increased to **$10,086,036** in Q1 2023, compared to a repayment of **$(9,898,667)** in Q1 2022[19](index=19&type=chunk) [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes provide comprehensive details on Sachem Capital Corp.'s business operations, accounting policies, financial instruments, and significant transactions, offering crucial context for the unaudited financial statements - The Company adopted the Current Expected Credit Loss (CECL) standard effective January 1, 2023, recording an initial allowance adjustment of **$2,489,574** as a direct charge to accumulated deficit[35](index=35&type=chunk)[64](index=64&type=chunk) - The CECL allowance for mortgages receivable increased by approximately **$55,000** from January 1, 2023 (**$1.9 million**), to March 31, 2023 (**$2.0 million**)[39](index=39&type=chunk) - The Company believes it qualifies as a Real Estate Investment Trust (REIT) for federal income tax purposes, generally exempting it from U.S. federal income tax on distributed taxable income[56](index=56&type=chunk)[59](index=59&type=chunk) [Note 1. The Company](index=10&type=section&id=Note%201.%20The%20Company) Sachem Capital Corp. specializes in originating and managing short-term, secured, non-bank first mortgage loans for real estate owners and investors, primarily in the Northeastern U.S. and Florida, with a focus on conservative loan-to-value ratios - The Company offers short-term (one to three years), secured, non-bank loans to real estate owners and investors for property acquisition, renovation, development, rehabilitation, or improvement[25](index=25&type=chunk) - Loans are secured by a first mortgage lien on real estate, often with additional collateral and personal guarantees, and the primary underwriting criterion is a conservative loan to value ratio[25](index=25&type=chunk) [Note 2. Significant Accounting Policies](index=10&type=section&id=Note%202.%20Significant%20Accounting%20Policies) This note outlines the key accounting principles and estimates used in preparing the financial statements, including the adoption of the CECL standard, fair value measurements, revenue recognition, and REIT tax treatment [Unaudited Financial Statements](index=10&type=section&id=Unaudited%20Financial%20Statements) The unaudited consolidated financial statements are prepared in accordance with GAAP for interim information, including all necessary adjustments, but do not contain all footnotes required for complete annual statements - Interim financial statements are prepared in accordance with GAAP for interim financial information and do not include all information and footnotes required for complete financial statements[26](index=26&type=chunk) [Use of Estimates](index=10&type=section&id=Use%20of%20Estimates) Management relies on various assumptions, projections, and economic conditions to make estimates for financial reporting, acknowledging that actual results may differ materially - Preparation of financial statements requires management to make estimates and assumptions based on experience, future operations, and economic conditions, with actual amounts potentially differing materially[27](index=27&type=chunk) [Cash and Cash Equivalents](index=10&type=section&id=Cash%20and%20Cash%20Equivalents) The company classifies demand deposits, cashier's checks, money market accounts, and certificates of deposit with original maturities of three months or less as cash equivalents, noting a concentration of credit risk due to balances exceeding FDIC insurance - All demand deposits, cashier's checks, money market accounts, and certificates of deposit with original maturities of three months or less are considered cash equivalents[28](index=28&type=chunk) - Combined account balances typically exceed FDIC insurance coverage, leading to a concentration of credit risk, though the Company does not believe the risk is significant[28](index=28&type=chunk) [Investment Securities](index=10&type=section&id=Investment%20Securities) Debt investments are classified as available-for-sale, with fair value changes recorded in other comprehensive income, while equity investments are measured at fair value or cost with impairment adjustments - Debt investments are classified as available-for-sale, with changes in fair value (excluding credit losses) recorded in other comprehensive income[30](index=30&type=chunk) - Equity investments with readily determinable fair values are measured at fair value; those without are measured using the equity method or cost with adjustments for observable changes or impairments[34](index=34&type=chunk) [Current Expected Credit Losses Allowance](index=12&type=section&id=Current%20Expected%20Credit%20Losses%20Allowance) The company adopted the CECL standard on January 1, 2023, establishing an allowance for credit losses on its loan portfolio and related receivables, using a loss-rate method that considers historical experience, current conditions, and future economic forecasts - The CECL standard was adopted effective **January 1, 2023**, replacing the probable incurred loss impairment methodology[35](index=35&type=chunk) - The CECL allowance for mortgages receivable was approximately **$2.0 million** as of March 31, 2023, an increase of approximately **$55,000** from January 1, 2023[39](index=39&type=chunk) - The CECL allowance for unfunded commitments was **$562,000** as of March 31, 2023, an increase of approximately **$40,000** from January 1, 2023[42](index=42&type=chunk) [Fair Value Measurements](index=14&type=section&id=Fair%20Value%20Measurements) The fair value hierarchy categorizes inputs into Level 1 (unadjusted quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable and significant inputs) to measure fair value - The fair value hierarchy prioritizes inputs to valuation techniques, with Level 1 being unadjusted quoted prices in active markets, Level 2 including observable inputs other than quoted prices, and Level 3 using unobservable inputs[43](index=43&type=chunk)[44](index=44&type=chunk)[45](index=45&type=chunk) [Property and Equipment](index=14&type=section&id=Property%20and%20Equipment) Land and buildings acquired for office facilities are stated at cost and depreciated using the straight-line method over 40 years, with the new corporate headquarters placed in service in Q1 2023 - The new corporate headquarters building, acquired in 2021, was completed and placed in service in **March 2023**, depreciated over **40 years**[47](index=47&type=chunk) [Real Estate Owned](index=14&type=section&id=Real%20Estate%20Owned) Real estate owned by the company is recorded at cost and is subject to quarterly impairment testing - Real estate owned is stated at cost and tested for impairment quarterly[48](index=48&type=chunk) [Consolidations](index=15&type=section&id=Consolidations) The consolidated financial statements include all subsidiaries where the company has control over significant operating, financial, and investing decisions, with all intercompany accounts and transactions eliminated - Consolidated financial statements include all controlled subsidiaries, with intercompany accounts and transactions eliminated[49](index=49&type=chunk) [Impairment of Long-Lived Assets](index=15&type=section&id=Impairment%20of%20Long-Lived%20Assets) The company monitors for events indicating potential impairment of long-lived assets, recognizing a loss if undiscounted expected future cash flows are less than the carrying amount - Impairment losses on long-lived assets are recognized when undiscounted expected future cash flows are less than the carrying amount[50](index=50&type=chunk) [Goodwill](index=15&type=section&id=Goodwill) Goodwill is not amortized but tested for impairment annually or more frequently if indicators arise, using a qualitative assessment or comparing fair value to carrying value - Goodwill is tested for impairment annually or more frequently if circumstances indicate potential impairment, using a qualitative assessment or comparing fair value to carrying value[51](index=51&type=chunk)[52](index=52&type=chunk) [Deferred Financing Costs](index=15&type=section&id=Deferred%20Financing%20Costs) Costs associated with revolving credit facilities and public offerings of unsecured notes are amortized over the term of the respective facilities or notes using the straight-line method - Deferred financing costs for credit facilities and public note offerings are amortized using the straight-line method over their respective terms[53](index=53&type=chunk) [Revenue Recognition](index=15&type=section&id=Revenue%20Recognition) Interest income from loans is recognized over the loan period using the simple interest method, while origination and modification fees are recognized ratably over the contractual life of the loan - Interest income from the loan portfolio is earned over the loan period using the simple interest method on principal amounts outstanding[54](index=54&type=chunk) - Origination and modification fee revenue, typically **1%-3%** of the loan balance, is recognized ratably over the contractual life of the loan[55](index=55&type=chunk) [Income Taxes](index=15&type=section&id=Income%20Taxes) The company operates as a REIT, generally avoiding federal income tax on distributed taxable income, and has elected to treat certain subsidiaries as taxable REIT subsidiaries (TRSs) which incur income tax liability - The Company believes it qualifies as a REIT, generally not subject to U.S. federal income tax on taxable income distributed to shareholders[56](index=56&type=chunk)[59](index=59&type=chunk) - Taxable REIT subsidiaries (TRSs) may hold assets and engage in business, generating federal and state income tax liability for these entities[60](index=60&type=chunk) [Earnings Per Share](index=17&type=section&id=Earnings%20Per%20Share) Basic and diluted earnings per share are calculated by dividing income available to common shareholders by the weighted-average number of common shares outstanding, with diluted EPS including potential dilution from stock options and warrants - Basic EPS is calculated by dividing income available to common shareholders by the weighted-average number of common shares outstanding[63](index=63&type=chunk) - Diluted EPS includes potential dilution from stock options and warrants using the treasury stock method[63](index=63&type=chunk) [Recent Accounting Pronouncements](index=17&type=section&id=Recent%20Accounting%20Pronouncements) The company adopted ASU 2016-13 (CECL) effective January 1, 2023, and ASU 2022-02 (TDR and Vintage Disclosures) which had no material effect, and does not anticipate a material impact from ASU 2022-03 (Fair Value Measurement of Equity Securities) - ASU No. 2016-13, 'Measurement of Credit Losses on Financial Instruments' (CECL), was adopted effective **January 1, 2023**, with a cumulative-effect adjustment to retained earnings[64](index=64&type=chunk) - ASU 2022-02, 'Troubled Debt Restructurings and Vintage Disclosures,' became effective for fiscal years beginning after **December 15, 2022**, and did not have a material effect on the Company's financial statements[66](index=66&type=chunk) - ASU 2022-03, 'Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions,' effective for fiscal years beginning after **December 15, 2023**, is not anticipated to have a material impact[67](index=67&type=chunk) [Reclassifications](index=19&type=section&id=Reclassifications) Certain amounts in the March 31, 2022, and December 31, 2022, consolidated financial statements were reclassified to align with the March 31, 2023, presentation - Certain amounts in prior period financial statements were reclassified to conform to the **March 31, 2023** presentation[69](index=69&type=chunk) [Note 3. Fair Value Measurement](index=19&type=section&id=Note%203.%20Fair%20Value%20Measurement) The company's assets measured at fair value, including liquid investments and real estate owned, are categorized by Level 1, 2, or 3 inputs, with total liquid investments increasing to $35.8 million as of March 31, 2023 Assets at Fair Value | Asset Category | March 31, 2023 (Total) | December 31, 2022 (Total) | | :-------------------- | :--------------------- | :---------------------- | | Stocks and ETFs | $1,403,680 | $4,728,724 | | Mutual funds | $15,193,680 | $14,850,839 | | Debt securities | $19,239,842 | $4,996,899 | | Total liquid investments | $35,837,202 | $24,576,462 | | Real estate owned | $6,138,912 | $5,216,149 | - As of March 31, 2023, the Company had continuous unrealized losses over **12 months** in Available-For-Sale debt securities of approximately **$517,000**, but no allowance for credit losses was deemed necessary[76](index=76&type=chunk) [Note 4. Mortgages Receivable](index=20&type=section&id=Note%204.%20Mortgages%20Receivable) This note details the company's mortgage loan portfolio, including lending standards, nonaccrual loans, funding and repayment activities, and the CECL allowance, noting a significant increase in nonaccrual loans and loans in foreclosure proceedings - The Company's lending standards typically require first mortgage liens and a maximum Loan-to-Value (LTV) of no greater than **70%** of appraised value, with exceptions based on additional collateral and borrower profile[78](index=78&type=chunk) - Outstanding principal balance of loans on nonaccrual status increased to **$97,106,984** as of March 31, 2023, from **$55,691,857** as of December 31, 2022[85](index=85&type=chunk) - As of March 31, 2023, **128** mortgage loans (approximately **31.5%** of the portfolio by count) representing approximately **$81.4 million** had matured but were not repaid or extended[101](index=101&type=chunk) - **52** mortgage loans, with an aggregate outstanding principal balance of approximately **$40.6 million**, were subject to foreclosure proceedings as of March 31, 2023[102](index=102&type=chunk) CECL Allowance Activity (Q1 2023) | Geographical Location | CECL Allowance as of Dec 31, 2022 | Adoption of ASU 2016-13 | Provision for CECL Allowance | CECL Allowance as of March 31, 2023 | | :-------------------- | :-------------------------------- | :---------------------- | :--------------------------- | :-------------------------------- | | New England | $105 | $1,302 | $3 | $1,410 | | West | $0 | $7 | $0 | $7 | | South | $0 | $402 | $56 | $458 | | Mid-Atlantic | $0 | $210 | $(3) | $207 | | Total | $105 | $1,921 | $56 | $2,082 | Loan Portfolio by Geographical Location (Carrying Value in thousands) | Geographical Location | March 31, 2023 | % of Portfolio | December 31, 2022 | % of Portfolio | | :-------------------- | :------------- | :------------- | :---------------- | :------------- | | New England | $226,026 | 47.23% | $225,603 | 48.97% | | South | $154,662 | 32.32% | $135,857 | 29.49% | | Mid-Atlantic | $94,713 | 19.79% | $96,128 | 20.86% | | West | $3,150 | 0.66% | $3,150 | 0.68% | | Total | $478,551 | 100.00% | $460,738 | 100.00% | | Less, CECL Allowance | $2,082 | | $105 | | | Carrying value, net | $476,469 | | $460,633 | | Loan Portfolio by Property Type (Outstanding Principal in thousands) | Property Type | March 31, 2023 | % of Portfolio | December 31, 2022 | % of Portfolio | | :------------ | :------------- | :------------- | :---------------- | :------------- | | Residential | $217,734 | 45.50% | $229,944 | 49.91% | | Commercial | $167,814 | 35.07% | $154,929 | 33.63% | | Land | $63,515 | 13.27% | $46,499 | 10.09% | | Mixed use | $29,488 | 6.16% | $29,366 | 6.37% | | Total | $478,551 | 100.00% | $460,738 | 100.00% | | Less, CECL Allowance | $2,082 | | $105 | | | Carrying value, net | $476,469 | | $460,633 | | [Note 5. Real Estate Owned](index=26&type=section&id=Note%205.%20Real%20Estate%20Owned) Real estate owned totaled $6.1 million as of March 31, 2023, comprising properties held for rental and sale. The company recognized a gain of $148,100 from property sales in Q1 2023, a reversal from a loss in Q1 2022 - Real estate owned totaled **$6,138,912** as of March 31, 2023, with no valuation allowance[105](index=105&type=chunk) - As of March 31, 2023, real estate owned included **$813,090** held for rental and **$5,325,822** held for sale[106](index=106&type=chunk) - The Company recognized an aggregate gain of **$148,100** from the sale of two properties held for sale during the three months ended March 31, 2023, compared to a loss of **$65,838** in the prior year period[107](index=107&type=chunk) [Note 6. Other Assets](index=28&type=section&id=Note%206.%20Other%20Assets) Other assets increased to $5.4 million as of March 31, 2023, from $4.9 million at December 31, 2022, including prepaid expenses, other receivables, goodwill, and deferred financing costs Other Assets Breakdown | Item | March 31, 2023 | December 31, 2022 | | :-------------------------- | :------------- | :---------------- | | Prepaid expenses | $400,418 | $410,373 | | Other receivables | $3,741,984 | $3,519,804 | | Other assets | $459,291 | $477,048 | | Goodwill | $391,000 | $391,000 | | Intangible asset – trade name | $130,400 | $130,400 | | Deferred financing costs, net | $297,274 | $54,548 | | Total | $5,420,367 | $4,983,173 | [Note 7. Line of Credit, Mortgage Payable, Churchill Facility, Credit Facility](index=29&type=section&id=Note%207.%20Line%20of%20Credit%2C%20Mortgage%20Payable%2C%20Churchill%20Facility%2C%20Credit%20Facility) The company manages various financing facilities, including a Wells Fargo margin loan, a refinanced New Haven Bank mortgage, a Churchill repurchase facility, and a new Needham Bank revolving credit facility, to support its lending operations and corporate purposes - The Wells Fargo margin loan had an outstanding balance of **$13,673,930** as of March 31, 2023, with an interest rate of **6.25%**[113](index=113&type=chunk) - The New Haven Bank Mortgage was refinanced on **February 28, 2023**, with a new **$1.66 million** adjustable-rate mortgage at an initial rate of **5.75%** per annum[115](index=115&type=chunk) - The Churchill MRA Funding I LLC Repurchase Financing Facility had **$54,055,815** outstanding as of March 31, 2023, with an effective interest rate of **9.09%**[120](index=120&type=chunk) - A new **$45 million** revolving credit facility was entered into with Needham Bank on **March 2, 2023**, with an option to increase to **$75 million**, secured by virtually all company assets[122](index=122&type=chunk) [Note 8. Notes Payable](index=32&type=section&id=Note%208.%20Notes%20Payable) The company has $280.6 million in unsecured, unsubordinated notes payable outstanding across seven series, with various interest rates and maturity dates, and future principal payments scheduled through 2027 - As of March 31, 2023, the Company had an aggregate of **$280,608,110** of unsecured, unsubordinated notes payable outstanding, net of deferred financing costs[126](index=126&type=chunk) Future Principal Payments on Notes Payable (as of March 31, 2023) | Year ending December 31, | Amount | | :----------------------- | :------------- | | Remainder of 2023 | $0 | | 2024 | $58,163,000 | | 2025 | $56,363,750 | | 2026 | $51,750,000 | | 2027 | $122,125,000 | | Total principal payments | $288,401,750 | - The Notes are subject to an 'Asset Coverage Ratio' requirement of at least **150%** for certain actions like dividend payments or incurring additional indebtedness[126](index=126&type=chunk) [Note 9. Accounts Payable and Accrued Liabilities](index=33&type=section&id=Note%209.%20Accounts%20Payable%20and%20Accrued%20Liabilities) Total accounts payable and accrued liabilities increased to $2.0 million as of March 31, 2023, from $1.4 million at December 31, 2022, primarily due to the inclusion of a $562,000 CECL allowance for unfunded contractual obligations Accounts Payable and Accrued Liabilities | Item | March 31, 2023 | December 31, 2022 | | :-------------------------------------------------- | :------------- | :---------------- | | Accounts payable and accrued expenses | $1,025,051 | $1,109,789 | | CECL - allowance for unfunded contractual obligation credit losses | $562,000 | $0 | | Other notes | $1,762 | $6,014 | | Accrued interest | $418,637 | $323,416 | | Total | $2,007,450 | $1,439,219 | [Note 10. Fee and Other Income](index=33&type=section&id=Note%2010.%20Fee%20and%20Other%20Income) Total fee and other income increased by 16.3% to $707,605 for the three months ended March 31, 2023, compared to the same period in 2022, with notable increases in extension fees and other fees Fee and Other Income (Three Months Ended March 31) | Item | 2023 | 2022 | | :---------------- | :--------- | :--------- | | Late and other fees | $113,131 | $128,864 | | Processing fees | $32,070 | $65,855 | | Rental income, net | $13,300 | $10,042 | | Extension fees | $180,410 | $101,834 | | Other fees | $203,029 | $50,562 | | Legal fees | $96,500 | $62,100 | | Other income | $69,165 | $189,307 | | Total | $707,605 | $608,564 | [Note 11. Commitments and Contingencies](index=34&type=section&id=Note%2011.%20Commitments%20and%20Contingencies) The company has significant unfunded future funding obligations totaling $114.9 million as of March 31, 2023, and details employment agreements with key executives, including stock-based compensation and termination provisions - Unfunded future funding obligations totaled **$114,851,913** as of March 31, 2023, which will be funded from loan payoffs and additional drawdowns under credit facilities and equity/debt sales[135](index=135&type=chunk) - As of March 31, 2023, **226,483** restricted common shares remain unvested for John Villano, the CEO[133](index=133&type=chunk) - John E. Warch's employment was terminated effective **May 4, 2023**, with **5,333** restricted common shares remaining unvested as of March 31, 2023[134](index=134&type=chunk) [Note 12. Related Party Transactions](index=35&type=section&id=Note%2012.%20Related%20Party%20Transactions) Loans to known shareholders increased to $25.4 million as of March 31, 2023, from $15.6 million in the prior year, with interest income from these loans also rising. The company also discloses compensation paid to family members of the CEO - Loans to known shareholders totaled **$25,436,352** as of March 31, 2023, compared to **$15,594,572** as of March 31, 2022[138](index=138&type=chunk) - Interest income earned on related party loans increased to **$506,093** for Q1 2023, up from **$347,638** for Q1 2022[138](index=138&type=chunk) - The CEO's daughter received **$43,000** in compensation for internal audit and compliance services in Q1 2023, up from **$27,500** in Q1 2022[139](index=139&type=chunk) [Note 13. Concentration of Credit Risk](index=35&type=section&id=Note%2013.%20Concentration%20of%20Credit%20Risk) The company's credit risk is concentrated in its mortgage loan portfolio, primarily in Connecticut (41.13%), Florida (26.79%), and New York (12.55%), making it susceptible to regional economic conditions - Mortgage loans are primarily concentrated in Connecticut (approximately **41.13%**), Florida (approximately **26.79%**), and New York (approximately **12.55%**)[142](index=142&type=chunk) - The Company maintains cash and cash equivalents with various financial institutions, with balances often exceeding FDIC insurance coverage[140](index=140&type=chunk) [Note 14. Outstanding Warrants](index=36&type=section&id=Note%2014.%20Outstanding%20Warrants) All remaining unexercised warrants to purchase common shares, issued in connection with a 2017 public offering, expired on October 24, 2022 - All remaining unexercised warrants, originally issued in **October 2017**, expired on **October 24, 2022**[144](index=144&type=chunk) [Note 15. Stock-Based Compensation and Employee Benefits](index=36&type=section&id=Note%2015.%20Stock-Based%20Compensation%20and%20Employee%20Benefits) The company granted 183,390 restricted common shares in Q1 2023, resulting in stock-based compensation expense of $173,132, and contributed $44,696 to its 401(k) Plan - The Company granted **183,390** restricted common shares under the Plan during Q1 2023, with a fair value of **$709,719**[146](index=146&type=chunk) - Stock-based compensation expense for Q1 2023 was **$173,132**, up from **$106,879** in Q1 2022[148](index=148&type=chunk) - The 401(k) Plan expense for Q1 2023 was **$44,696**, an increase from **$19,993** in Q1 2022[149](index=149&type=chunk) [Note 16. Equity Offerings](index=36&type=section&id=Note%2016.%20Equity%20Offerings) During Q1 2023, the company sold 2,479,798 common shares for approximately $9.4 million and Series A Preferred Stock for $139,500 under its at-the-market offering facility - During Q1 2023, the Company sold **2,479,798** common shares, realizing gross proceeds of approximately **$9.4 million**[150](index=150&type=chunk) - The Company also sold Series A Preferred Stock with an aggregate liquidation preference of **$154,675**, realizing gross proceeds of **$139,500**[150](index=150&type=chunk) [Note 17. Partnership Investments](index=36&type=section&id=Note%2017.%20Partnership%20Investments) The company has invested approximately $35.3 million in four limited liability companies focused on commercial real estate finance, generating $549,723 in income for Q1 2023, and has unfunded partnership commitments of $573,000 - As of March 31, 2023, the Company had invested approximately **$35.3 million** in four limited liability companies[151](index=151&type=chunk) - Income from partnership investments increased to **$549,723** for Q1 2023, up from **$272,488** for Q1 2022[156](index=156&type=chunk) - The Company had unfunded partnership commitments totaling approximately **$573,000** as of March 31, 2023[157](index=157&type=chunk) [Note 18. Special Purpose Acquisition Corporation](index=38&type=section&id=Note%2018.%20Special%20Purpose%20Acquisition%20Corporation) The company's wholly-owned subsidiary, Sachem Sponsor LLC, invested in Sachem Acquisition Corp., a blank check company formed for business combinations, incurring approximately $452,000 in related costs - Sachem Sponsor LLC, a wholly-owned subsidiary, purchased **1,437,500** shares of Class B common stock of Sachem Acquisition Corp. for **$25,000**[158](index=158&type=chunk) - The Company incurred approximately **$452,000** in costs related to the SPAC's registration statement, including legal, accounting, and filing fees[158](index=158&type=chunk) [Note 19. Series A Preferred Stock](index=38&type=section&id=Note%2019.%20Series%20A%20Preferred%20Stock) The Series A Preferred Stock pays quarterly cumulative dividends at 7.75% of its $25.00 per share liquidation preference, is generally not redeemable before June 29, 2026, and has limited voting rights - The Series A Preferred Stock pays quarterly cumulative dividends at **7.75%** of the **$25.00** per share liquidation preference per annum[160](index=160&type=chunk) - The Series A Preferred Stock is not redeemable before **June 29, 2026**, except upon a Change of Control, and holders generally do not have voting rights[160](index=160&type=chunk)[163](index=163&type=chunk) [Note 20. Subsequent Events](index=40&type=section&id=Note%2020.%20Subsequent%20Events) From April 1, 2023, to May 12, 2023, the company sold 136,356 common shares for approximately $510,000 and declared a dividend of $0.13 per share payable on April 24, 2023 - From **April 1, 2023**, through **May 12, 2023**, the Company sold **136,356** common shares, realizing gross proceeds of approximately **$510,000**[164](index=164&type=chunk) - On **April 4, 2023**, the Board of Directors declared a dividend of **$0.13** per share, payable on **April 24, 2023**[164](index=164&type=chunk) [Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=41&type=section&id=Item%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses the company's financial performance for Q1 2023, highlighting significant revenue growth driven by lending activities, but also noting increased operating expenses and a challenging market outlook due to rising interest rates and competition. The section also covers financing strategies, REIT qualification, and liquidity [Company Overview](index=41&type=section&id=Company%20Overview) Sachem Capital Corp. is a Connecticut-based real estate finance company specializing in short-term, first mortgage loans, operating as a REIT since 2017 to fund its mortgage loan portfolio and diversify ownership - Sachem Capital Corp. is a Connecticut-based real estate finance company specializing in originating, underwriting, funding, servicing, and managing a portfolio of short-term (three years or less) loans secured by first mortgage liens on real property[168](index=168&type=chunk) - The Company qualified as a REIT for federal income tax purposes beginning with its **2017** tax year, allowing deductions for distributions of taxable income to shareholders[168](index=168&type=chunk) [Review of the First Quarter and Outlook for Balance of Year](index=41&type=section&id=Review%20of%20the%20First%20Quarter%20and%20Outlook%20for%20Balance%20of%20Year) Q1 2023 saw a 42.8% revenue increase and 22.3% net income growth, with EPS remaining at $0.10. The company aims to grow its loan portfolio and enhance operational excellence in 2023, despite challenges from rising operating costs - Compared to Q1 2022, Q1 2023 revenue increased **42.8%**, net income attributable to common shareholders increased **22.3%**, and earnings per share remained unchanged at **$0.10**[169](index=169&type=chunk) - The revenue increase was primarily due to a **29.0%** increase in interest income and a **101.7%** increase in income from partnership investments[169](index=169&type=chunk) - Operating costs and expenses increased by **61.1%**, mainly due to a **76.3%** increase in interest and amortization of deferred financing costs and a **79.0%** increase in compensation[169](index=169&type=chunk) - The primary business objective for 2023 is to grow the loan portfolio while protecting capital and providing attractive risk-adjusted returns, focusing on larger-value commercial loans[170](index=170&type=chunk) [Overall Business Strategy and Challenges](index=43&type=section&id=Overall%20Business%20Strategy%20and%20Challenges) The company's strategy focuses on capitalizing on real estate lending opportunities and improving operational efficiencies, but faces challenges including interest rate compression (weighted average cost of capital rose to 7.23%), geopolitical concerns, increased competition from non-traditional lenders, shifting borrower expectations, property value fluctuations, and higher operating expenses - The weighted average cost of capital increased to **7.23%** as of March 31, 2023, from **6.08%** as of March 31, 2022, due to rising interest rates[171](index=171&type=chunk) - Challenges include interest rate compression, geopolitical concerns, increased competition from private equity funds, hedge funds, and other specialty finance entities, shifting borrower expectations, and property value fluctuations[171](index=171&type=chunk)[172](index=172&type=chunk)[173](index=173&type=chunk)[174](index=174&type=chunk) - Unfunded commitments totaled **$114.9 million** at March 31, 2023, requiring the company to maintain higher cash balances[179](index=179&type=chunk) [Financing Strategy Overview](index=45&type=section&id=Financing%20Strategy%20Overview) The company's financing strategy involves leveraging its portfolio, with debt representing 59.9% of total capital as of March 31, 2023. It utilizes seven series of unsecured notes, secured facilities (Churchill, Wells Fargo, New NHB Mortgage, Needham Credit Facility), and at-the-market equity offerings to fund growth and manage capital costs - Debt represented approximately **59.9%** of total capital at March 31, 2023, compared to **55.5%** at March 31, 2022[181](index=181&type=chunk) - The Company has seven series of unsecured unsubordinated notes outstanding, with an aggregate principal balance of **$288.4 million**[182](index=182&type=chunk) - Secured indebtedness includes the Churchill Facility (**$54.1 million** outstanding at **9.09%** effective rate), the Wells Fargo Loan (**$13.7 million** outstanding at **6.25%**), the New NHB Mortgage (**$1.66 million** at **5.75%**), and a new **$45 million** Needham Credit Facility (undrawn as of March 31, 2023)[191](index=191&type=chunk)[192](index=192&type=chunk)[194](index=194&type=chunk)[195](index=195&type=chunk) - During Q1 2023, the Company sold **2,479,798** Common Shares for approximately **$9.4 million** and Series A Preferred Stock for **$139,500** through at-the-market offerings[197](index=197&type=chunk) [REIT Qualification](index=51&type=section&id=REIT%20Qualification) The company believes it has qualified as a REIT since its IPO in 2017, requiring it to distribute at least 90% of its taxable income annually to shareholders to avoid federal income tax - The Company believes it has qualified as a REIT since its IPO in **2017** and elected to be taxed as a REIT beginning with its **2017** tax year[198](index=198&type=chunk) - As a REIT, the Company is required to distribute at least **90%** of its taxable income to shareholders annually to generally avoid U.S. federal income tax[198](index=198&type=chunk)[200](index=200&type=chunk) [Critical Accounting Policies and Use of Estimates](index=51&type=section&id=Critical%20Accounting%20Policies%20and%20Use%20of%20Estimates) The preparation of financial statements in accordance with GAAP necessitates management to make estimates and assumptions based on prior results, future operations, and economic conditions, which may differ materially from actual outcomes - The preparation of consolidated financial statements requires management to make estimates and assumptions that affect reported amounts, based on prior results, future operations, and economic conditions[201](index=201&type=chunk) [Results of Operations](index=51&type=section&id=Results%20of%20Operations) For Q1 2023, total revenue increased by 42.8% to $14.7 million, driven by a 29.0% rise in interest income and a 101.7% increase in partnership investment income. However, total operating costs and expenses also surged by 61.1% to $9.6 million, primarily due to higher interest and amortization costs, resulting in net income attributable to common shareholders of $4.2 million ($0.10 per share) [Total revenue](index=51&type=section&id=Total%20revenue) Total revenue for Q1 2023 increased by $4.4 million, or 42.8%, to $14.7 million, primarily due to a 29.0% increase in interest income from loans and a 101.7% increase in income from partnership investments - Total revenue for Q1 2023 was approximately **$14.7 million**, an increase of approximately **$4.4 million (42.8%)** from Q1 2022[203](index=203&type=chunk) - Interest income from loans increased by approximately **$2.5 million (29.0%)** to **$11.0 million** in Q1 2023[203](index=203&type=chunk) - Income from partnership investments increased by approximately **$277,000 (101.7%)** to **$550,000** in Q1 2023[203](index=203&type=chunk) [Operating costs and expenses](index=53&type=section&id=Operating%20costs%20and%20expenses) Total operating costs and expenses increased by $3.6 million, or 61.1%, to $9.6 million in Q1 2023, mainly driven by a 76.3% increase in interest and amortization of deferred financing costs - Total operating costs and expenses for Q1 2023 were approximately **$9.6 million**, an increase of approximately **$3.6 million (61.1%)** from Q1 2022[204](index=204&type=chunk) - Interest and amortization of deferred financing costs increased by approximately **$3.0 million (76.3%)** to **$6.9 million** in Q1 2023[204](index=204&type=chunk) - Compensation, fees, and taxes increased by approximately **$785,000**, and general and administrative expenses increased by approximately **$266,000**[204](index=204&type=chunk) [Comprehensive income](index=53&type=section&id=Comprehensive%20income) For Q1 2023, the company reported an unrealized gain on investment securities of approximately $92,000, reflecting a decrease in prior unrealized losses - The Company reported an unrealized gain on investment securities of approximately **$92,000** for Q1 2023, reflecting a decrease in prior unrealized losses since December 31, 2022[205](index=205&type=chunk) [Net income](index=53&type=section&id=Net%20income) Net income attributable to common shareholders for Q1 2023 was approximately $4.2 million, or $0.10 per share, an increase from $3.4 million ($0.10 per share) in Q1 2022 - Net income attributable to common shareholders for Q1 2023 was approximately **$4.2 million**, or **$0.10** per share, compared to approximately **$3.4 million**, or **$0.10** per share, for Q1 2022[206](index=206&type=chunk) [Non-GAAP Metrics – Adjusted Earnings](index=53&type=section&id=Non-GAAP%20Metrics%20%E2%80%93%20Adjusted%20Earnings) Adjusted Earnings, a non-GAAP metric, is used to provide a better perspective of taxable income by excluding unrealized gains/losses on available-for-sale securities. Adjusted Earnings attributable to common shareholders decreased to $3.5 million ($0.08 per share) in Q1 2023 from $4.5 million ($0.13 per share) in Q1 2022 - Adjusted Earnings is calculated as net income attributable to common shareholders, prior to the effect of unrealized gains (losses) on securities available-for-sale, to better reflect taxable income for REIT distribution requirements[208](index=208&type=chunk) Adjusted Earnings Attributable to Common Shareholders | Metric | For the Period Ended March 31, 2023 | For the Period Ended March 31, 2022 | | :------------------------------------------ | :---------------------------------- | :---------------------------------- | | Net income attributable to common shareholders | $4,195,460 | $3,429,700 | | Add: Unrealized (gains) losses on investment securities | $(716,389) | $1,052,230 | | Adjusted earnings attributable to common shareholders | $3,479,071 | $4,481,930 | | Adjusted Earnings per share | $0.08 | $0.13 | [Liquidity and Capital Resources](index=55&type=section&id=Liquidity%20and%20Capital%20Resources) Total assets increased by 5.5% to $597.0 million, and total shareholders' equity increased by 5.2% to $229.0 million as of March 31, 2023. Net cash provided by operating activities decreased, while net cash used for investing activities decreased, and net cash provided by financing activities also decreased significantly. The company believes current cash and anticipated operating cash flows will be sufficient for short-term needs - Total assets increased by approximately **$31.3 million (5.5%)** to **$597.0 million** at March 31, 2023, primarily due to increases in the mortgage loan portfolio, partnership investments, and investment securities[211](index=211&type=chunk) - Total shareholders' equity increased by approximately **$11.3 million (5.2%)** to **$229.0 million**, driven by net proceeds from common share sales and net income, offset by preferred stock dividends and a CECL adjustment[213](index=213&type=chunk) - Net cash provided by operating activities decreased to **$5.0 million** in Q1 2023 from **$7.6 million** in Q1 2022[214](index=214&type=chunk) - Net cash used for investing activities decreased to **$34.0 million** in Q1 2023 from **$48.4 million** in Q1 2022[215](index=215&type=chunk) - Net cash provided by financing activities decreased to **$25.6 million** in Q1 2023 from **$56.8 million** in Q1 2022[216](index=216&type=chunk) [Subsequent Events](index=56&type=section&id=Subsequent%20Events) Management evaluated subsequent events through May 12, 2023, and determined that no adjustments were required in the accompanying financial statements - No adjustments were required in the financial statements based on the evaluation of subsequent events through **May 12, 2023**[220](index=220&type=chunk) [Off-Balance Sheet Arrangements](index=56&type=section&id=Off-Balance%20Sheet%20Arrangements) The company is not a party to any off-balance sheet transactions, arrangements, or relationships with unconsolidated entities that would significantly affect liquidity or capital resources - The Company is not a party to any off-balance sheet transactions, arrangements, or relationships with unconsolidated entities[221](index=221&type=chunk) [Contractual Obligations](index=56&type=section&id=Contractual%20Obligations) As of March 31, 2023, the company's total contractual obligations, primarily unfunded loan commitments and investment in partnerships, amounted to $115.4 million, all due within one year Contractual Obligations (as of March 31, 2023) | Item | Total | Less than 1 year | | :------------------------ | :------------ | :--------------- | | Investment in partnerships | $572,518 | $572,518 | | Unfunded loan commitments | $114,851,913 | $114,851,913 | | Total contractual obligations | $115,424,431 | $115,424,431 | [Critical Accounting Policies and Recent Accounting Pronouncements](index=56&type=section&id=Critical%20Accounting%20Policies%20and%20Recent%20Accounting%20Pronouncements) This section refers to Note 2 for details on critical accounting policies and recent accounting pronouncements impacting the company - Refer to Note 2 – Significant Accounting Policies for explanations of recent accounting pronouncements[224](index=224&type=chunk) [Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=58&type=section&id=Item%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) As a smaller reporting company, Sachem Capital Corp. is not required to provide detailed quantitative and qualitative disclosures about market risk - As a smaller reporting company, Sachem Capital Corp. is not required to provide quantitative and qualitative disclosures about market risk[226](index=226&type=chunk) [Item 4. CONTROLS AND PROCEDURES](index=58&type=section&id=Item%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2023, and reported no material changes in internal control over financial reporting during the quarter [Evaluation and Disclosure Controls and Procedures](index=58&type=section&id=Evaluation%20and%20Disclosure%20Controls%20and%20Procedures) The chief executive officer and chief financial officer evaluated the effectiveness of disclosure controls and procedures as of March 31, 2023, concluding they were effective - Management concluded that the disclosure controls and procedures were effective as of **March 31, 2023**[227](index=227&type=chunk) [Changes in Internal Control Over Financial Reporting](index=58&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) There were no material changes in the company's internal control over financial reporting during the fiscal quarter ended March 31, 2023 - No material changes in internal control over financial reporting occurred during the fiscal quarter ended **March 31, 2023**[228](index=228&type=chunk) [PART II. OTHER INFORMATION](index=59&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section details exhibits filed with the Form 10-Q, providing supporting documentation for the financial report [Item 6. EXHIBITS](index=59&type=section&id=Item%206.%20EXHIBITS) This section provides a comprehensive list of exhibits filed with the Form 10-Q, including organizational documents, indentures, stock agreements, and financing agreements, with references to their previous filings - The exhibits include various corporate documents such as the Certificate of Incorporation, Bylaws, Indentures for notes, and agreements related to financing facilities and stock grants[231](index=231&type=chunk) [SIGNATURES](index=63&type=section&id=SIGNATURES) The Form 10-Q is officially signed on behalf of Sachem Capital Corp. by John L. Villano, President, Chief Executive Officer, and Interim Chief Financial Officer, on May 15, 2023 - The report was signed by John L. Villano, President, Chief Executive Officer, and Interim Chief Financial Officer, on **May 15, 2023**[238](index=238&type=chunk)

Sachem Capital Corp. (NYSE:SACH) Q4 2022 Results Conference Call March 31, 2023 8:00 AM ET Company Participants Kevin Reed - ICR John Villano - Chief Executive Officer John Warch - Chief Financial Officer Conference Call Participants Matthew Erdner - JonesTrading Gaurav Mehta - EF Hutton Christopher Nolan - Ladenburg Thalmann Tyler Batory - Oppenheimer Chris Muller - JMP Securities Operator Greetings, and welcome to the Sachem Capital Corp. Fourth Quarter and Full Year 2022 Earnings Conference Call. At this ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-37997 SACHEM CAPITAL CORP. (Exact name of registrant as specified in its charter) New York 81-3467779 State or othe ...

[PART I. FINANCIAL INFORMATION](index=5&type=section&id=Part%20I%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (unaudited)](index=5&type=section&id=Item%201.%20FINANCIAL%20STATEMENTS) The company's unaudited statements detail its financial position, performance, and cash flows for the period [Balance Sheets](index=5&type=section&id=Balance%20Sheets) | Metric | Sep 30, 2022 (unaudited) | Dec 31, 2021 (audited) | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $35,464,257 | $41,938,897 | | Investment securities | $34,351,374 | $60,633,661 | | Mortgages receivable | $448,524,665 | $292,301,209 | | Total assets | $561,821,384 | $417,961,751 | | **Liabilities** | | | | Notes payable (net) | $279,557,613 | $160,529,363 | | Repurchase facility | $43,100,146 | $19,087,189 | | Total liabilities | $342,521,410 | $237,879,190 | | **Shareholders' Equity** | | | | Total shareholders' equity | $219,299,974 | $180,082,561 | | Total liabilities and shareholders' equity | $561,821,384 | $417,961,751 | - Total assets increased by **$143.8 million (34.4%)** from December 31, 2021, to September 30, 2022, primarily driven by a $156.2 million increase in the mortgage loan portfolio and a $16.5 million increase in partnership investments, partially offset by a $32.8 million decrease in cash and investment securities[185](index=185&type=chunk) - Total liabilities rose by **$104.6 million (44.0%)** over the same period, mainly due to increases in the repurchase facility ($24.0 million, 125.8%) and notes payable ($119.0 million, 74.1%), partially offset by decreases in accounts payable, accrued dividends, line of credit, and advances from borrowers[186](index=186&type=chunk) - Total shareholders' equity increased by **$39.2 million (21.8%)**, primarily from $36.7 million in net proceeds from common share sales and $11.9 million in net income attributable to common shareholders, partially offset by $2.8 million in preferred stock dividends and $9.6 million in common share dividends[187](index=187&type=chunk) [Statements of Comprehensive Income](index=6&type=section&id=Statements%20of%20Comprehensive%20Income) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Interest income from loans | $11,545,748 | $6,094,165 | $30,490,694 | $15,307,692 | | Origination and modification fees, net | $1,669,034 | $1,268,624 | $5,759,650 | $2,788,498 | | Unrealized losses on investment securities | $(1,076,836) | — | $(3,607,498) | — | | Total revenue | $13,540,987 | $8,522,376 | $36,390,493 | $20,948,451 | | Interest and amortization of deferred financing costs | $5,974,975 | $2,589,847 | $15,083,228 | $7,541,536 | | Total operating costs and expenses | $8,487,348 | $4,221,761 | $21,757,811 | $11,915,593 | | Net income | $5,053,639 | $4,300,615 | $14,632,682 | $9,032,858 | | Net income attributable to common shareholders | $4,131,873 | $3,386,824 | $11,867,385 | $8,100,769 | | Basic and diluted net income per common share | $0.11 | $0.12 | $0.32 | $0.32 | - Total revenue for the three months ended September 30, 2022, increased by **58.9% to $13.5 million**, primarily due to an 89.5% increase in interest income from loans and a 31.6% increase in origination and modification fees, partially offset by $1.1 million in unrealized losses on investment securities[171](index=171&type=chunk) - Operating costs and expenses for the three months ended September 30, 2022, surged by **101.0% to $8.5 million**, mainly driven by a 130.7% increase in interest and amortization of deferred financing costs, a 95.7% rise in compensation, fees, and taxes, and a 49.6% increase in general and administrative expenses[172](index=172&type=chunk) - Net income attributable to common shareholders for the three months ended September 30, 2022, was **$4.1 million ($0.11 per share)**, compared to $3.4 million ($0.12 per share) in the prior year, with a decrease in EPS despite higher net income due to an increased weighted average number of common shares outstanding[19](index=19&type=chunk)[175](index=175&type=chunk) [Statements of Changes in Shareholders' Equity](index=7&type=section&id=Statements%20of%20Changes%20in%20Shareholders%27%20Equity) | Metric | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Total Shareholders' Equity (Beginning) | $180,082,561 | $80,919,540 | | Issuance of common shares, net | $36,654,419 | $30,883,928 | | Stock based compensation | $357,321 | $126,632 | | Unrealized loss on marketable securities | $(81,525) | $(611,998) | | Dividends paid on Series A Preferred Stock | $(2,765,297) | $(932,089) | | Dividends paid on common shares | $(9,580,187) | $(6,123,415) | | Net income for the period | $14,632,682 | $9,032,858 | | Total Shareholders' Equity (Ending) | $219,299,974 | $158,758,082 | - Shareholders' equity increased from **$180.1 million** at January 1, 2022, to **$219.3 million** at September 30, 2022, driven by $36.7 million from common share issuances and $14.6 million in net income, partially offset by $2.8 million in preferred stock dividends and $9.6 million in common share dividends[23](index=23&type=chunk)[187](index=187&type=chunk) [Statements of Cash Flows](index=9&type=section&id=Statements%20of%20Cash%20Flows) | Metric | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $12,405,669 | $17,374,676 | | Net cash used for investing activities | $(151,227,331) | $(84,941,629) | | Net cash provided by financing activities | $132,347,022 | $67,401,241 | | Net increase (decrease) in cash and cash equivalents | $(6,474,640) | $(165,712) | | Cash and cash equivalents - End of period | $35,464,257 | $19,242,316 | - Net cash provided by operating activities decreased to **$12.4 million** for the nine months ended September 30, 2022, from $17.4 million in the prior year, primarily due to changes in operating assets and liabilities, including increases in interest and fees receivable and due from borrowers, and decreases in advances from borrowers[188](index=188&type=chunk)[190](index=190&type=chunk) - Net cash used for investing activities significantly increased to **$151.3 million** in 2022 from $84.9 million in 2021, driven by higher principal disbursements for mortgages receivable ($252.4 million vs $154.8 million) and increased purchases of investment securities and partnership interests[191](index=191&type=chunk) - Net cash provided by financing activities rose to **$132.3 million** in 2022 from $67.4 million in 2021, mainly due to $117.6 million from fixed-rate notes issuance, $36.7 million from common share issuance, and $24.0 million from the repurchase facility, partially offset by line of credit repayments and dividend payments[192](index=192&type=chunk) [Notes to Financial Statements (unaudited)](index=11&type=section&id=Notes%20to%20Financial%20Statements%20(unaudited)) [1. The Company](index=11&type=section&id=1.%20The%20Company) - Sachem Capital Corp specializes in originating, underwriting, funding, servicing, and managing a portfolio of short-term (one to three years), secured, non-bank first mortgage loans to real estate owners and investors, primarily in Connecticut, New York, and Florida[31](index=31&type=chunk) [2. Significant Accounting Policies](index=11&type=section&id=2.%20Significant%20Accounting%20Policies) - The unaudited financial statements are prepared in accordance with GAAP for interim financial information, relying on management estimates and assumptions[32](index=32&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk)[35](index=35&type=chunk)[37](index=37&type=chunk)[38](index=38&type=chunk)[39](index=39&type=chunk) - The Company accounts for real estate owned at cost, tests for impairment quarterly, and consolidates subsidiaries where it has control[42](index=42&type=chunk)[43](index=43&type=chunk)[46](index=46&type=chunk)[47](index=47&type=chunk) - Sachem Capital Corp elected to be taxed as a **Real Estate Investment Trust (REIT)** for federal income tax purposes starting in 2017, which generally exempts it from US federal income tax on distributed taxable income, provided it meets various complex requirements[49](index=49&type=chunk) [3. Fair Value Measurement](index=15&type=section&id=3.%20Fair%20Value%20Measurement) | Asset Category | Level 1 | Level 2 | Level 3 | Total | | :--- | :--- | :--- | :--- | :--- | | Stocks and ETFs | $9,135,577 | — | — | $9,135,577 | | Mutual funds | $25,215,797 | — | — | $25,215,797 | | Total liquid investments | $34,351,374 | — | — | $34,351,374 | | Real estate owned | — | — | $5,615,940 | $5,615,940 | - The Company's fair value assets as of September 30, 2022, primarily consist of **Level 1 liquid investments** (stocks, ETFs, mutual funds) totaling **$34.4 million**, valued at quoted market prices[56](index=56&type=chunk)[57](index=57&type=chunk)[58](index=58&type=chunk) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Unrealized (losses) on AFS securities at beginning of period | $(425,972) | $(137,802) | $(476,016) | $(25,992) | | Unrealized (losses) on securities available-for-sale | $(131,569) | $(500,188) | $(81,525) | $(611,998) | | Balance at end of period | $(557,541) | $(637,990) | $(557,541) | $(637,990) | [4. Mortgages Receivable](index=16&type=section&id=4.%20Mortgages%20Receivable) - The Company's mortgage loan portfolio increased significantly, with **$252.4 million in loans funded** during the nine months ended September 30, 2022, compared to $154.8 million in the prior year[62](index=62&type=chunk) - As of September 30, 2022, the total outstanding mortgages receivable reached **$448.5 million**, up from $292.3 million at December 31, 2021[17](index=17&type=chunk)[62](index=62&type=chunk) | Loan Type | Dec 31, 2021 | Sep 30, 2022 | | :--- | :--- | :--- | | Residential | $157,841,896 | $234,747,362 | | Commercial | $95,319,795 | $143,898,654 | | Land | $20,755,891 | $39,513,545 | | Mixed Use | $18,383,627 | $30,365,104 | | Total | $292,301,209 | $448,524,665 | - At September 30, 2022, **92 loans totaling approximately $45.0 million** were past maturity and either in foreclosure or being extended[67](index=67&type=chunk) [5. Real Estate Owned](index=17&type=section&id=5.%20Real%20Estate%20Owned) - Real estate owned (REO) decreased from $6.8 million at September 30, 2021, to **$5.6 million** at September 30, 2022[69](index=69&type=chunk) - As of September 30, 2022, REO included **$800,053 of real estate held for rental** and **$4,815,887 held for sale**[70](index=70&type=chunk)[71](index=71&type=chunk) [6. Other Assets](index=18&type=section&id=6.%20Other%20Assets) | Category | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Prepaid expenses | $117,449 | $271,291 | | Other receivables | $512,284 | $94,108 | | Other assets | $472,800 | $306,440 | | Deferred financing costs, net | $19,809 | $264,451 | | Total | $1,122,342 | $936,290 | [7. Line of Credit, Mortgage Payable, and Churchill Facility](index=18&type=section&id=7.%20Line%20of%20Credit,%20Mortgage%20Payable,%20and%20Churchill%20Facility) - The Wells Fargo margin loan, secured by investment securities, had an outstanding balance of **$3,542,853** at September 30, 2022, with an interest rate of **4.50%**[76](index=76&type=chunk) - The NHB Mortgage, an adjustable-rate loan for up to $1.4 million, had **$750,000 outstanding** at September 30, 2022[77](index=77&type=chunk) - The $200 million Churchill MRA Funding I LLC Repurchase Financing Facility had **$43,100,146 outstanding** at September 30, 2022, with an effective interest rate of **6.99%**[80](index=80&type=chunk)[81](index=81&type=chunk)[82](index=82&type=chunk) [8. Financing Transactions](index=19&type=section&id=8.%20Financing%20Transactions) - During the nine months ended September 30, 2022, the Company generated approximately **$159.7 million in gross proceeds** from securities sales, including $122.1 million from various unsecured notes and $37.6 million from the sale of 7,177,043 common shares in an at-the-market offering[84](index=84&type=chunk)[85](index=85&type=chunk) [9. Notes Payable](index=21&type=section&id=9.%20Notes%20Payable) - As of September 30, 2022, the Company had **$279,557,613 in unsecured, unsubordinated notes payable** (net of deferred financing costs)[87](index=87&type=chunk)[89](index=89&type=chunk) - The notes are listed on the NYSE American and are callable by the Company without premium or penalty after their second anniversary of issuance[87](index=87&type=chunk) [10. Accounts Payable and Accrued Liabilities](index=21&type=section&id=10.%20Accounts%20Payable%20and%20Accrued%20Liabilities) | Category | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Accounts payable and Accrued expenses | $555,571 | $501,753 | | Other notes | $10,760 | $30,921 | | Accrued interest | $595,839 | $164,729 | | Total | $1,162,170 | $697,403 | [11. Fee and Other Income](index=23&type=section&id=11.%20Fee%20and%20Other%20Income) | Category | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Late and other fees | $92,098 | $202,572 | $338,638 | $300,471 | | Processing fees | $37,480 | $50,230 | $165,950 | $129,615 | | Rental income, net | $8,867 | $28,320 | $37,067 | $23,105 | | Extension fees | $212,608 | $86,671 | $415,128 | $232,886 | | Other fees | $124,292 | $55,025 | $259,542 | $150,094 | | Legal fees | $91,115 | $69,800 | $253,055 | $181,600 | | Other income | $75,289 | $98,823 | $579,541 | $833,260 | | Total | $641,749 | $591,441 | $2,048,921 | $1,851,031 | [12. Commitments and Contingencies](index=23&type=section&id=12.%20Commitments%20and%20Contingencies) - Deferred revenue from loan origination and modification fees totaled **$4,471,800** at September 30, 2022, with $1,583,313 expected to be recognized in 2022, $2,687,114 in 2023, and $201,373 in 2024[93](index=93&type=chunk) - At September 30, 2022, the Company had unfunded future funding obligations of **$118,103,785**, which borrowers can draw upon satisfying conditions[98](index=98&type=chunk)[99](index=99&type=chunk) [13. Related Party Transactions](index=24&type=section&id=13.%20Related%20Party%20Transactions) - Loans to known shareholders totaled **$20,932,994** at September 30, 2022, up from $13,200,972 in 2021, with interest income from these loans increasing to $1,248,826 for the nine months ended September 30, 2022, from $573,446 in the prior year[100](index=100&type=chunk) - Compensation paid to the CEO's wife (Director of Finance, retired Q3 2022) was **$62,865** for the nine months ended September 30, 2022[101](index=101&type=chunk)[103](index=103&type=chunk) [14. Concentration of Credit Risk](index=25&type=section&id=14.%20Concentration%20of%20Credit%20Risk) - The Company's mortgage loans are concentrated primarily in **Connecticut (approximately 43.0%)**, **Florida (approximately 21.7%)**, and **New York (approximately 14.2%)**, exposing it to regional economic conditions[104](index=104&type=chunk)[105](index=105&type=chunk) [15. Outstanding Warrants](index=25&type=section&id=15.%20Outstanding%20Warrants) - IPO Warrants to purchase 130,000 common shares **expired unexercised** on February 9, 2022[106](index=106&type=chunk)[107](index=107&type=chunk) [16. Stock-Based Compensation and Employee Benefits](index=25&type=section&id=16.%20Stock-Based%20Compensation%20and%20Employee%20Benefits) - Under the 2016 Equity Compensation Plan, **153,967 restricted common shares** were granted during the nine months ended September 30, 2022, compared to 94,681 in 2021[110](index=110&type=chunk)[111](index=111&type=chunk) - The 401(k) Plan expense for the nine months ended September 30, 2022, was **$71,925**, up from $46,276 in the prior year, reflecting the Company's obligation to contribute 3% of a participant's compensation[112](index=112&type=chunk) [17. Equity Offerings](index=26&type=section&id=17.%20Equity%20Offerings) - During the nine months ended September 30, 2022, the Company sold **7,177,043 common shares** through an at-the-market offering, generating net proceeds of **$36,654,419**[113](index=113&type=chunk)[114](index=114&type=chunk) [18. Partnership Investments](index=26&type=section&id=18.%20Partnership%20Investments) - As of September 30, 2022, the Company had invested approximately **$22.5 million** in four limited liability companies, with ownership interests up to 49%[115](index=115&type=chunk)[116](index=116&type=chunk) [19. Special Purpose Acquisition Corporation](index=28&type=section&id=19.%20Special%20Purpose%20Acquisition%20Corporation) - The Company loaned **$25,000** to its wholly-owned subsidiary, Sachem Sponsor LLC, to purchase shares in Sachem Acquisition Corp, a SPAC[119](index=119&type=chunk) [20. Series A Preferred Stock](index=28&type=section&id=20.%20Series%20A%20Preferred%20Stock) - The Series A Preferred Stock pays quarterly cumulative dividends at **7.75% per annum** ($1.9375 per share) on a $25.00 liquidation preference[121](index=121&type=chunk) [21. Charter Amendments](index=28&type=section&id=21.%20Charter%20Amendments) - On July 19, 2022, the Company increased its authorized common shares from **100,000,000 to 200,000,000**[122](index=122&type=chunk)[123](index=123&type=chunk) [22. Subsequent Events](index=28&type=section&id=22.%20Subsequent%20Events) - From October 1 to November 9, 2022, the Company sold **405,037 common shares**, generating approximately **$1.6 million** in gross proceeds[124](index=124&type=chunk)[127](index=127&type=chunk) - Effective October 7, 2022, the Board adopted a stock repurchase plan for up to **$7.5 million** of common shares through September 30, 2023[128](index=128&type=chunk)[129](index=129&type=chunk)[130](index=130&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses financial conditions and operational results, highlighting revenue growth and strategic initiatives [Company Overview](index=31&type=section&id=Company%20Overview) - Sachem Capital Corp is a Connecticut-based real estate finance company specializing in short-term first mortgage loans[133](index=133&type=chunk) [Review of the First Nine Months of 2022 and Outlook for Balance of Year](index=31&type=section&id=Review%20of%20the%20First%20Nine%20Months%20of%202022%20and%20Outlook%20for%20Balance%20of%20Year) - For the first nine months of 2022, **revenue increased by 73.7%**, net income attributable to common shareholders rose by 46.5%, and EPS remained consistent at $0.32[134](index=134&type=chunk) - The Company's primary objective for 2022 is to **grow its loan portfolio** while preserving capital and providing attractive risk-adjusted returns, mainly through dividends[135](index=135&type=chunk) - Challenges for the upcoming quarters include **rising interest rates and inflation** (Fed raised rates 6 times for 3.75% total), increased borrowing costs, and potential adverse impacts on capital access and property valuations[137](index=137&type=chunk)[139](index=139&type=chunk)[140](index=140&type=chunk)[141](index=141&type=chunk)[142](index=142&type=chunk) - Despite challenges, the Company believes in its business model, focusing on well-capitalized **'hard money' lending** to small- and mid-scale real estate developers in stable and growing markets[147](index=147&type=chunk) [Financing Strategy Overview](index=36&type=section&id=Financing%20Strategy%20Overview) - To grow its business, the Company must increase its loan portfolio by using existing working capital and raising additional capital through equity sales or debt[148](index=148&type=chunk) - As of September 30, 2022, the Company had **$288.4 million in seven series of unsecured unsubordinated notes** outstanding, ranking equally with other senior unsecured debt but subordinated to secured debt[149](index=149&type=chunk)[152](index=152&type=chunk)[153](index=153&type=chunk) - Secured indebtedness includes the **Churchill Facility ($43.1 million outstanding at 6.99% effective rate)**, the Wells Fargo Loan ($3.5 million outstanding at 4.5% interest), and the NHB Mortgage ($750,000 outstanding at 3.75% initial rate)[154](index=154&type=chunk)[155](index=155&type=chunk)[156](index=156&type=chunk)[159](index=159&type=chunk) - During the nine months ended September 30, 2022, the Company raised approximately **$36.7 million in net proceeds** from common share sales through an at-the-market offering[160](index=160&type=chunk)[161](index=161&type=chunk) [REIT Qualification](index=40&type=section&id=REIT%20Qualification) - The Company believes it has qualified as a REIT since its IPO in 2017 and intends to maintain this status, which requires distributing at least **90% of its taxable income annually** to shareholders[162](index=162&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk) [Emerging Growth Company Status](index=40&type=section&id=Emerging%20Growth%20Company%20Status) - As an 'emerging growth company' under the JOBS Act, Sachem Capital Corp has availed itself of exemptions from certain reporting requirements, including delaying the adoption of new accounting standards[165](index=165&type=chunk)[167](index=167&type=chunk)[170](index=170&type=chunk) [Critical Accounting Policies and Use of Estimates](index=42&type=section&id=Critical%20Accounting%20Policies%20and%20Use%20of%20Estimates) - The preparation of financial statements requires management to make estimates and assumptions based on experience, future projections, and market conditions[168](index=168&type=chunk)[169](index=169&type=chunk) [Results of Operations](index=42&type=section&id=Results%20of%20Operations) [Three months ended September 30, 2022 compared to three months ended September 30, 2021](index=42&type=section&id=Three%20months%20ended%20September%2030,%202022%20compared%20to%20three%20months%20ended%20September%2030,%202021) - Total revenue increased by **58.9% to $13.5 million**, driven by an 89.5% increase in interest income from loans and a 31.6% increase in origination and modification fees, partially offset by $1.1 million in unrealized losses on investment securities[171](index=171&type=chunk) - Operating costs and expenses rose by **101.0% to $8.5 million**, primarily due to a 130.7% increase in interest and amortization of deferred financing costs, a 95.7% increase in compensation, fees, and taxes, and a 49.6% increase in general and administrative expenses[172](index=172&type=chunk) - Net income attributable to common shareholders was **$4.1 million ($0.11 per share)** for the three months ended September 30, 2022, compared to $3.4 million ($0.12 per share) in the prior year, with a slight decrease in EPS due to a higher weighted average number of common shares outstanding[175](index=175&type=chunk) [Nine months ended September 30, 2022 compared to nine months ended September 30, 2021](index=44&type=section&id=Nine%20months%20ended%20September%2030,%202022%20compared%20to%20nine%20months%20ended%20September%2030,%202021) - Total revenue increased by **73.7% to $36.4 million**, primarily from a 99.2% increase in interest income ($30.5 million) and a 106.6% increase in origination and modification fees ($5.8 million)[176](index=176&type=chunk) - Operating costs and expenses grew by **82.6% to $21.8 million**, mainly due to a 100.0% increase in interest and amortization of deferred financing costs ($15.1 million), a 69.7% increase in compensation, fees, and taxes, and a 45.6% increase in general and administrative expenses[177](index=177&type=chunk) - Net income attributable to common shareholders was **$11.9 million ($0.32 per share)** for the nine months ended September 30, 2022, compared to $8.1 million ($0.32 per share) in the prior year, with EPS remaining flat despite higher net income due to an increased weighted average number of common shares outstanding[179](index=179&type=chunk) [Non-GAAP Metrics – Adjusted Earnings](index=44&type=section&id=Non-GAAP%20Metrics%20%E2%80%93%20Adjusted%20Earnings) - Adjusted Earnings, a non-GAAP metric, is used to provide a better perspective of taxable income by excluding unrealized gains (losses) on available-for-sale securities, which are marked-to-market under GAAP but not recognized for tax purposes until sold[180](index=180&type=chunk)[181](index=181&type=chunk)[182](index=182&type=chunk) | Metric | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net income attributable to common shareholders | $4,131,873 | $11,867,385 | | Add: Unrealized losses on investment securities | $1,076,836 | $3,607,498 | | Adjusted earnings attributable to common shareholders | $5,208,709 | $15,474,883 | | Adjusted Earnings per share | $0.13 | $0.42 | [Liquidity and Capital Resources](index=46&type=section&id=Liquidity%20and%20Capital%20Resources) - Cash and cash equivalents and investment securities totaled **$69.8 million** at September 30, 2022, down from $102.6 million at December 31, 2021, reflecting a draw down to fund new loans[184](index=184&type=chunk)[185](index=185&type=chunk) - Total liabilities increased by **44.0% to $342.5 million**, mainly from increases in the repurchase facility and notes payable[186](index=186&type=chunk)[187](index=187&type=chunk) - Net cash provided by operating activities decreased to **$12.4 million**, while net cash used for investing activities significantly increased to **$151.3 million**[188](index=188&type=chunk)[191](index=191&type=chunk)[192](index=192&type=chunk) - The Company projects current cash balances and anticipated operating cash flows will be sufficient for short-term operating needs (next 12 months), including loan funding, expenses, and dividends[193](index=193&type=chunk)[194](index=194&type=chunk) [Subsequent Events](index=48&type=section&id=Subsequent%20Events) - From October 1 to November 9, 2022, the Company sold **405,037 common shares for approximately $1.6 million**[196](index=196&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk) - All remaining underwriters' warrants **expired unexercised** on October 24, 2022[199](index=199&type=chunk)[200](index=200&type=chunk) [Off-Balance Sheet Arrangements](index=49&type=section&id=Of%20-Balance%20Sheet%20Arrangements) - The Company is not a party to any off-balance sheet transactions, arrangements, or relationships with unconsolidated entities or other persons that are likely to affect liquidity or capital resources[201](index=201&type=chunk) [Contractual Obligations](index=49&type=section&id=Contractual%20Obligations) | Obligation | Total | Less than 1 year | | :--- | :--- | :--- | | Investment in partnerships | $3,588,984 | $3,588,984 | | Unfunded loan commitments | $118,103,785 | $118,103,785 | | Total contractual obligations | $121,692,769 | $121,692,769 | - As of September 30, 2022, total contractual obligations amounted to **$121.7 million**, primarily consisting of $118.1 million in unfunded loan commitments and $3.6 million in investment in partnerships, all due within one year[203](index=203&type=chunk) [Critical Accounting Policies and Recent Accounting Pronouncements](index=49&type=section&id=Critical%20Accounting%20Policies%20and%20Recent%20Accounting%20Pronouncements) - Management does not believe that any recently issued, but not yet effective, accounting standards would have a material effect on the Company's financial statements if currently adopted[54](index=54&type=chunk)[204](index=204&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=51&type=section&id=Item%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) As a smaller reporting company, the company is exempt from providing detailed disclosures about market risk - As a smaller reporting company, Sachem Capital Corp is not required to provide quantitative and qualitative disclosures about market risk[206](index=206&type=chunk) [Item 4. Controls and Procedures](index=51&type=section&id=Item%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2022 - Management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were **effective as of September 30, 2022**, ensuring timely and accurate reporting of information required under the Exchange Act[207](index=207&type=chunk) - **No changes in internal control** over financial reporting were identified during the fiscal quarter ended September 30, 2022, that materially affected or are reasonably likely to materially affect the Company's internal control over financial reporting[208](index=208&type=chunk) [PART II. OTHER INFORMATION](index=52&type=section&id=Part%20II%20OTHER%20INFORMATION) [Item 1A. Risk Factors](index=52&type=section&id=Item1A.%20Risk%20Factors) Key risks include significant unfunded commitments and the adverse impact of inflation and rising interest rates - The Company has significant unfunded commitments of approximately **$118.1 million** under existing loans[211](index=211&type=chunk) - Inflation and rising interest rates (Fed raised rates **3.75% in 2022**) have increased borrowing costs and adversely impacted the Company's ability to raise capital in public markets[212](index=212&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=52&type=section&id=Item2.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company details its unregistered sales of equity securities for an acquisition - On October 6, 2022, the Company issued **300,000 restricted common shares**, valued at approximately **$1.1 million**, to Urbane New Haven, LLC as part of an asset acquisition[213](index=213&type=chunk) [Item 6. Exhibits](index=53&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including corporate documents, agreements, and certifications - The exhibits include various corporate documents such as the Certificate of Incorporation and amendments, Amended and Restated Bylaws, Indentures and Supplemental Indentures for different series of notes, and the form of Series A Cumulative Redeemable Preferred Stock Certificate[215](index=215&type=chunk) - Key agreements listed are employment agreements for John L Villano and John E Warch, the 2016 Equity Compensation Plan and related restrictive stock grant agreements, and the Master Repurchase Agreement with Churchill MRA Funding I LLC[215](index=215&type=chunk)[216](index=216&type=chunk) - Certifications required under the Sarbanes-Oxley Act (Sections 302 and 906) from the Chief Executive Officer and Chief Financial Officer are also included, along with XBRL Instance Document and Taxonomy Extension documents[216](index=216&type=chunk) [SIGNATURES](index=57&type=section&id=SIGNATURES) The report contains official signatures from the CEO and CFO certifying the submission - The report is duly signed on November 10, 2022, by John L Villano, CPA, President and Chief Executive Officer, and John E Warch, CPA, Chief Financial Officer, in accordance with the requirements of the Securities Exchange Act of 1934[222](index=222&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-37997 SACHEM CAPITAL CORP. (Exact name of registrant as specified in its charter) New York 81-3467779 (State o ...

Revenue and Income Growth - Revenue increased by 80.3% compared to Q1 2021, with interest income rising by 87.8% and origination fees increasing by 216.5%[126] - Total revenue for Q1 2022 was approximately $10.3 million, an increase of 80.3% from $5.7 million in Q1 2021[160] - Interest income for Q1 2022 was approximately $8.5 million, up 87.8% from $4.5 million in Q1 2021[160] - Origination fees increased to approximately $1.6 million in Q1 2022, representing a 216.5% increase from approximately $517,000 in Q1 2021[160] - Net income attributable to common shareholders rose by 57.1%, while earnings per share remained unchanged at $0.10[126] - Net income attributable to common shareholders for the three months ended March 31, 2022, was $3,429,700, up from $2,183,101 in the prior year[166] - Adjusted earnings attributable to common shareholders for the period ended March 31, 2022, were $4,481,930, compared to $2,183,101 for the same period in 2021, reflecting a significant increase[166] Assets and Liabilities - Total assets increased by approximately $63.8 million, or 15.3%, to approximately $481.8 million as of March 31, 2022, primarily due to an increase in the mortgage loan portfolio[168] - Total liabilities rose by approximately $44.5 million, or 18.7%, to approximately $282.4 million as of March 31, 2022, mainly due to an increase in notes payable[169] - Total shareholders' equity increased by approximately $19.3 million to approximately $199.4 million as of March 31, 2022, driven by net proceeds from the sale of common shares[170] Cash Flow - Net cash provided by operating activities for the three months ended March 31, 2022, was approximately $7.8 million, compared to $2.8 million for the same period in 2021[171] - Net cash used for investing activities increased significantly to approximately $48.7 million for the three months ended March 31, 2022, compared to $2.1 million in the prior year[172] - Net cash provided by financing activities for the three months ended March 31, 2022, was approximately $56.8 million, a substantial increase from $1.8 million used in the comparable 2021 period[174] Loan Portfolio and Underwriting - Mortgages receivable increased by 125.6% compared to March 31, 2021, and cash and cash equivalents rose by 215.4%[126] - As of March 31, 2022, the mortgage loan portfolio included 204 loans with future funding obligations totaling approximately $115.4 million, up from 129 loans totaling approximately $23.5 million a year earlier[138] - The yield on the mortgage loan portfolio decreased from 11.73% in Q1 2021 to 11.30% in Q1 2022, indicating interest rate compression[130] - The company has implemented a new underwriting model to automate loan documentation, enhancing processing accuracy and efficiency[127] - The company is focusing on larger-value commercial loans with experienced sponsors to drive growth and operational excellence[127] Debt and Financing - Debt represented approximately 55.5% of total capital as of March 31, 2022, down from 63.0% a year prior[140] - The outstanding balance under the Churchill Facility was approximately $26.9 million as of March 31, 2022, accruing interest at an effective rate of 4.70% per annum[145] - The Wells Fargo Loan had a balance of approximately $23.3 million at March 31, 2022, with an interest rate of 1.75% below the prime rate[146] - The NHB Mortgage had an outstanding amount of $750,000 as of December 31, 2021, with an initial interest rate of 3.75% per annum[147] Shareholder Distributions - The company aims to grow its loan portfolio while maintaining a minimum distribution of 90% of taxable income to qualify as a REIT[125] - The company intends to pay regular quarterly distributions to holders of common shares of not less than 90% of its REIT taxable income[177] - The company raised approximately $15.5 million from the sale of 2,730,725 common shares during the three months ended March 31, 2022[150] - The company raised approximately $45.5 million from the sale of 1,903,000 shares of Series A Preferred Stock in June and July 2021[148] Operating Expenses - Increased operating expenses were noted, primarily due to a higher debt load, increased headcount, and loan volume[137] - Total operating costs and expenses for Q1 2022 were approximately $5.9 million, an increase of 68.6% from $3.5 million in Q1 2021[161] Contractual Obligations - As of March 31, 2022, total contractual obligations amounted to approximately $119.2 million, including unfunded loan commitments of $115.4 million[185]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ⌧ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 or ◻ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-37997 SACHEM CAPITAL CORP. (Exact name of registrant as specified in its charter) State or other jurisdiction of (I ...