SACH Sachem Capital Corp. - 10-K

Item 1A. Risk Factors.

The following factors may affect our growth and profitability of and should be considered by any prospective purchaser or current holder of our securities:

Risks Related to Our Current Financial Condition

We incurred a net loss attributable to common shareholders for 2024 but returned to profitability in 2025. We cannot assure you that we will be profitable for 2026.

For the year ended December 31, 2025, we reported net income attributable to common shareholders of $1.8 million compared to a net loss attributable to common shareholders of $43.9 million for the year ended December 31, 2024. 2024 was the first annual net loss that we reported since we became a publicly traded company in 2017. There were a number of factors that contributed to this result. For the year ended December 31, 2024, we recorded a $22.0 million realized loss on sale of loans, a $4.9 million valuation allowance for loans held for sale, a $26.9 million provision for credit loss related to loans held for investment and loans transferred to real estate owned, and an impairment charge of $0.5 million relating to real estate owned, all of which are presented on our consolidated statement of operations. Second, top-line revenue for 2024 declined 11.2% compared to 2023, after we had delivered solid growth every year from 2017 through 2023. This decrease was due to the unavailability of capital required to grow our business after revenues decreased due to increases in nonperforming loans and distress in the lending markets. Historically, we relied on the capital markets to provide us with the bulk of our growth capital. Given the interest rate environment in 2023 and 2024 and the state of the real estate market in general, we were unable to access the capital markets and our existing credit facilities were not robust enough to fill the gap. On top of that, two tranches of outstanding unsecured public notes, having an aggregate principal amount of $58.2 million came due in 2024 and were repaid from cash flow from operations or drawdowns on our credit facilities. We were able to improve our results of operations in 2025 by obtaining new debt financing and amending existing credit facilities. In addition, we were able to significantly reduce the losses and other charges that we reported in 2024 related to loan sales, valuation allowances and credit losses. For 2025, gains on loan sales were $0.1 million, valuations allowances were $1.0 million and credit losses were $3.3 million. Nonetheless, we cannot assure you that we will continue to be profitable in 2026.

Concurrently with the decline in our operational performance, we have reduced the dividend payable to shareholders.

To maintain our REIT status for income tax purposes, we are required to distribute at least 90% of our taxable income to our shareholders. As a practical matter, since we started to operate as a REIT in 2017 through the end of 2023, we distributed 100% of our GAAP income to shareholders, in cash. However, in 2024 and 2025, primarily because we did not have access to growth capital, we reduced the dividend payable to shareholders. The reduction in the dividend payment does not jeopardize our REIT election because our taxable income has decreased as well. Despite the decrease in taxable income, the Company continued to pay dividends, which were in excess of our taxable income for 2024 and 2025. Any distributions we make to our shareholders, the amount of such dividend and whether such dividend is payable in cash, our Common Shares or other property, or a combination thereof, is at the discretion of the Board and will depend on, among other things, our actual results of operations and liquidity. Our ability to pay distributions will be affected by various factors, including the net interest and other revenue generated from operations, our operating expenses, working capital requirements, the restrictions and limitations imposed by the New York Business Corporation Law (“BCL”), and any restrictions and/or limitations imposed on us by our creditors. Accordingly, we cannot assure you as to the timing or amount of any dividend payments in the future or how they may be paid.

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The price of our publicly traded securities has declined significantly.

Primarily because of our operating performance and the reduced dividend payments, in 2024 and 2025, we experienced a steep decline in the trading price of all our equity and debt securities. For example, the opening price of our Common Shares on January 2, 2024, as reported on the NYSE American, was $3.73 per share. The closing price on December 31, 2024, as reported by the NYSE American, was $1.35 per share. The closing price on December 31, 2025, as reported by the NYSE American, was $1.04 per share. Similarly, the opening price of our 7.75% Series A Cumulative Redeemable Preferred Stock (“Series A Preferred Stock”) on January 2, 2024, as reported on the NYSE American, was $20.00 per share. The closing price on December 31, 2024, as reported by the NYSE American, was $15.49 per share. The closing price on December 31, 2025, as reported by the NYSE American, was $17.75 per share. Similar declines were recorded for the price of our Notes. The declining prices in our securities does not only adversely impact the holders of those securities, it also adversely impacts our ability to raise capital at accretive or market prices. Lower trading prices means we have to sell more securities to raise the funds we need for growth, which dilutes the interests of the existing security holders and raises the cost of issuance through interest expense or dividends. Thus, issuing more securities increases our costs, which, in turn, means we have to raise more money to cover the costs, which means we have to sell more securities. Therefore, during the second half of 2024 and in 2025, we did not sell Common Shares or debt securities to raise capital. However, we did sell an immaterial amount of shares of our Series A Preferred Stock in December 2025. We believe it is imperative for us to increase the value of our securities, both debt and equity, and for us to do so, we must improve our operating performance and increase our dividend. We are currently in the market for accretive working capital. However, we cannot assure you that capital will be available to us or, if it is, what will be the cost of such capital.

A default under the Needham Credit Facility could have significant adverse consequences on our business, operations, and financial condition.

Under our new $50 million revolving credit facility (the “Needham Credit Facility”) with Needham Bank (“Needham”), we are required to maintain a debt service coverage ratio of 1.4-to-1.0 throughout the entire term of that facility. In other words, our operating cash flow must be equal to or greater than 1.4 times the interest payable on all our outstanding indebtedness. We have maintained compliance with that covenant as well as the other covenants governing the Needham Credit Facility. However, we cannot assure you that we will continue to remain in compliance with any of these covenants during the remainder of the term. If we were in default of the covenant under the Needham Credit Facility, and if Needham issues a notice of default, it could have significant adverse consequences on our business, operations, and financial condition. First, Needham could declare the entire outstanding balance on the facility immediately due and payable. Alternatively, it could look to execute on the collateral securing the loan, which would deprive us of a significant portion of our working capital and cash flow. In addition, a default under the Needham Credit Facility would trigger a default under the terms of our $0.9 million mortgage with New Haven Bank (the “NHB Mortgage”).

Notes having an aggregate outstanding principal amount of $173.3 million are due and payable in full between December 2026 and September 2027.

Notes having an aggregate outstanding principal amount of $173.3 million mature between December 2026 and September 2027, including $51.8 million on December 30, 2026, $51.7 million on March 30, 2027, $29.7 million on June 30, 2027 and $40.1 million on September 30, 2027. If we cannot repay any of these Notes and the holders of such Notes call a default, it may trigger defaults under our other obligations and impair our ability to raise capital from other sources. As previously noted, a default under the Notes would also trigger a default under the terms of the NHB Mortgage. This could have a material adverse impact on our operations, financial condition and business.

We are subject to the “baby shelf” rules, which limits the amount of securities we can sell pursuant to an S-3 Registration Statement.

To date, we have financed our operations through the sale of our Common Shares, Series A Preferred Stock and the Notes. These securities were covered by an S-3 Registration Statement that the SEC declared effective on February 25, 2022. At that time, we were not subject to any limitations on the volume of securities that we could sell under that Registration Statement. That Registration Statement expired on February 25, 2025. We filed a new S-3 Registration Statement that was declared effective on May 30, 2025. Given the fact that our public float is currently less than $75 million and for so long as the “public float” remains under $75 million, we are limited as to the amount of securities we can sell during any 12-month period. The limit is an amount equal to one-third of our “public float”.

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Although alternative public and private transaction structures may be available, these may require additional time and cost, may impose operational restrictions on the Company, and may not be available on attractive terms. Our inability to continue to raise capital when needed will harm our business, financial condition and results of operations, and will likely cause our stock value to decline further, which could have a material adverse impact on our business, operations and financial condition.

The illiquidity of our loan portfolio could significantly impede our ability to respond to adverse changes in economic, financial, investment and other conditions.

Due to the relative illiquidity of our loan portfolio, our ability to promptly sell all or a portion of the portfolio in response to changing economic, financial, investment or other conditions is limited. The real estate market, in general, and real estate lending, especially the type of loans we typically make, is affected by many factors that are beyond our control, including general economic conditions, the state of capital and credit markets. Our inability to dispose of our real estate loans at opportune times or on favorable terms could have a material adverse effect on us.

In addition, the Internal Revenue Code of 1986, as amended (the “Code”) imposes restrictions on a REIT’s ability to dispose of properties that are not applicable to other types of real estate companies. In particular, the tax laws applicable to REITs require that we hold our loans for investment, rather than primarily for sale in the ordinary course of business, which may cause us to forego or defer sales of properties that otherwise would be in our best interest. Therefore, we may not be able to vary our portfolio in response to economic, financial, investment or other conditions promptly or on favorable terms, which could have a material adverse effect on us.

Risks Related to Our Business and Our Company

Declining real estate valuations have resulted in impairment charges or provisions for credit losses, the determination of which involves a significant amount of judgment on our part. Any future impairment or provision could have a material adverse effect on us.

We review our loan portfolio for impairments and provisions for credit losses on a quarterly basis and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Indicators of loss include, but are not limited to, a sustained significant decrease in the value of the collateral securing the loan, including the value of the real estate and other assets pledged to secure the loan as well as personal guarantees by the principals of the borrower, or a borrower’s inability to stay current with respect to its obligations under the terms of the loan. A significant amount of judgment is involved in determining the presence of an indicator of impairment or credit loss. If we determine that the value of the collateral is less than the amount outstanding on the loan or the amount that may become due upon the maturity of the loan, a loss must be recognized for the difference between the fair value of the property and the carrying value of the loan. Any impairment or credit losses could have a material adverse effect on our financial condition.

We have experienced a significant increase in the balance of non-performing loans.

We define loans that are more than 90 days in arrears as non-performing status and stop accruing interest on such loans. Over the past two years, we have experienced a significant increase in the outstanding balance of loans in this category. At December 31, 2022, loans in non-performing status had an aggregate outstanding balance of $45.9 million. At December 31, 2023, the comparable balance increased to $84.6 million. At December 31, 2024, loans in non-performing status had an aggregate outstanding balance of $87.0 million. At December 31, 2025, the comparable balance increased to $117.6 million. This has had a material adverse impact on our operational performance and financial condition.

A high level of defaults, particularly among larger mortgage loans, could have a material adverse impact on our business, operations and financial condition.

Historically, our mortgage loans were relatively small, and a small number of foreclosures did not have a material adverse impact on our business. However, our business strategy has changed, and we are now making larger loans with increasing frequency, changing the risk profile of our mortgage loan portfolio. When combined with the decline in commercial real estate values and restrictive credit conditions, the rate of foreclosures that we are experiencing is increasing. At December 31, 2025, we had 66 loans, 57.4% of the loans in our portfolio, with an outstanding principal balance exceeding $1 million. At December 31, 2024, we had 88 loans, 52.4% of the loans in our portfolio, with an outstanding principal balance exceeding $1 million. At December 31, 2023, we had 113 loans, 36.3% of the loans in our

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portfolio, with an outstanding principal balance exceeding $1 million. If this trend continues, it could have a material adverse impact on our business, operations and financial condition.

Difficult conditions in the mortgage and real estate markets, the financial markets and the economy generally have caused and may cause us to experience losses in the future.

Our business is materially affected by conditions in the residential and commercial mortgage and real estate markets, the financial markets and the economy generally. We believe the risks associated with our mortgage loan portfolio will be more acute during periods of economic slowdown, recession or market dislocation, especially if these periods are accompanied by declining real estate values and defaults. In prior years, concerns about the health of the global economy generally and the residential and commercial real estate markets specifically, as well as inflation, energy costs, perceived or actual changes in interest rates, European sovereign debt, U.S. debt limit and budget deficits, slowing economic growth among developed nations, geopolitical conflicts, international trade issues, public health issues, and the availability and cost of credit have contributed to increased volatility and uncertainty for the economy and the financial and credit markets. For example, COVID-19 contributed significantly to the supply chain issues in the real estate sector that have affected our borrowers, ultimately slowing construction and driving up costs. In addition, we cannot assure that similar or completely different set of adverse conditions will not arise in the future.

An economic slowdown, a public health crisis (such as COVID-19), armed conflicts, societal unrest, delayed recovery or general disruption in the mortgage markets may result in decreased demand for residential and commercial properties, which could adversely impact homeownership rates and force owners of commercial properties to lower rents, thus placing additional pressure on property values. We believe there is a strong correlation between real estate values and mortgage loan delinquencies. For example, to the extent that a commercial property owner has fewer tenants or receives lower rents, such owner will generate less cash flow on the property, thus reducing the value of the property and increasing the likelihood that such property owner will default on its debt service obligations. If the borrowers of our mortgage loans default or become delinquent on their obligations, we may incur material losses on those loans. Any sustained period of increased payment delinquencies, defaults, foreclosures, or losses could adversely affect both our operating income and our ability to obtain financing on favorable terms or at all. Any deterioration in the mortgage markets, the residential or commercial real estate markets, the financial markets and the economy generally may lower net income, increase losses and impair the market value of our assets, all of which may adversely affect our results of operations, the availability and cost of credit and our ability to make distributions to our shareholders.

Increases in interest rates could adversely affect our ability to generate income and pay dividends.

Although the Federal Reserve Board (the "Fed") reduced the federal funds rate in 2025 and the rate of inflation has decreased as well, inflation still remains above the Fed's target of 2% and the data on the labor market continues to be volatile. Accordingly, it is clear that the Fed will continue to reduce interest rates in 2026. In addition, commercial lending rates remain relatively high, adversely impacting our ability to refinance our existing indebtedness at lower rates and obtain growth capital. High interest rates adversely impacts our business in several ways. First, it makes it more difficult for us to borrow money to sustain our growth. Second, even if we borrow money at higher rates there is no assurance that we can pass these increases on to our borrowers, without adversely impacting the demand for our products. If our borrowers and their related projects cannot manage the increase in interest rates, we may have an increase in non-performing loans. Further, if we cannot raise the rates on our mortgages, the spread between our cost of funds and the yield on our mortgage loan portfolio will decrease. Thus, increases in interest rates could have a material adverse effect on our business, financial condition and results of operations and our ability to make distributions to our shareholders.

Adverse geopolitical developments could have a material adverse impact on our business.

Currently, there are several geopolitical concerns that could, indirectly, have an adverse impact on our business. These concerns include the ongoing armed conflicts in Europe and the Middle East, heightened tensions between the United States and China over trade, intelligence gathering and Taiwan and differences between the United States and some of its key allies on a variety of issues. These conditions, and the responses thereto, such as tariffs and sanctions imposed by the United States, and any expansion thereof is likely to have unpredictable and wide-ranging effects on the domestic and global financial markets, which could have an adverse effect on our business and results of operations. Already, these conditions have led to market volatility, a sharp increase in the cost of certain basic goods, and an increase in the number and frequency of cybersecurity threats. Even though our business is purely domestic, our borrowers are impacted by the uncertainty created by world events, price increases and market volatility.

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Prepayment rates can change, adversely affecting the performance of our assets.

The frequency at which prepayments (including both voluntary prepayments by the borrowers and liquidations due to defaults and foreclosures) occur on our mortgage loans is difficult to predict and is affected by a variety of factors, including the prevailing level of interest rates as well as economic, demographic, tax, social, legal, legislative and other factors. Generally, borrowers tend to prepay their mortgages when prevailing mortgage rates fall below the interest rates on their mortgage loans. To the extent that faster prepayment rates are due to lower interest rates, the principal payments received from prepayments will tend to be reinvested in lower-yielding mortgage loans, which may reduce our income in the long run. Therefore, if actual prepayment rates differ from anticipated prepayment rates, our business, financial condition and results of operations and ability to make distributions to our shareholders could be materially adversely affected.

Many of our loans are not funded with interest reserves and our borrowers may be unable to pay the interest accruing on the loans when due, which could have a material adverse impact on our financial condition.

Many of our loans do not have an interest reserve. Thus, we generally rely on the borrowers to make interest payments as and when due from other sources of cash. Since many of the properties securing our loans are under construction or renovation and, therefore, are not income producing or even cash producing and most of the borrowers are entities with no assets other than the single property that is the subject of the loan, some of our borrowers could have considerable difficulty servicing our loans and the risk of a non-payment of default is considerable. We depend on the borrower’s ability to refinance the loan at maturity or sell the property for repayment. If the borrower is unable to repay the loan, together with all the accrued interest, at maturity, our operating results and cash flows would be materially and adversely affected.

Most of the properties securing our mortgage loans are not income producing, thus increasing the risks of delinquency and foreclosure.

Most of our loans, by both number of loans and aggregate principal amount, are secured by properties, whether residential or commercial, that are under construction or renovation and are not income producing. The risks of delinquency and foreclosure on these properties may be greater than similar risks associated with loans made on the security of single- family, owner-occupied, residential property. In the case of income producing properties, the ability of a borrower to repay the loan typically depends primarily upon the successful operation of such property. If the net operating income of the subject property is reduced, the borrower’s ability to repay the loan, or our ability to receive adequate returns on our investment, may be impaired.

In the case of non-income producing properties, the expectation is that our loans will be repaid out of sale or refinancing proceeds. Thus, the borrower’s ability to repay our mortgage loans will depend, to a great extent, on the value of the property at the maturity date of the loan. In the event of any default under a mortgage loan held by us, we will bear a risk of loss to the extent of any deficiency between the value of the collateral and the outstanding principal and accrued interest of the mortgage loan, and any such losses could have a material adverse effect on our cash flow from operations and our ability to make distributions to our shareholders.

In the event of the bankruptcy of a mortgage loan borrower, the mortgage loan to such borrower will be deemed to be secured only to the extent of the value of the underlying collateral at the time of bankruptcy (as determined by the bankruptcy court), and the lien securing the mortgage loan will be subject to the avoidance powers of the bankruptcy trustee or debtor-in-possession to the extent the lien is unenforceable under state law. Foreclosure of a mortgage loan can be an expensive and lengthy process, which could have a substantial negative effect on our anticipated return on the foreclosed mortgage loan.

Our due diligence may not reveal all the risks associated with a mortgage loan or the property that will be mortgaged to secure the loan, which could lead to losses.

Despite our efforts to manage credit risk, there are many aspects of credit risk that we cannot control. Our credit policies and procedures may not be successful in limiting future delinquencies, defaults, and losses. Our underwriting reviews and due diligence procedures are designed for completeness and accuracy and are based on pre-funding diligence. Borrower circumstances as well as market conditions could change significantly during the term of the loan resulting in non-performance. The foreclosure process is lengthy, in some cases pro-borrower and costly. The length of time it takes to gain control of our collateral may cause a decline in fair market value or other impairments related to operational costs like taxes and insurance. The frequency of default and the loss severity on loans upon default may be greater than we anticipate. If properties securing our mortgage loans become real estate owned because of foreclosure, we bear the risk of not being

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able to sell the property and recovering our investment and of being exposed to the risks attendant to the ownership of real property.

Before approving and funding a mortgage loan, we undertake extensive due diligence of the borrower, its principals (if the borrower is not an individual) and the property that will be mortgaged to secure the loan. Such due diligence is usually limited to (i) the credit history of the borrower and its principals (if the borrower is not an individual), (ii) the value of the property, (iii) legal and lien searches against the borrower, the guarantors and the property, (iv) an environmental assessment of the property, (v) a review of the documentation related to the property and (vi) other reviews and or assessments that we may deem appropriate to conduct. There can be no assurance that we will conduct any specific level of due diligence, or that, among other things, the due diligence process will uncover all relevant facts, which could result in losses on the loan in question, which, in turn, could adversely affect our business, financial condition and results of operations and our ability to make distributions to our shareholders.

Residential mortgage loans are subject to increased risks.

While we are not a traditional long term mortgage lender, we do lend on commercial use of transitional residential property. At December 31, 2025, 53.6% of our outstanding mortgage loans receivable are secured by residential real property. None of these loans are guaranteed by the U.S. government or any government sponsored entity. Therefore, the value of the underlying property, the creditworthiness and financial position of the borrower and the priority and enforceability of our lien will significantly impact the value of such mortgage. In the event of foreclosure, we may assume direct ownership of the underlying real estate. The liquidation proceeds upon sale of such real estate may be less than the outstanding balance of the loan (including principal, accrued but unpaid interest and other fees and charges). In addition, any costs or delays involved in the foreclosure or liquidation process may increase losses.

Finally, residential mortgage loans are also subject to “special hazard” risk (property damage caused by hazards, such as earthquakes or environmental hazards, not covered by standard property insurance policies), and to bankruptcy risk (reduction in a borrower’s mortgage debt by a bankruptcy court). In addition, claims may be assessed against us on account of our position as a mortgage holder or property owner, including assignee liability, responsibility for tax payments, environmental hazards and other liabilities. In some cases, these liabilities may be “recourse liabilities” or may otherwise lead to losses in excess of the purchase price of the related mortgage or property.

Our real estate assets are subject to risks particular to real property.

As a result of foreclosures, we also directly own real estate. In some cases, the real estate is classified as “held for sale” and in other cases it is classified as “held for rental”. Given the nature of our business, we may in the future acquire more real estate assets upon a default of mortgage loans. In general, real estate assets are subject to various risks, including:

• acts of God, including earthquakes, floods and other natural disasters, which may result in uninsured losses;

• acts of war or terrorism, including the consequences of terrorist attacks, such as those that occurred on September 11, 2001, social unrest and civil disturbances;

• adverse changes in national and local economic and market conditions; and

• changes in governmental laws and regulations, fiscal policies, zoning ordinances and environmental legislation and the related costs of compliance with laws and regulations, fiscal policies and ordinances.

In addition, whether the real estate is held for sale or for rental, if it is income producing property, the net operating income can be adversely affected by, among other things:

• tenant mix;

• success of tenant businesses;

• the performance, actions and decisions of operating partners and the property managers they engage in the day-to-day management and maintenance of the property;

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• property location, condition and design;

• new construction of competitive properties;

• a surge in homeownership rates;

• changes in laws that increase operating expenses or limit rents that may be charged;

• changes in specific industry segments, including the labor, credit and securitization markets;

• declines in regional or local real estate values;

• declines in regional or local rental or occupancy rates;

• increases in interest rates, real estate taxes, energy costs and other operating expenses;

• costs of remediation and liabilities associated with environmental conditions;

• the potential for uninsured or underinsured property losses; and

• the risks particular to real property.

The occurrence of any of the foregoing or similar events may reduce our return from an affected property or asset and, consequently, materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our shareholders.

We may be adversely affected by the economies and other conditions of the markets in which we operate, particularly in Connecticut, Florida and New York, where we have a high concentration of our loans.

The geographic distribution of our loan portfolio exposes us to risks associated with the real estate and commercial lending industry in general within the states and regions in which we operate. These risks include, without limitation:

• declining real estate values;

• overbuilding;

• extended vacancies of properties;

• increases in competition;

• increases in operating expenses such as property taxes and energy costs;

• changes in zoning laws;

• unemployment rates;

• environmental issues;

• public health issues (such as COVID-19);

• casualty or condemnation losses;

• uninsured damages from floods, hurricanes, earthquakes or other natural disasters; and

• changes in interest rates.

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At December 31, 2025, 41.8% of our mortgage loans held for investment (representing 26.9% of the aggregate outstanding principal balance of our loans held for investment portfolio) were secured by property located in Connecticut; 13.9% (representing 30.3% of the aggregate outstanding principal balance of our loans held for investment portfolio) were secured by property located in Florida; and 14.8% (representing 8.2% of the aggregate outstanding principal balance of our loans held for investment portfolio) were secured by property located in New York. As a result, we are particularly subject to the general economic and market conditions in those markets. For example, other geographic markets in neighboring states could become more attractive for developers, investors and owners based on favorable costs and other conditions to construct or improve or renovate real estate properties. Some states have created tax and other incentives to attract businesses to relocate or to establish new facilities in their jurisdictions. These changes in other markets may increase demand in those markets and result in a corresponding decrease in demand in the markets in which we currently operate. Any adverse economic or real estate developments or any adverse changes in the local business climate in any geographic market in which we have a concentration of properties, could have a material adverse effect on us. To the extent any of the foregoing risks arise in Connecticut, New York and Florida, our business, financial condition and results of operations and ability to make distributions to shareholders could be materially adversely affected.

Competition could have a material adverse effect on our business, financial condition and results of operations.

We operate in a highly competitive market, and we believe these conditions will persist for the foreseeable future as the financial services industry continues to consolidate, producing larger, better capitalized and more geographically diverse companies with broad product and service offerings. Our existing and potential future competitors include other “hard money” lenders, mortgage REITs, specialty finance companies, savings and loan associations, banks, mortgage banks, insurance companies, mutual funds, pension funds, private equity funds, hedge funds, institutional investors, investment banking firms, non-bank financial institutions, governmental bodies, family offices and high net worth individuals. We may also compete with companies that partner with and/or receive government financing. Many of our competitors are substantially larger than us and have considerably greater financial, technical, marketing and other resources than we do. In addition, larger and more established competitors may enjoy significant competitive advantages, including enhanced operating efficiencies, more extensive referral networks, greater and more favorable access to investment capital and more desirable lending opportunities. Several of these competitors, including mortgage REITs, have recently raised or are expected to raise significant amounts of capital, which enables them to make larger loans or a greater number of loans. Some competitors may also have a lower cost of funds and access to funding sources that may not be available to us, such as funding from various governmental agencies or under various governmental programs for which we are not eligible. In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of possible loan transactions or to offer more favorable financing terms than we would. Finally, as a REIT and because we operate in a manner to be exempt from the requirements of the Investment Company Act, we may face further restrictions to which some of our competitors may not be subject. For example, we may find that the pool of potential qualified borrowers available to us is limited. We cannot assure you that the competitive pressures we face will not have a material adverse effect on our business, financial condition and results of operations. As a result of these competitive factors, we may not be able to originate and fund mortgage loans at favorable spreads over our cost of capital, which could have a material adverse effect on our business, financial condition, results of operations and ability to make distributions to our shareholders.

We may adopt new or change our existing underwriting financing, or other strategies and asset allocation and operational and management policies without shareholder consent, which may result in the purchase of riskier assets, the use of greater leverage or commercially unsound actions, any of which could materially adversely affect our business, financial condition and results of operations and our ability to make distributions to our shareholders.

Currently, we have no policies in place that limit or restrict our ability to borrow money or raise capital by issuing debt securities. Similarly, we have only a limited number of policies regarding underwriting criteria, loan metrics and operations in general. Even within these policies, management has broad discretion. We may adopt new strategies, policies and/or procedures or change any of our existing strategies, policies and /or procedures regarding financing, hedging, asset allocation, lending, operations and management at any time without the consent of shareholders, which could result in us originating and funding mortgage loans or entering into financing or hedging transactions with which we have no or limited experience or that are different from, and possibly riskier than our existing strategies and policies. The adoption of new strategies, policies and procedures or any changes, modifications or revisions to existing strategies, policies and procedures, may increase our exposure to fluctuations in real estate values, interest rates, prepayment rates, credit risk and other factors and there can be no assurance that we will be able to effectively identify, manage, monitor or mitigate these risks. A change in our lending guidelines could result in us making riskier real estate loans than those we have been making until now.

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The Board determines our operational policies and may adopt new policies or amend or revise existing policies regarding lending, financing, investment or other operational and management policies relating to growth, operations, indebtedness, capitalization and distributions or approve transactions that deviate from these policies without a vote of, or notice to, shareholders. Changes in our lending and financing strategies and to our operational and management policies, or adoption of new strategies and/or policies, could materially adversely affect our business, financial condition and results of operations and ability to make distributions to our shareholders.

Moreover, while the Board may periodically review our loan guidelines and our strategies and policies and while it may also approve certain loans, it does not approve every individual mortgage loan that we originate or fund, leaving management with day-to-day discretion over our loan portfolio composition within our broad lending guidelines. Within those guidelines, management has the discretion to significantly change the composition of our loan portfolio. In addition, in conducting periodic reviews, the directors may rely primarily on information provided to them by management. Moreover, because management has great latitude within our guidelines in determining the amounts and other terms of a particular mortgage loan, there can be no assurance that management will not make or approve loans that result in returns that are substantially below expectations or result in losses, which would materially adversely affect our business, results of operations, financial condition and ability to make distributions to our shareholders.

In connection with our lending operations, we rely on third-party service providers to perform a variety of services, comply with applicable laws and regulations, and carry out contractual covenants and terms, the failure of which by any of these third-party service providers may adversely impact our business and financial results.

In connection with our business of originating and funding mortgage loans, we rely on third-party service providers to perform a variety of services, comply with applicable laws and regulations, and carry out contractual covenants and terms. For example, we may rely on appraisers for a valuation analysis of the property that will be mortgaged to secure the loan or we may rely on attorneys to close the loans and to make sure that the loan is properly secured. These and other service providers upon whom we rely, may fail to adequately perform the services that they have been engaged to provide by committing errors, negligence, or fraud. As a result, we are subject to the risks associated with a third party’s failure to perform, including failure to perform due to reasons such as fraud, negligence, errors, miscalculations, or insolvency and the corresponding losses or impairments to our investments. In addition, we could also suffer reputational damage because of their acts or omissions, which could lead to borrowers and lenders and other counterparties ceasing to do business with us, which could materially adversely affect our business, financial condition and results of operations and ability to make distributions to our shareholders.

We may be adversely affected by deficiencies in foreclosure practices as well as related delays in the foreclosure process.

One of the biggest risks overhanging the mortgage market has been uncertainty around the timing and ability of lenders to foreclose on defaulted loans, so that they can liquidate the underlying properties. Given the magnitude of the housing crisis of 2008, and in response to the well-publicized failures of many mortgage servicing companies to follow proper foreclosure procedures (such as involving “robo-signing”), lenders, and their agents, are being held to much higher foreclosure-related documentation standards than they previously were. As a result, the mortgage foreclosure process has become lengthier and more expensive through the payment of past due taxes, insurance, as well as legal fees. Many factors delaying foreclosure, such as borrower lawsuits and judicial backlog and scrutiny, are outside of our control. Current defendant legal practice will likely continue to delay foreclosure processing in both judicial states (where foreclosures require court involvement) and non-judicial states to the benefit of our borrowers. The extension of foreclosure timelines also increases the inventory backlog of distressed homes on the market and creates greater uncertainty about housing prices. Continuing deficiencies in foreclosure practices of mortgage lenders and related delays in the foreclosure process may impact our loss assumptions and affect the values of, and our returns on, our mortgage loans.

We may be unable to identify and complete acquisitions on favorable terms or at all, which may inhibit our growth and have a material adverse effect on us.

As part of our growth strategy, we occasionally evaluate acquisition opportunities, including other real estate lenders or loan portfolios. To date, we have never pursued any of these opportunities. Acquisitions, in general, involve a high degree of risk including the following:

• we could incur significant expenses for due diligence, document preparation and other pre-closing activities and then fail to consummate the acquisition;

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• we could overpay for the business or assets acquired;

• there may be hidden liabilities that we failed to uncover prior to the consummation of the acquisition;

• the demands on management’s time related to the acquisition will detract from their ability to focus on the operation of our business; and

• challenges or difficulties in integrating the acquired business or assets into our existing platform.

We cannot assure you that we will be able to identify or consummate any acquisitions and we cannot assure you that, if we are able to identify and consummate one or more acquisitions, that those acquisitions will yield the anticipated benefits. Our inability to complete property or business acquisitions on favorable terms or at all could have a material adverse effect on us.

The downgrade of the credit ratings of the U.S., any future downgrades of the credit ratings of the U.S. and the failure to resolve issues related to U.S. fiscal and debt policies may materially adversely affect our business, liquidity, financial condition and results of operations.

Concerns regarding the gross federal debt and the budget deficit have increased the possibility of credit-rating downgrades or economic slowdowns in the U.S. The impact of any downgrades to the U.S. Government’s sovereign credit rating or its perceived creditworthiness could adversely affect the U.S. and global financial markets and economic conditions. A downgrade of the U.S. Government’s credit rating or a default by the U.S. Government to satisfy its debt obligations likely would create broader financial turmoil and uncertainty, which would weigh heavily on the global banking system and these developments could cause interest rates and borrowing costs to rise and a reduction in the availability of credit, which may negatively impact the value of our loan portfolio, our net income, liquidity and our ability to finance our assets on favorable terms.

Risks Related to Our Operations, Structure and Change in Control Provisions

We have significant unfunded commitments to existing borrowers. If we are unable to fund these commitments, we may be subject to borrower legal claims.

At December 31, 2025, we had unfunded commitments under existing loans of $37.2 million. We do not record these unfunded commitments as liabilities on our balance sheets as the unfunded portion of the loans are not included in the outstanding mortgage loan balances. We try to maintain a reasonable amount of working capital at all times, although not in amounts sufficient to cover all of our deferred funding obligations. Nevertheless, there is a risk that borrower demand for funding under existing loans could exceed our available working capital and if we fail to meet our funding obligations, we may be subject to legal claims by the borrowers. This could have a material and adverse impact on our business reputation, our operations as well as our financial condition.

Interruptions in our ability to provide our products and our service to our customers could damage our reputation, which could have a material adverse effect on us.

Our business and reputation could be adversely affected by any interruption or failure on our part to provide our products and services to our customers and prospective customers in a timely manner, even if such failures are a result of a natural disaster, public health issues (such as COVID-19), human error, errors and/or omissions by third parties on whom we depend, whether willful or unintentional, sabotage, vandalism, terrorist acts, unauthorized entry or other unanticipated problems. If a significant disruption occurs, we may be unable to take corrective action in a timely manner or, if and when implemented, these measures may not be sufficient or could be circumvented through the reoccurrence of a natural disaster or other unanticipated problem, or as a result of accidental or intentional actions. Furthermore, such disruptions may result in legal liability. Accordingly, our failure or inability to provide products and services to our customers in a timely and efficient manner may result in significant liability, a loss of customers and damage to our reputation, which could have a material adverse effect on us.

The occurrence of cyber incidents, or a deficiency in our cybersecurity or in those of any of our third-party service providers, could negatively impact our business by causing a disruption to our operations, a compromise or corruption

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of our confidential information or damage to our business relationships or reputation, all of which could negatively impact our business and results of operations.

In general, any adverse event that threatens the confidentiality, integrity, or availability of our information resources or the information resources of our third-party service providers is considered a cyber incident. More specifically, a cyber incident is an intentional attack or an unintentional event that can include gaining unauthorized access to systems to disrupt operations, corrupt data, or steal confidential information. As our reliance on technology has increased, so have the risks posed to our systems, both internal and those we have outsourced. The primary risks that could directly result from the occurrence of a cyber incident include operational interruption and private data exposure. We cannot assure you that our business and results of operations will not be negatively impacted by a cyber incident.

We face risks from cybersecurity threats that could have a material adverse effect on our business, financial condition, results of operations, cash flows or reputation. We acknowledge that the risk of a cyber incident is prevalent in the current threat landscape and that a future cyber incident may occur in the normal course of our business. However, cyber incidents have not been identified to date, therefore having no material adverse effect on our business, financial condition, results of operations, or cash flows. We understand potential vulnerabilities to known or unknown threats remain and have implemented our cyber risk management program described in Item 1.C. below to stay up-to-date on attacks against IT assets, data, and services, and to prevent their occurrence and recurrence where practicable. We cannot assure you that our program will be effective in preventing a cyber incident in the future. If it is not effective, it could have a material adverse effect on our business, financial condition, results of operations, or cash flows.

The loss of key personnel, such as one of our executive officers, could have a material adverse effect on us.

We believe that our continued success depends on the continued services of John L. Villano, our Chairman, Chief Executive Officer and President. Our reputation and our relationships with our key customers are the direct result of a significant investment of time and effort by him to build our credibility in a highly specialized industry. The loss of Mr. Villano’s services could diminish our business and investment opportunities and our relationships with lenders, business partners and existing and prospective customers and could have a material adverse effect on us. While we have entered into an employment agreement with Mr. Villano, he can terminate his employment with us at any time, for any reason. In the event Mr. Villano terminates his employment with us or is unable to carry out his duties, our business and operations will be adversely impacted.

Effective September 1, 2025, Jeffery Walraven was appointed Executive Vice President and Chief Financial Officer. While we have entered into an employment agreement with Mr. Walraven, he can terminate his employment with us at any time, for any reason. In the event Mr. Walraven terminates his employment with us or is unable to carry out his duties, it could have an adverse effect on our financial management, growth, and stability.

Our inability to recruit or retain qualified personnel or maintain access to key third-party service providers and software developers, could have a material adverse effect on us.

Training new employees is a difficult, time-consuming and expensive task but is key to our growth and success. We must continue to identify, hire, train, and retain qualified professionals, operations employees, and sales and senior management personnel who maintain relationships with our customers and who can provide the technical, strategic and marketing skills that will help us grow. Competitive pressures may require that we enhance our pay and benefits package to compete effectively for such personnel. An increase in these costs or our inability to recruit and retain necessary professional, technical, managerial, sales and marketing personnel or to maintain access to key third-party providers could have a material adverse effect on us.

The stock ownership limit imposed by our charter may inhibit market activity in our Common Shares and may restrict our business combination opportunities.

For us to maintain our qualification as a REIT under the Code, not more than 50% in value of the issued and outstanding shares of our capital stock may be owned, actually or constructively, by five or fewer individuals (as defined in the Code to include certain entities) at any time during the last half of each taxable year (other than our first year as a REIT). This test is known as the “5/50 test.” Attribution rules in the Code apply to determine if any individual or entity actually or constructively owns our capital stock for purposes of this requirement. Additionally, at least 100 persons must beneficially own our capital stock during at least 335 days of each taxable year (other than our first year as a REIT). To help ensure that we meet these tests, our charter restricts the acquisition and ownership of shares of our capital stock. Our charter, with certain exceptions, authorizes our directors to take such actions as are necessary and desirable to preserve our

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qualification as a REIT and provides that, unless exempted by the Board, no person may own more than 4.99% in value of the aggregate of the outstanding shares of our capital stock or more than 4.99% in value or in number of shares, whichever is more restrictive, of the aggregate of our outstanding shares of our Common Shares. The ownership limits contained in our charter could delay or prevent a transaction or a change in control of our company under circumstances that otherwise could provide our shareholders with the opportunity to realize a premium over the then current market price for our Common Shares or would otherwise be in the best interests of our shareholders.

If we sell or transfer mortgage loans to a third party, including a securitization entity, we may be required to repurchase such loans or indemnify such third party if we breach representations and warranties.

In order to raise working capital, we may sell or transfer mortgage loans to a third party, including a securitization entity. In connection with these sales, we may be required to make certain representations and warranties to the buyers that are typical in these types of transactions. If there is a material breach in any of these representations and warranties, we may be liable for any damages incurred by the buyer as a result of such breach or we may be obligated to repurchase one or more of the sold loans that is directly impacted by the breach or replace the impacted loan with another loan. Any remedy, whether we have to pay damages or repurchase or replace a loan, could have a material adverse impact on our business, operations and financial condition.

Risks Related to Debt Financing

If we cannot access external sources of capital on favorable terms or at all, our ability to execute our business and growth strategies will be impaired.

In addition to the usual operating expenses, we have significant other cash requirements, notably interest and dividend payments (to maintain our REIT status, we are required to distribute at least 90% of our taxable income on a annual basis) and loan repayments ($51.8 million principal amount of Notes will become due in December 2026 and an aggregate of an additional $121.5 million principal amount of Notes will become at various due dates in 2027.) Consequently, we rely on third-party sources of capital to fund a substantial amount of our working capital needs. Our access to third-party sources of capital depends, in part, on general market conditions, the market’s perception of our growth potential, leverage, current and expected results of operations, liquidity, financial condition and cash distributions to shareholders and the market price of our equity securities. If we cannot obtain capital when needed, we may not be able to execute our business and growth strategies, satisfy our debt service obligations, make the cash distributions to our shareholders necessary to qualify and maintain our qualification as a REIT (which would expose us to significant penalties and corporate level taxation), or fund our other business needs, any of which could have a material adverse effect on us.

We employ leverage, which magnifies the potential for gain or loss on amounts invested and may increase the risk of investing in us. If we are unable to leverage our assets to the extent we anticipate, the returns on certain if not all of our assets could be diminished, which may limit or eliminate our ability to make distributions to our shareholders.

A key element of our growth strategy is to use leverage to increase the size of our loan portfolio to enhance our returns. If we are unable to leverage our assets to the extent we currently anticipate, the returns on our loan portfolio could be diminished, which may limit or eliminate our ability to make distributions to our shareholders. For example, from June 2019 through August 2022, we consummated seven public offerings of unsecured unsubordinated five-year notes having an aggregate original principal amount of $288.4 million. Those funds were critical to our growth during that period.

Our organizational documents contain no limitations regarding the maximum level of indebtedness, whether as a percentage of our market capitalization or otherwise, that we may incur. The amount of leverage that we employ depends on management's assessment of market and other factors at the time of any proposed borrowing. As our capital needs continue to grow, we anticipate increasing our overall indebtedness. Our substantial outstanding indebtedness, and the limitations imposed on us by our debt agreements, could have other significant adverse consequences, including the following:

• our cash flow may be insufficient to meet our required principal and interest payments;

• we may use a substantial portion of our cash flows to make principal and interest payments and we may be unable to obtain additional financing as needed or on favorable terms, which could, among other things, have a material adverse effect on our ability to capitalize upon acquisition opportunities, fund

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working capital, make capital expenditures, make cash distributions to our shareholders, or meet our other business needs;

• we may be unable to refinance our indebtedness at maturity or the refinancing terms may be less favorable than the terms of our original indebtedness;

• we may be forced to dispose of assets, possibly on unfavorable terms or in violation of certain covenants to which we may be subject in order to pay debt obligations when due;

• our financial flexibility may be diminished as a result of various covenants including debt and coverage and other financial ratios;

• our vulnerability to general adverse economic and industry conditions may be increased;

• we may be at a competitive disadvantage relative to our competitors that have less indebtedness; and

• our flexibility in planning for, or reacting to, changes in our business and the markets in which we operate may be limited and we may default on our indebtedness by failure to make required payments or violation of covenants, which would entitle holders of such indebtedness, and possibly other indebtedness, to accelerate the maturity of their indebtedness and to foreclose on our mortgages receivable that secure their loans.

The occurrence of any one of these events could have a material adverse effect on our business, financial condition and results of operations and our ability to make distributions to shareholders.

We are leveraged. If we default on our obligations, we may suffer adverse consequences.

Indebtedness for borrowed money, also known as "leverage", magnify the potential for income gain or loss on amounts invested in loans and, therefore, increase the risks associated with investing in us. We borrow from and issue senior debt securities to banks and other lenders that are secured by liens on our assets. Holders of these senior securities have fixed dollar claims on our assets that are superior to the claims of the holders of our other securities. Leverage is generally considered a speculative investment technique. Any increase in our income in excess of interest payable on our outstanding indebtedness would cause our net income to increase more than it would have had we not incurred leverage, while any decrease in our income would cause net income to decline more sharply than it would have had we not incurred leverage. Such a decline could negatively affect our ability to pay dividends to the holders of our equity securities or scheduled debt payments. There can be no assurance that our leveraging strategy will be successful.

Our outstanding indebtedness imposes, and additional debt we may incur in the future will likely impose, financial and operating covenants that restrict our business activities, including limitations that could hinder our ability to finance additional loans and investments or to make the distributions required to maintain our status as a REIT.

Total outstanding indebtedness at December 31, 2025 was $277.8 million, which included $171.3 million aggregate outstanding principal balance of Notes, $86.6 million of senior secured notes payable, $19.0 million outstanding on the Needham Credit Facility, and $0.9 million outstanding on the NHB Mortgage. All amounts borrowed under the Needham Credit Facility are secured by a first priority lien on virtually all our assets excluding real estate owned by us (other than real estate acquired pursuant to foreclosure). The NHB Mortgage is secured by a first mortgage lien on the property located at 568 E. Main Street, Branford Connecticut, which we own and which is our principal place of business. In addition, the NHB Mortgage has cross default provisions, which means that a default under the terms of any other indebtedness, would also be an event of default under the NHB Mortgage as well. Thus, any default under the Needham Credit or the NHB Mortgage could have a material adverse effect on our business, financial condition and results of operations, cash flows, our ability to make distributions to shareholders and make the interest payment on the Notes.

Under the Indenture governing the Notes, as well as the agreements relating to our various credit facilities, we are generally required to meet an asset coverage ratio at least equal to 150%, respectively, of total assets to total borrowings and other senior securities, which include all our borrowings and any redeemable preferred stock we may issue in the future. In addition, we cannot pay dividends to our shareholders to the extent such dividends would cause us to fall below the 150% asset coverage ratio. If this ratio declines below 150%, we may not be able to incur additional debt and may need

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to sell a portion of our investments to repay some debt when it is disadvantageous to do so, and we may not be able to make distributions to our shareholders.

Any default under the agreements governing our existing indebtedness, or other indebtedness that we may incur in the future that is not waived by the required lenders, and the remedies sought by the holders of such indebtedness could make us unable to pay principal and interest on the Notes and substantially decrease the market value of the Notes. If we are unable to generate sufficient cash flow and are otherwise unable to obtain funds necessary to meet required payments of principal and interest on our indebtedness, or if we otherwise fail to comply with the various covenants, including financial and operating covenants, in the instruments governing our indebtedness, we could be in default under the terms of the agreements governing such indebtedness, including the Notes. In the event of such default, the holders of such indebtedness could elect to declare all the funds borrowed thereunder to be due and payable, together with accrued and unpaid interest. In addition, the lenders under any revolving credit facility or other financing that we may obtain in the future could elect to terminate their commitment, cease making further loans and institute foreclosure proceedings against our assets and force us into bankruptcy or liquidation. Any such default may constitute a default under all our indebtedness, including the Notes, which could further limit our ability to repay our indebtedness, including the Notes. If our operating performance declines, we may in the future need to seek to obtain waivers from our existing lenders at the time to avoid being in default. If we breach any loan covenants, we may not be able to obtain such a waiver from the lenders in which case we would be in default under the credit arrangement and the lender could exercise its rights as described above, and we may be forced into bankruptcy or liquidation. If we are unable to repay indebtedness, lenders having secured obligations could proceed against the collateral securing the debt. Because the NHB Mortgage have, and any future credit facilities may have, customary cross-default provisions, if repayment of any outstanding indebtedness, such as the Notes, the NHB Mortgage, the Needham Credit Facility or any future credit facility, is accelerated, we may be unable to repay or finance the amounts due.

Despite our current debt levels, we may incur substantially more debt or take other actions which could have the effect of diminishing our ability to make payments on our indebtedness when due and distributions to our shareholders.

Despite our current debt levels, we may incur substantial additional debt in the future, secured or unsecured, senior or subordinate, subject to the restrictions contained in our debt instruments, by issuing additional debt securities in public or private transactions, arranging new credit facilities or increasing borrowings under our existing credit facilities, or by other means. A failure to add new debt facilities or issue additional debt securities or incur other indebtedness in lieu of or in addition to existing indebtedness could have a material adverse effect on our business, financial condition or results of operations. However, we cannot assure you that we will be able to raise additional debt capital on reasonable terms, if at all. Even if we are successful, we cannot assure that we will be able to service any increase in the amount of our indebtedness.

Risks Related to the Notes

Our outstanding fixed rate term notes are unsecured and therefore are effectively subordinated to any secured indebtedness we have incurred or may incur in the future.

As of December 31, 2025, we had $173.3 million aggregate principal amount of Notes outstanding. The Notes are unsecured. As a result, they are effectively subordinated to all our existing and future secured indebtedness, such as the Senior Secured Notes Payable ($90.0 million outstanding principal balance at December 31, 2025), the Needham Credit Facility ($19.0 million outstanding balance at December 31, 2025), and the NHB Mortgage, ($0.9 million outstanding balance at December 31, 2025) as well as any secured indebtedness that we may incur in the future, or any indebtedness that is initially unsecured to which we subsequently grant a security interest, to the extent of the value of the assets securing such indebtedness. In any liquidation, dissolution, bankruptcy or other similar proceeding, the holders of any of our existing or future secured indebtedness may assert rights against the assets pledged to secure that indebtedness in order to receive full payment of their indebtedness before the assets may be used to pay other creditors, including the holders of the Notes. The Needham Credit Facility is secured by a first priority lien on virtually all our assets excluding real estate owned by us (other than real estate acquired pursuant to foreclosure) and mortgages sold under the Senior Secured Notes Payable. The NHB Mortgage is secured by a first mortgage lien on the property located at 568 East Main Street, Branford, Connecticut.

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The Notes are subordinated to the indebtedness and other liabilities of our subsidiaries.

The Notes are our exclusive obligations, and not of any of our subsidiaries. In addition, the Notes are not guaranteed by any third-party, whether an affiliate or unrelated. None of the assets of our subsidiaries will be directly available to satisfy the claims of holders of the Notes. Except to the extent, we are a creditor with recognized claims against our subsidiaries, all claims of creditors of our subsidiaries will have priority over our equity interests in such entities (and therefore the claims of our creditors, including holders of the Notes) with respect to the assets of such entities. Even if we are recognized as a creditor of one or more of these entities, our claims would still be effectively subordinated to any security interests in the assets of any such entity and to any indebtedness or other liabilities of any such entity senior to our claims. Consequently, the Notes will be structurally subordinated to all indebtedness and other liabilities of any of our subsidiaries. In addition, our subsidiaries and these entities may incur substantial indebtedness in the future, all of which would be structurally senior to the Notes.

The indenture under which the Notes are issued contains limited protection for holders of the Notes.

The indenture under which the Notes were issued offers limited protection to holders of the Notes. The terms of the indenture and the Notes do not restrict our ability to engage in, or otherwise be a party to, a variety of corporate transactions, circumstances or events that could have a material adverse impact on an investment in the Notes. Except in limited circumstances, the terms of the indenture and the Notes do not restrict our ability to:

• issue securities or otherwise incur additional indebtedness or other obligations, including (i) any indebtedness or other obligations that would be equal in right of payment to the Notes, (ii) any indebtedness or other obligations that would be secured and therefore rank effectively senior in right of payment to the Notes to the extent of the values of the assets securing such debt, (iii) indebtedness that we incur that is guaranteed by one or more of our subsidiaries and which therefore is structurally senior to the Notes and (iv) securities, indebtedness or obligations issued or incurred by our subsidiaries that would be senior to our equity interests in those entities and therefore rank structurally senior to the Notes with respect to the assets of these entities;

• pay dividends on, or purchase or redeem or make any payments in respect of, capital stock or other securities ranking junior in right of payment to the Notes, including subordinated indebtedness;

• sell assets (other than certain limited restrictions on our ability to consolidate, merge or sell all or substantially all of our assets);

• enter into transactions with affiliates;

• create liens or enter into sale and leaseback transactions;

• make investments; or

• create restrictions on the payment of dividends or other amounts to us from our subsidiaries.

In addition, the indenture does not require us to offer to purchase the Notes in connection with a change of control or any other event.

Similarly, the terms of the indenture and the Notes do not protect holders of the Notes in the event that we experience changes (including significant adverse changes) in our financial condition, results of operations or credit ratings, if any, as long as we adhere to the Asset Coverage Ratio covenant in the indenture. See “Management’s Discussion of Financial Condition and Results of Operations – Financing Strategy Overview.”

Our ability to recapitalize, incur additional debt and take other actions that are not limited by the terms of the Notes may have important consequences to the holders of the Notes, including making it more difficult for us to satisfy our obligations with respect to the Notes or negatively affecting the trading value of the Notes.

Other debt we issue or incur in the future could contain more protections for its holders than the indenture and the Notes, including additional covenants and events of default. For example, the indenture under which the Notes are issued

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does not contain cross-default provisions. The issuance of any indebtedness with incremental protections could adversely affect the market for, trading volume and prices of the Notes.

An increase in market interest rates could result in a decrease in the value of the Notes.

In general, as market interest rates rise, notes bearing interest at a fixed rate decline in value. Consequently, if you own Notes or purchase Notes, and the market interest rates subsequently increase, the market value of your Notes may decline. We cannot predict the future level of market interest rates.

Although the Notes are listed on the NYSE American, an active trading market for the Notes may not develop, which could limit a noteholder's ability to sell the Notes and/or the market price of the Notes.

Although the Notes are listed on the NYSE American, there is limited trading of the Notes on the exchange and we cannot assure holders of the Notes that an active trading market will develop or be maintained for the Notes. In addition, the Notes may trade at a discount from their initial offering price depending on prevailing interest rates, the market for similar securities, our credit ratings, if any, general economic conditions, our financial condition, performance and prospects and other factors. Although the underwriters advised us at the time of issuance that they intend to make a market in the Notes, they are not obligated to do so. The underwriters may discontinue any market-making in the Notes at any time at their sole discretion. Accordingly, we cannot assure you that a liquid trading market for the Notes will develop or can be sustained, or that holders of the Notes will be able to sell their Notes at a particular time or that the price they will receive at the time of sale will be favorable. To the extent an active trading market does not develop, the liquidity and trading price for the Notes may be harmed. Accordingly, the holders of Notes may be required to bear the financial risk of an investment in the Notes indefinitely.

We may choose to redeem the Notes when prevailing interest rates are relatively low.

All the Notes are currently redeemable at the time of our choosing. We may choose to redeem the Notes when prevailing interest rates are lower than the rate borne by the Notes. If prevailing rates are lower at the time of redemption, holders of the Notes would not be able to reinvest the redemption proceeds in a comparable security at an effective interest rate as high as the interest rate on the Notes being redeemed. Our redemption right may adversely impact the ability of holders to sell the Notes as the optional redemption date or period approaches.

We are not obligated to contribute to a sinking fund to retire the Notes and the Notes are not guaranteed by a third party.

We are not obligated to contribute funds to a sinking fund to repay principal or interest on the Notes upon maturity or default. The Notes are not certificates of deposit or similar obligations of, or guaranteed by, any depositary institution. Further, no private party or governmental entity insures or guarantees payment on the Notes if we do not have enough funds to make principal or interest payments.

A downgrade, suspension or withdrawal of the credit rating assigned by a rating agency to us or the Notes, if any, could cause the liquidity or market value of the Notes to decline significantly.

Our credit rating is an assessment by third parties of our ability to pay our obligations. Consequently, real or anticipated changes in our credit rating will generally affect the market value of the Notes. Our credit rating, however, may not reflect the potential impact of risks related to market conditions generally or other factors discussed above on the market value of or trading market for the Notes. Credit ratings are not a recommendation to buy, sell or hold any security, and may be revised or withdrawn at any time by the issuing organization in its sole discretion.

Upon issuance, each tranche of Notes received a private rating of BBB+ from Egan-Jones Ratings Company. An explanation of the significance of ratings may be obtained from the rating agency. Generally, rating agencies base their ratings on such material and information, and such of their own investigations, studies and assumptions, as they deem appropriate. We have no obligation to maintain our credit rating or to advise holders of the Notes of any changes in our credit rating. There can be no assurance that our credit rating will remain for any given period of time or that such credit rating will not be lowered or withdrawn entirely by the rating agency if in their judgment future circumstances relating to the basis of the credit rating so warrant.

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Risks Related to our Series A Preferred Stock

The Series A Preferred Stock effectively ranks junior to all our indebtedness and other liabilities and of our subsidiaries.

In the event of a bankruptcy, liquidation, dissolution or winding up of our affairs, our assets will be available to pay obligations on the Series A Preferred Stock only after all our indebtedness and other liabilities and that of our subsidiaries have been paid in full. At December 31, 2025, the aggregate liquidation preference of the issued and outstanding shares Series A Preferred Stock was $57.8 million and our total liabilities on a consolidated basis were $285.1 million.

The rights of holders of the Series A Preferred Stock to participate in the distribution of our assets will rank junior to the prior claims of our current and future creditors and any future series or class of preferred stock we may issue that ranks senior to the Series A Preferred Stock. Similarly, the Series A Preferred Stock effectively ranks junior to all existing and future indebtedness and other liabilities of (as well as any preferred equity interests held by others in) our existing subsidiaries and any future subsidiaries. Our existing subsidiaries are, and any future subsidiaries would be, separate legal entities and have no legal obligation to pay any amounts to us in respect of dividends due on the Series A Preferred Stock. If we are forced to liquidate our assets to pay our creditors, we may not have sufficient assets to pay amounts due with respect to the outstanding shares of Series A Preferred Stock. We and our subsidiaries have incurred and may in the future incur substantial amounts of debt and other obligations that will rank senior to the Series A Preferred Stock. Certain of our existing or future debt instruments may restrict the authorization, payment or setting apart of dividends on the Series A Preferred Stock.

As a result, future offerings of debt or senior equity securities may adversely affect the market price of the Series A Preferred Stock. In addition, if we issue debt or senior equity securities in the future, it is possible that these securities will be governed by an indenture or other instrument containing covenants restricting our operating flexibility, including the ability to pay dividends. Furthermore, any convertible or exchangeable securities that we issue in the future may have rights, preferences and privileges more favorable than those of the Series A Preferred Stock and may dilute the ownership interest of the holders of the Series A Preferred Stock. We and, indirectly, our shareholders, including holders of the Series A Preferred Stock will bear the cost of issuing and servicing such securities. Thus, holders of the Series A Preferred Stock will bear the risk of our future offerings reducing the market price of the Series A Preferred Stock and diluting the value of their holdings in us.

We may issue additional shares of Series A Preferred Stock and additional series of preferred shares that rank on parity with the Series A Preferred Stock as to dividend rights, rights upon liquidation or voting rights.

We may issue additional shares of Series A Preferred Stock in the future and may create new classes or series of preferred shares that would rank equal or senior to the Series A Preferred Stock with respect to dividend payments and rights upon liquidation, dissolution or winding up of our affairs.

The issuance of additional shares of Series A Preferred Stock and additional series of parity preferred stock may reduce amounts available to the holders of the Series A Preferred Stock upon our liquidation or dissolution or the winding up of our affairs. It also may reduce dividend payments on the Series A Preferred Stock if we do not have sufficient funds to pay dividends on all Series A Preferred Stock outstanding and other classes of stock with equal priority with respect to dividends.

Although holders of shares of Series A Preferred Stock are entitled to limited voting rights, the Series A Preferred Stock will vote separately as a class together with all other classes or series of our preferred shares that we may issue upon which like voting rights have been conferred. As a result, the voting rights of holders of shares of Series A Preferred Stock may be significantly diluted, and the holders of such other series of preferred shares that we may issue may be able to control or significantly influence the outcome of any vote.

Future issuances and sales of parity preferred shares, or the perception that such issuances and sales could occur, may cause prevailing market prices for the Series A Preferred Stock and our Common Shares to decline and may adversely affect our ability to raise additional capital in the financial markets at times and prices favorable to us.

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Market interest rates may materially and adversely affect the value of the Series A Preferred Stock.

One of the factors that will influence the price of the Series A Preferred Stock will be the dividend yield on the Series A Preferred Stock (as a percentage of the market price of the Series A Preferred Stock) relative to market interest rates. Dividends on the Series A Preferred Stock are payable at the rate of 7.75% per annum. An increase in market interest rates may lead prospective purchasers of the Series A Preferred Stock to expect a higher dividend yield (and higher interest rates would likely increase our borrowing costs and potentially decrease funds available for dividend payments). Thus, higher market interest rates could cause the market price of the Series A Preferred Stock to materially decrease and reduce the amount of funds available and that may be used to make dividend payments.

Our ability to pay dividends is limited by the requirements of New York law.

Our ability to pay dividends on the Series A Preferred Stock is limited by the laws of New York. Under applicable New York law, a New York corporation may not make a distribution if, after giving effect to the distribution, the corporation would not be able to pay its debts as the debts become due in the usual course of business, or, except in limited circumstances, the corporation’s total assets would be less than the sum of its total liabilities plus, unless our certificate of incorporation, as amended, provides otherwise, the amount that would be needed, if the corporation were dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those receiving the distribution. Accordingly, we may not make a distribution on the Series A Preferred Stock if, after giving effect to the distribution, we would not be able to pay our debts as they become due in the usual course of business or, except in limited circumstances, our total assets would be less than the sum of our total liabilities plus, unless the charter provides otherwise, the amount that would be needed to satisfy the preferential rights upon dissolution of the holders of shares of any class or series of preferred shares then outstanding, if any, with preferences senior to those of the Series A Preferred Stock.

Our cash available for distribution may not be sufficient to pay dividends on the Series A Preferred Stock at the stated dividend rate.

Dividends on the Series A Preferred Stock are payable quarterly subject to being authorized by the Board in its sole discretion out of assets legally available therefor and will depend on a number of factors, including our earnings, our financial condition, restrictions under applicable law, our need to comply with the terms of our existing financing arrangements, our capital requirements and such other factors as the Board may deem relevant from time to time. To the extent, earnings and/or cash flow from operations are insufficient to fund dividend payments, we may make up the shortfall from working capital, proceeds from the sale of securities, other financing facilities or from the sale of assets. Funding dividend payments from working capital could restrict our operations. If we are required to sell assets, such sales may occur at a time or in a manner that does not allow us to realize the full extent of the value of those assets. If we borrow funds to pay dividends, our leverage ratios and interest expense would increase thereby reducing our earnings and cash flow and making it more difficult for us to obtain additional financing to fund our growth. Accordingly, we cannot assure you that we will be able to pay dividends in the future.

The change of control conversion rights may not adequately compensate the holders of Series A Preferred Stock in the event we undergo a change of control. The change of control conversion rights may also make it more difficult for a party to acquire us or discourage a party from acquiring us.

Upon the occurrence of a “Change of Control” (as defined in our certificate of incorporation, as amended), each holder of shares of Series A Preferred Stock will have the right (unless, prior to the Change of Control Conversion Date (as defined in our certificate of incorporation, as amended), we have provided notice of our election to redeem some or all of the shares of Series A Preferred Stock held by such holder in which case such holder will have the right only with respect to shares of Series A Preferred Stock that are not called for redemption) to convert some or all of such holder’s shares of Series A Preferred Stock into our Common Shares (or under specified circumstances certain alternative consideration). Notwithstanding that we generally may not redeem the Series A Preferred Stock prior to June 29, 2026, we have a special optional redemption right to redeem the Series A Preferred Stock in the event of a Change of Control, and holders of the Series A Preferred Stock will not have the right to convert any shares that we have elected to redeem prior to the Change of Control Conversion Date.

If we do not elect to redeem the Series A Preferred Stock prior to the Change of Control Conversion Date, then upon an exercise of their conversion rights, the holders of Series A Preferred Stock will be limited to a maximum number of our Common Shares (or, if applicable, the Alternative Conversion Consideration (as defined in our certificate of

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incorporation, as amended)) equal to the lesser of (a) the quotient obtained by dividing (i) the sum of (A) the $25.00 liquidation preference per share of Series A Preferred Stock plus (B) the amount of any accumulated and unpaid dividends thereon to, but not including, the Change of Control Conversion Date (unless the Change of Control Conversion Date is after a dividend record date and prior to the corresponding dividend payment date for the Series A Preferred Stock, in which case no additional amount for such accrued and unpaid dividend will be included in this sum) by (ii) the Common Stock Price (as defined in our certificate of incorporation, as amended); and (b) 25.00, multiplied by the number of shares of Series A Preferred Stock converted.

In addition, the Change of Control conversion feature of the Series A Preferred Stock may have the effect of discouraging a third party from making an acquisition proposal for us or of delaying, deferring or preventing certain of our change of control transactions under circumstances that otherwise could provide the holders of our Common Shares and Series A Preferred Stock with the opportunity to realize a premium over the then-current market price of such stock or that shareholders may otherwise believe is in their best interests.

An increase in the market price of our Common Shares will not necessarily result in an increase in the market price of the Series A Preferred Stock

Since an increase in the market price of our Common Shares will not necessarily result in an increase in the market price of the Series A Preferred Stock, which depends more on the dividend yield relative to other investment opportunities, we cannot assure you that a holder will benefit from an increase in the market price of our Common Shares even upon a conversion.

If we redeem your shares of the Series A Preferred Stock, you will no longer receive dividends.

On or after June 29, 2026, we may, from time to time, at our option redeem, in whole or in part, the outstanding shares of the Series A Preferred Stock. We may have an incentive to redeem the Series A Preferred Stock if market conditions allow us to issue other preferred stock or debt securities at a rate that is lower than the dividend rate on the Series A Preferred Stock. If we redeem the Series A Preferred Stock, from and after the redemption date, dividends will cease to accrue on the shares that are redeemed and all your rights as a holder of such shares will terminate except the right to receive the redemption price plus accrued but unpaid dividends, if any.

You should not expect us to redeem shares of the Series A Preferred Stock on or after the date they become redeemable.

The Series A Preferred Stock is a perpetual security, meaning that it has no maturity or mandatory redemption date and is not redeemable at the option of the holders. Those shares may only be redeemed by us after June 29, 2026 or following a Change in Control (as defined in our certificate of incorporation, as amended). Our decision to redeem the Series A Preferred Stock will depend on, among other things, our evaluation of our capital position and structure and general market conditions.

The trading price of the Series A Preferred Stock could be substantially affected by various factors.

During the year ended December 31, 2025, the closing price for our Series A Preferred Stock on the NYSE American ranged from a high of $18.99 to a low of $12.54. The market price of the Series A Preferred Stock in the future may be higher or lower than the limits reflected in the prior sentence depending on many factors, many of which are beyond our control and may not be directly related to our operating performance. These factors include, but are not limited to, the following:

• increases in prevailing interest rates, which may have an adverse effect on the market price of the Series A Preferred Stock;

• market prices of common and preferred equity securities issued by REITs and other real estate companies;

• our history of timely dividend payments;

• the annual yield from distributions on the Series A Preferred Stock as compared to yields on other financial instruments;

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• general economic and financial market conditions;

• government action or regulation;

• the financial condition, performance and prospects of us and our competitors;

• changes in financial estimates or recommendations by securities analysts with respect to us, our competitors or our industry;

• our issuance of additional common equity or debt securities;

• our issuance of additional series or classes of preferred securities; and

• actual or anticipated variations in quarterly operating results of us and our competitors.

The market price and trading volume of the Series A Preferred Stock may be volatile and you could experience a loss if you sell your shares.

Even if an active trading market develops for the Series A Preferred Stock, the market price for the shares may be volatile. Also, the trading volume may fluctuate and cause significant price variations. If the market price for the Series A Preferred Stock declines significantly, you may not be able to sell your shares at or above the price that you paid for those shares. Some of the factors that could negatively impact share price or cause fluctuations in price or trading volume include, but are not limited to, the following:

• actual or anticipated variations in our quarterly results of operations;

• changes in our cash flow, earnings estimates or recommendations by securities analysts;

• publication of research report about us or the real estate sector in general; the extent of investor interest; increases in market interest rates;

• changes in market valuations of other companies in our peer group;

• strategic decisions by us or our competitors, such as acquisitions, divestments, spin-offs, joint ventures, strategic investments or business strategy;

• the reputation of REITs generally and specifically of those with portfolios similar to ours,

• the attractiveness of securities of REITs in comparison to securities issued by other entities;

• adverse market reaction to any additional debt that we incur, or acquisitions that we make in the future;

• additions or departures of key management personnel;

• future issuances by us of equity securities;

• actions by institutional or activist investors; speculation in the press or investment community;

• the realization of any risk factors discussed herein; and

• general market and economic conditions.

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In sum, we cannot assure you that the market price of the Series A Preferred Stock will not fluctuate significantly in the future.

Our certificate of incorporation, as amended, including the certificate of amendment establishing the terms of the Series A Preferred Stock, contains restrictions upon ownership and transfer of the Series A Preferred Stock, which may impair the ability of holders to convert Series A Preferred Stock into our Common Shares.

Our certificate of incorporation, as amended, including the certificate of amendment creating the Series A Preferred Stock, contains restrictions on ownership and transfer of the Series A Preferred Stock intended to assist us in maintaining our qualification as a REIT for federal income tax purposes. Specifically, our charter provides that no person may own, or be deemed to own by virtue of applicable constructive ownership rules of the Code, more than 4.99% (by value or by number of shares, whichever is more restrictive) of our outstanding Common Shares or 4.99% by value of our outstanding shares of capital stock, subject to certain exceptions. Notwithstanding any other provision of the Series A Preferred Stock, no holder of shares of Series A Preferred Stock will be entitled to convert such stock into our Common Shares to the extent that receipt of our Common Shares would cause the holder to exceed the ownership limitations contained in our certificate of incorporation, as amended, including the certificate of amendment creating the Series A Preferred Stock. In addition, these restrictions could have takeover defense effects and could reduce the possibility that a third party will attempt to acquire control of us, which could adversely affect the market price of the Series A Preferred Stock.

The Series A Preferred Stock shareholders have limited voting rights.

Generally, the holders of the Series A Preferred Stock have no voting rights. There are, however, two exceptions. Holders of shares of Series A Preferred Stock have the right to elect, voting together as a single class with the holders of any other class or series of our preferred shares having similar voting rights, two additional directors to the Board, in the event that six quarterly dividends (whether or not consecutive) payable on the Series A Preferred Stock are in arrears, and the right to vote on amendments to our charter, including amendments to the certificate of amendment creating the Series A Preferred Stock, that materially and adversely affect the rights of the holders of shares of Series A Preferred Stock or that authorize, increase or create additional classes or series of our stock that are senior to the Series A Preferred Stock. Other than the limited circumstances described in our certificate of incorporation, as amended, holders of shares of Series A Preferred Stock will not have any voting rights.

Future sales of substantial amounts of the Series A Preferred Stock, or the possibility that such sales could occur, could adversely affect the market price of the Series A Preferred Stock.

We cannot predict the effect, if any, that future issuances or sales of our securities including sales of the Series A Preferred Stock pursuant to the At Market Issuance Sales Agreement with Ladenburg Thalmann & Co. Inc. and Lucid Capital Markets, LLC, as sales agents (the “Sales Agreement”) or the availability of our securities for future issuance or sale, will have on the market price of the Series A Preferred Stock. Issuances or sales of substantial amounts of our securities, including sales of shares of the Series A Preferred Stock pursuant to the Sales Agreement or the perception that such issuances or sales might occur, could negatively impact the market price of the Series A Preferred Stock and the terms upon which we may obtain additional equity financing in the future.

Although the Series A Preferred Stock currently has a private credit rating of BBB from Egan-Jones Ratings Company, the Series A Preferred Stock may be downgraded, suspended or withdrawn as a result of the offering of additional shares of Series A Preferred Stock.

The Series A Preferred Stock has a private credit rating of BBB from Egan-Jones Ratings Company. An explanation of the significance of ratings may be obtained from the rating agency. Generally, rating agencies base their ratings on such material and information, and such of their own investigations, studies and assumptions, as they deem appropriate. The issuance of additional shares in the future or other factors could affect our ability to maintain the rating on the Series A Preferred Stock. The rating of the Series A Preferred Stock should be evaluated independently from similar ratings of other securities. A credit rating of a security is paid for by the issuer and is not a recommendation to buy, sell or hold securities and maybe subject to review, revision, suspension, reduction or withdrawal at any time by the assigning rating agency. We cannot assure you that the credit rating assigned to us or the Series A Preferred Stock will not be downgraded, suspended or withdrawn in the future. If it is, the liquidity or market value of the Series A Preferred Stock could be adversely affected.

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If we are unable to comply with the continued listing requirements of the NYSE American, our Common Shares could be delisted, which could adversely affect the listing of the Series A Preferred Stock.

Currently, our Common Shares and the Series A Preferred Stock are listed on the NYSE American. In order to maintain this listing, we required to meet certain qualitative tests. We cannot assure that we will be able to maintain our listing on the NYSE American. If we fail to do so, it would adversely impact your ability to sell these securities and to obtain accurate pricing information. It would also make it more difficult for us to raise capital.

Listing on NYSE American does not guarantee an active trading market for the Series A Preferred Stock.

Although the Series A Preferred Stock is currently listed on the NYSE American, there is no guarantee that an active and liquid trading market to sell these shares can be sustained. If an active trading market cannot be sustained, the market price and liquidity of the Series A Preferred Stock may be adversely affected. Even if an active trading market is sustained, we cannot assure you that the market price for those shares will equal or exceed the price you paid for your shares.

If the Series A Preferred Stock or our Common Shares are delisted, your ability to transfer or sell your shares of the Series A Preferred Stock may be limited and the market value of the Series A Preferred Stock will likely be materially adversely affected.

Other than in connection with a Change of Control, the Series A Preferred Stock does not contain rights that are intended to protect you if our Common Shares are delisted from the NYSE American. Because the Series A Preferred Stock has no stated maturity date, you may be forced to hold your shares of the Series A Preferred Stock and receive stated dividends on the Series A Preferred Stock when, as and if authorized by the Board and paid by us with no assurance as to ever receiving the liquidation value thereof. In addition, if our Common Shares are delisted from the NYSE American, it is likely that the Series A Preferred Stock will be delisted from the NYSE American as well. Accordingly, if our Common Shares are delisted from the NYSE American, your ability to transfer or sell your shares of the Series A Preferred Stock may be limited and the market value of the Series A Preferred Stock will likely be materially adversely affected.

Risks Relating to our Common Shares

The market price and trading volume of our securities may be volatile.

The stock markets, including the NYSE American, which is the exchange on which we list our Common Shares, have experienced significant price and volume fluctuations. During the year ended December 31, 2025, the closing price for our Common Shares on the NYSE American ranged from a high of $1.33 to a low of $0.80. The market price of our Common Shares may be higher or lower than the limits reflected in the prior sentence depending on many factors, many of which are beyond our control and may not be directly related to our operating performance. These factors include, but are not limited to, the following:

• our actual or projected operating results, financial condition, cash flows and liquidity, or changes in business strategy or prospects;

• equity issuances by us, or share resales by our shareholders, or the perception that such issuances or resales may occur;

• publication of research reports about us or the real estate industry;

• changes in market valuations of similar companies;

• adverse market reaction to the level of leverage we employ;

• additions to or departures of our key personnel;

• accounting issues;

• speculation in the press or investment community;

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• our failure to meet, or the lowering of, our earnings’ estimates or those of any securities analysts;

• increases in market interest rates, which may lead investors to demand a higher distribution yield for our Common Shares and would result in increased interest expenses on our debt;

• failure to qualify or to remain qualified as a REIT;

• price and volume fluctuations in the stock market generally; and

• general market and economic conditions, including the current state of the credit and capital markets and current level of inflation.

We have not established a minimum dividend payment level for our Common Shares and there are no assurances of our ability to pay dividends to our common shareholders in the future.

We intend to pay quarterly dividends and to make distributions to our common shareholders in amounts such that all or substantially all our taxable income in each year, subject to certain adjustments, is distributed. This, along with other factors, should enable us to qualify for the tax benefits accorded to a REIT under the Code. We have not established a minimum dividend payment level for our common shareholders and our ability to pay dividends may be harmed by the risk factors described herein. All distributions to our common shareholders will be made at the discretion of the Board and will depend on our earnings, our financial condition, maintenance of our REIT status and such other factors as the Board may deem relevant from time to time. We cannot assure you of our ability to pay dividends to our common shareholders in the future at the current rate or at all. If our ability to pay dividends is compromised, whether as a result of the risks described in this Report or for any other reason, the market price of our Common Shares could decline.

Future offerings of preferred shares or debt securities would rank senior to our Common Shares upon liquidation and for dividend purposes, would dilute the interests of our common shareholders and may adversely affect the market price of our Common Shares.

In the future, we may seek to increase our capital resources by making offerings of debt, including short- and medium-term notes, senior or subordinated or convertible notes, or additional offerings of preferred shares. Issuance of debt securities or preferred equity would reduce the amount available for distribution to common shareholders on account of the interest payable to the holders of the debt securities and the dividends payable to the holders of the preferred equity. Similarly, upon liquidation, holders of our debt securities and lenders with respect to other borrowings as well as holders of preferred shares will receive a distribution of our available assets prior to the holders of our Common Shares. Finally, issuances of preferred shares or debt securities with equity features, such as convertible notes, may dilute the holdings of our existing shareholders or reduce the market price of our Common Shares or both. Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, holders of our Common Shares bear the risk of our future offerings reducing the market price of our Common Shares and diluting their interest in us.

An increase in interest rates may have an adverse effect on the market price of our Common Shares and our ability to make distributions to our shareholders.

One of the factors that investors may consider in deciding whether to buy or sell our Common Shares is our dividend rate (or expected future dividend rates) as a percentage of our share price, relative to market interest rates. If market interest rates increase, prospective investors may demand a higher dividend rate on our Common Shares or seek alternative investments paying higher dividends or interest. As a result, interest rate fluctuations and capital market conditions can affect the market price of our Common Shares independent of the effects such conditions may have on our loan portfolio.

Your investment in and resulting interest in us may be diluted or lose value if we issue additional shares.

Sales of substantial amounts of our Common Shares in the public market may have an adverse effect on the market price of our Common Shares. Sales of substantial amounts of our Common Shares, including by any selling shareholders, adoption and utilization of an at the market issuance program, or the availability of such Common Shares for sale, whether or not actually sold, could adversely affect the prevailing market prices for our Common Shares. If this occurs and continues, it could impair our ability to raise additional capital through the sale of securities.

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Our current shareholders do not have preemptive rights to any Common Shares issued by us in the future. Therefore, our current common shareholders may experience dilution of their equity investment if we sell additional Common Shares in the future, sell securities that are convertible into Common Shares or issue Common Shares or options exercisable for Common Shares. In addition, we could sell securities at a price less than our then-current book value per share.

If we fail to comply with the continued listing standards of the NYSE American, all or some of our securities that currently are listed on the NYSE American could be delisted. This would have a material adverse impact on the holders of that security and us.

The continued listing of our Common Shares on the NYSE American is contingent on our continued compliance with the listing standards of the exchange. The NYSE American retains substantial discretion to, at any time and without notice, suspend dealings in or remove from any security from listing. To maintain this listing, we must maintain certain share prices, financial and share distribution targets, including maintaining a minimum amount of shareholders’ equity and a minimum number of public shareholders. In addition to these objective standards, the NYSE American may delist the securities of any issuer: (i) if, in its opinion, the issuer’s financial condition and/or operating results appear unsatisfactory; (ii) if it appears that the extent of public distribution or the aggregate market value of the security has become so reduced as to make continued listing on the NYSE American inadvisable; (iii) if the issuer sells or disposes of principal operating assets or ceases to be an operating company; (iv) if an issuer fails to comply with the NYSE American’s listing requirements; (v) if the trading price of a listed security falls below what the NYSE American considers a “low selling price” and the issuer fails to correct this situation within a reasonable period following receipt of notification from the NYSE American; or (vi) if any other event occurs or any condition exists which makes continued listing on the NYSE American, in its opinion, inadvisable. There is no assurance that we will remain in compliance with these standards.

Delisting from the NYSE American would adversely affect our ability to raise additional financing through the public or private sale of equity securities, significantly affect the ability of investors to trade our securities and negatively affect the value and liquidity of our Common Shares. Delisting also could limit our strategic alternatives and attractiveness to potential counterparties and have other negative results, including the potential loss of employee confidence, decreased analyst coverage of our securities, the loss of institutional investors or interest in business development opportunities. Moreover, we committed in connection with the sale of securities to use commercially reasonable efforts to maintain the listing of our Common Shares during such time that certain warrants are outstanding.

Risks Related to Regulatory Matters

Maintenance of our Investment Company Act exemption imposes limits on our operations.

We have conducted and intend to continue to conduct our operations so as not to become regulated as an investment company under the Investment Company Act. We believe that there are several exclusions under the Investment Company Act that are applicable to us. To maintain the exclusion, the assets that we acquire are limited by the provisions of the Investment Company Act and the rules and regulations promulgated under the Investment Company Act. If we fail to qualify for, our exclusion, we could, among other things, be required either (a) to change the manner in which we conduct our operations to avoid being required to register as an investment company or (b) to register as an investment company, either of which could have a material adverse effect on our operations and the market price of our Common Shares.

Tax Risks Related to Our Structure

Failure to qualify as a REIT would adversely affect our operations and ability to make distributions.

We believe that we were organized and, since the IPO, have operated and we plan to continue to operate in conformity with the requirements for qualification and taxation as a REIT. We elected to be taxed as a REIT, commencing with our taxable year ended December 31, 2017. Our continued qualification as a REIT will depend on our ability to meet, on an ongoing basis, various complex requirements concerning, among other things, the ownership of our outstanding stock, the nature of our assets, the sources of our income, and the amount of our distributions to our shareholders. To satisfy these requirements, we might have to forego investments we might otherwise make. Thus, compliance with the REIT requirements may hinder our operational performance. Moreover, while we intend to continue to operate so to qualify as a REIT for U.S. federal income tax purposes, given the highly complex nature of the rules governing REITs, there can be no assurance that we will so qualify in any taxable year.

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We have not requested and do not plan to request a ruling from the IRS that we qualify as a REIT and the statements in this Report are not binding on the IRS, or any court. If we fail to qualify as a REIT in any taxable year and we do not qualify for certain statutory relief provisions, all our taxable income would be subject to U.S. federal and state income taxes at the prevailing corporate income tax rates, we would no longer be allowed to deduct the distributions to our shareholders and we generally would be disqualified from treatment as a REIT for the four taxable years following the year in which we lost our REIT status.

Qualifying as a REIT involves highly technical and complex provisions of the Code and therefore, in certain circumstances, may be subject to uncertainty.

To qualify as a REIT, we must satisfy several requirements, including requirements regarding the composition of our assets, the sources of our income and the diversity of our share ownership. Also, we must make distributions to stockholders aggregating annually at least 90% of our “REIT taxable income” (determined without regard to the dividends paid deduction and excluding net capital gain). Compliance with these requirements and all other requirements for qualification as a REIT involves the application of highly technical and complex Code provisions for which there are only limited judicial and administrative interpretations. Even a technical or inadvertent mistake could jeopardize our REIT status. In addition, the determination of various factual matters and circumstances relevant to REIT qualification is not entirely within our control and may affect our ability to qualify as a REIT. Accordingly, we cannot be certain that our organization and operation will enable us to qualify as a REIT for federal income tax purposes.

Even if we qualify as a REIT, we will be subject to some taxes that will reduce our cash flow.

Even if we qualify for taxation as a REIT, we may be subject to certain federal, state and local taxes on our income and assets, including taxes on any undistributed income, tax on income from some activities conducted as a result of a foreclosure, and state or local income, property and transfer taxes. Moreover, if we have net income from “prohibited transactions,” that income will be subject to a 100% tax. In general, prohibited transactions are sales or other dispositions of property held primarily for sale to customers in the ordinary course of business. The determination as to whether a sale is a prohibited transaction depends on the facts and circumstances related to that sale. The need to avoid prohibited transactions could cause us to forgo or defer sales of assets that we otherwise would have sold or that might otherwise be in our best interest to sell. In addition, we could, in certain circumstances, be required to pay an excise or penalty tax (which could be significant in amount) to utilize one or more relief provisions under the Code to maintain our qualification as a REIT. Any of these taxes would reduce our cash flow and could decrease cash available for distribution to shareholders and decrease cash available to service our indebtedness.

The REIT distribution requirements could adversely affect our ability to grow our business and may force us to seek third-party capital during unfavorable market conditions.

To qualify as a REIT, we generally must distribute to our shareholders at least 90% of our “REIT taxable income” (determined without regard to the dividends paid deduction and excluding net capital gain) each year, and we will be subject to regular corporate income taxes to the extent that we distribute less than 100% of our “REIT taxable income” each year. We are also subject to a 4% non-deductible excise tax on the amount, if any, by which distributions paid by us in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years. To maintain our REIT status and avoid the payment of income and excise taxes, we may be forced to seek third-party capital to meet the distribution requirements even if the then- prevailing market conditions are not favorable. These capital needs could result from differences in timing between the recognition of taxable income and the actual receipt of cash or the effect of non-deductible capital expenditures, the creation of reserves or required debt or amortization payments. If we do not have other funds available in these situations, we may have to borrow funds on unfavorable terms or sell assets at disadvantageous prices. In addition, we may be forced to distribute amounts that would otherwise have been invested in future acquisitions to make distributions sufficient to enable us to pay out enough of our taxable income to satisfy the REIT distribution requirement and to avoid corporate income tax and the excise tax in a particular year.

Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends, which could depress the market price of our Common Shares if it is perceived as a less attractive investment.

Under current tax law, "qualified dividends" are taxed at a 20% rate (excluding the 3.8% net investment income tax) to individuals, trusts and estates. Distributions from REITs, are not deemed "qualified dividends", except to the extent that certain holding requirements have been met and the dividends are attributable to dividends received by a REIT from taxable corporations (such as a “taxable REIT subsidiary”), or to income that was subject to tax at the REIT/corporate

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level, or to dividends properly designated by the REIT as “capital gains dividends.” However, pursuant to the One Big Beautiful Bill Act of 2025 (the "OBBBA"), the deduction previously established under Section 199A of the Code, which allows U.S. stockholders (other than corporations) to deduct 20% of distributions received from REITs (to the extent such distributions are not "qualified dividends"), has been made permanent. Thus, despite the permanence of this deduction under the OBBBA, those U.S. stockholders in the top marginal tax bracket of 37%, the deduction for REIT dividends yields an effective income tax rate of 29.6% on REIT dividends, which is still higher than the 20% tax rate on "qualified dividends". Thus, investors who are non-corporate taxpayers may perceive investments in REITs as less attractive than investments in the stock of non-REIT “C” corporations that pay dividends, which could depress the market price of the stock of REITs, including our Common Shares.

We may in the future choose to pay dividends in the form of Common Shares, in which case shareholders may be required to pay income taxes in the absence of cash dividends.

We may seek in the future to distribute taxable dividends that are payable in cash and Common Shares. Taxable shareholders receiving such dividends will be required to include the full amount of the dividend as ordinary income to the extent of our current and accumulated earnings and profits for federal income tax purposes. As a result, shareholders may be required to pay income taxes with respect to such dividends in excess of the cash dividends received. If a U.S. shareholder sells Common Shares that it receives as a dividend to pay this tax, the sales proceeds may be less than the amount included in income with respect to the dividend, depending on the market price of Common Shares at the time of the sale. In addition, in such case, a U.S. shareholder could have a capital loss with respect to Common Shares sold that could not be used to offset such dividend income. Furthermore, with respect to certain non-U.S. shareholders, we may be required to withhold federal income tax with respect to such dividends, including in respect of all or a portion of such dividend that is payable in Common Shares. In addition, such a taxable share dividend could be viewed as equivalent to a reduction in our cash distributions, and that factor, as well as the possibility that a significant number of our shareholders could determine to sell Common Shares to pay taxes owed on dividends, may put downward pressure on the market price of Common Shares.

Complying with REIT requirements may cause us to liquidate or forgo otherwise attractive investment opportunities.

To qualify as a REIT, we must ensure that, at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and “real estate assets” (as defined in the Code), including certain mortgage loans and securities (the “75% asset test”). The remainder of our investments (other than securities includable in the 75% asset test) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our total assets (other than securities includable in the 75% asset test) can consist of the securities of any one issuer, no more than 20% of the value of our total assets can be represented by securities of one or more “taxable REIT subsidiaries” (of which we have none), and debt instruments issued by publicly offered REITs, to the extent not secured by real property or interests in real property, cannot exceed 25% of the value of our total assets. If we fail to comply with these requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences. As a result, we may be required to liquidate or forgo otherwise attractive investment opportunities. These actions could have the effect of reducing our income and amounts available for distribution to our shareholders and our income and amounts available to service our indebtedness.

In addition to the asset tests set forth above, to qualify as a REIT, we must continually satisfy tests concerning, among other things, the sources of our income, the amounts we distribute to our stockholders and the ownership of our stock. We may be unable to pursue investment opportunities that would be otherwise advantageous to us in order to satisfy the source-of-income or asset-diversification requirements for us to qualify as a REIT. Thus, compliance with the REIT requirements may hinder our ability to make certain attractive investments and, thus, reduce our income and amounts available to service our indebtedness.

We may be subject to adverse legislative or regulatory tax changes that could reduce the market price of our Common Shares.

Effective July 4, 2025, the OBBBA was signed into law. Certain provisions of OBBBA impact us and our shareholders. Among other changes, this legislation (i) permanently extended the 20% deduction for “qualified REIT dividends” for individuals and other non-corporate taxpayers under Section 199A of the Code, (ii) permanently reinstates 100% bonus depreciation for certain property acquired after January 19, 2025, (iii) increased the percentage limit under the REIT asset test applicable to taxable REIT subsidiaries from 20% to 25% for taxable years beginning after December 31,

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2025, and (iv) increases the base on which the 30% interest deduction limit under Section 163(j) of the Code applies by excluding depreciation, amortization and depletion from the definition of “adjusted taxable income” (i.e. based on EBITDA rather than EBIT) for taxable years beginning after December 31, 2024.

The IRS, the U.S. Treasury Department and Congress frequently review U.S. federal income tax legislation, regulations and other guidance. At any time, the U.S. federal income tax laws governing REITs or the administrative interpretations of those laws may be amended or modified. We cannot predict whether, when or to what extent new U.S. federal tax laws, regulations, interpretations or rulings will be adopted or modified. Changes to the tax laws, including the possibility of major tax legislation, possibly with retroactive application, may adversely affect how we or our shareholders are taxed. We urge our shareholders and prospective shareholders to consult with their tax advisors with respect to the status of legislative, regulatory or administrative developments and proposals and their potential effect on an investment in our Common Shares.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and the notes to those statements included elsewhere in this annual report. Certain statements in this discussion and elsewhere in this Report constitute forward-looking statements, within the meaning of section 21E of the Exchange Act, that involve risks and uncertainties. Actual results may differ materially from those anticipated in these forward-looking statements.

Company Overview

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. 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.

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Items Affecting Comparability of Results

Due to a number of factors, our historical financial results may not be comparable from period to period or to future periods. Key factors that may affect comparability include:

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

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

• Changes in our funding mix, leverage levels, and cost of funds, including repayments, refinancings, and the issuance of new indebtedness (including senior secured notes, revolving credit facilities, and "baby bond" obligations), which may alter average borrowings outstanding and result in material period-to-period changes in interest expense. In certain periods, indebtedness has been replaced at interest rates materially higher than retired obligations, including increases of approximately 200 to 300 basis points, which may negatively impact net interest margin.

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

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

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

2025 Year in Review

During 2025, the Company focused on stabilizing its credit profile and strengthening its capital structure following the portfolio repositioning actions taken in 2024 and 2025. While average earning assets declined year over year and net interest margin compressed, management prioritized liquidity preservation, resolution of nonperforming assets, and extension of debt maturities over portfolio expansion.

Key developments during 2025 included:

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

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

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

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

• Successfully completed the sale of its office property located in Westport, Connecticut generating net cash proceeds of approximately $19.9 million and realized a book gain of approximately $4.0 million. The Westport asset was sourced, managed, and executed through Urbane Capital, the Company’s in-house development and asset management platform.

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

Although nonaccrual balances remain elevated relative to historical norms, migration trends moderated during the year and reserve coverage reflects updated collateral valuations and expected liquidation timelines. Management continues to evaluate asset resolution strategies with the objective of improving earning asset mix and reducing nonaccrual exposure over time.

While funding costs remain elevated relative to pre-2024 levels, the Company believes its current capital structure provides improved duration visibility and liquidity flexibility. Future earnings performance will depend on continued resolution of nonperforming assets, stabilization of net interest margin, disciplined capital allocation, and broader real estate market conditions.

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

Recent Developments

Update on Naples, Florida Assets

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

The acquired assets include:

• The condominium association,

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

• The southern parcel, which is entitled for the development of four additional condominium units. The Company intends to commence construction and marketing activities for these units, with anticipated sales occurring over the next 18 to 24 months, subject to market conditions.

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

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

In addition, the Company has retained and further enhanced its interest in the existing approximate $12.3 million first mortgage secured by a separate and unrelated waterfront development parcel in Naples. The Company does not control or manage development activities related to the waterfront parcel and is not assuming development responsibility for that asset. The Company will continue to monitor this loan held for investment with respect to this parcel in its capacity as a senior secured lender, consistent with its objective of protecting principal and maximizing value.

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

Needham Credit Facility Update

On January 21, 2026, the Company entered into Amendment No. 2 to its Credit, Security and Guaranty Agreement with Needham Bank, as administrative agent, and the lenders party thereto, with respect to the Company’s $50.0 million revolving credit facility. The amendment extends the stated maturity of the facility from March 2, 2026 to

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March 2, 2028, and provides the Company with the ability to request an additional one-year extension to March 2, 2029, subject to lender consent and customary conditions. All other material terms of the credit facility remain unchanged.

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

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Critical Accounting Policies and Use of Estimates

The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management will base the use of estimates on (a) various assumptions that consider prior reporting results, (b) projections regarding future operations and (c) general financial market and local and general economic conditions. 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 for further details.

Revenue Recognition

Interest income from commercial loans is recognized, as earned, over the loan period, whereas origination and modification fee revenue on commercial loans are amortized over the term of the respective notes.

CECL Allowance

We record an allowance for credit losses (“CECL”) in accordance with the CECL standard on our loan portfolio, including unfunded construction commitments, on a collective basis by assets with similar risk characteristics. This methodology replaces the probable incurred loss impairment methodology. In addition, interest and fees receivable and amounts included in due from borrowers, other than reimbursements, which include origination, modification and other fees receivable are also analyzed for credit losses in accordance with the CECL standard, as they represent a financial asset that is subject to credit risk. Further, CECL requires credit losses to be presented as an allowance rather than as a write-down on available-for-sale debt securities if management does not intend to sell and does not believe that it is more likely than not, they will be required to sell. As allowed under the CECL standard that we have adopted, as a practical expedient, the fair value of the collateral at the reporting date is compared to the net carrying amount of the loan when determining the allowance for credit losses for loans in pending/pre-foreclosure status, as defined. Fair value of collateral is reduced by estimated cost to sell if the collateral is expected to be sold. The CECL standard requires an entity to consider historical loss experience, current conditions, and a reasonable and supportable forecast of the economic environment. We utilize a loss-rate method for estimating current expected credit losses. The loss rate method involves applying a loss rate to a pool of loans with similar risk characteristics to estimate the expected credit losses on that pool of loans. In determining the CECL allowance, we consider various factors including (1) historical loss experience in its portfolio, (2) loan specific losses for loans deemed collateral dependent based on excess amortized cost over the fair value of the underlying collateral, and (3) its current and future view of the macroeconomic environment. 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. Loans, interest receivable, due from borrowers, unfunded commitments, and (available-for-sale debt) investment securities are all presented net on the Consolidated Balance Sheets with expanded disclosures in the notes to the consolidated financial statements. The change in the balances during the reporting period are recorded in the Consolidated Statements of Operations under the provision for credit losses.

Real Estate Owned (“REO”)

REO acquired through foreclosure is initially measured at fair value and is thereafter subject to an ongoing impairment analysis. After an REO acquisition, events or circumstances may occur that result in a material and sustained decrease in the cash flows generated from the property or other market indicators, including listing data, may signal a decline in the liquidation value. REO is evaluated for recoverability when impairment indicators are identified. Any impairment losses or recoveries are included in the Consolidated Statements of Operations.

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Results of Operations

Our results of operations depend primarily on net interest income, the credit performance of our loan portfolio, and the effectiveness of our operating platform. These results are affected by a variety of factors, including demand for commercial real estate loans, competitive conditions in loan origination, the cost, structure, and availability of financing, operating expense levels, and the performance of the collateral securing our loans.

Years ended December 31, 2025 and 2024

Year Ended December 31,

$ Change

% Change

Interest income from loans

Interest income from limited liability company investments

Interest expense and amortization of deferred financing costs

Net interest income

Net interest margin

Provision for credit losses related to loans held for investment

Gain (loss) on sale of loans

Change in valuation allowance related to loans held for sale

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

Other income

Fee income from loans

Income from limited liability company investments

Other investment income

Gain on investment securities

Other income

Total other income

Operating expenses

Compensation and employee benefits

General and administrative expenses

Impairment loss on real estate owned

Gain on sale of investments in developmental real estate, real estate owned, and property and equipment, net

Other expenses

Total operating expenses

Net income (loss)

Preferred stock dividends

Net income (loss) attributable to common shareholders

Basic and diluted earnings (losses) per Common Share

Basic and diluted weighted average Common Shares outstanding

Net income (loss) and Net income (loss) attributable to common shareholders are the primary metrics by which we assess our business performance. Accordingly, we closely monitor the primary drivers which consist of the following:

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Net interest income

Net interest income represents the largest component of our net income and is evaluated on both an absolute basis and relative to our provision for credit losses and operating expenses. Net interest income is generated when the yield earned on our loan portfolio exceeds the cost of financing those assets, which we primarily achieve through short- and long-term financing arrangements. Accordingly, we actively monitor financing market conditions and maintain ongoing dialogue with investors and financial institutions as we evaluate funding sources and cost of capital.

In evaluating net interest income, management monitors: (1) portfolio loan yields, (2) funding costs, (3) net interest spread, and (4) net interest margin. Net interest spread reflects the difference between the yield earned on our loans and the interest rates paid on our funding sources. Net interest margin represents net interest income, calculated as annualized interest income less annualized interest expense, expressed as a percentage of average loans outstanding for the applicable period.

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

Changes in net interest income are primarily driven by origination activity, changes in average outstanding loan balances (total, performing and nonperforming), and fluctuations in interest rates affecting asset yields and funding costs. Historically, portfolio growth driven by loan originations has been the primary contributor to increases in net interest income. Net interest income is evaluated both before and after interest expense associated with corporate debt and before and after provisions for credit losses.

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

• Average loans held for investment were $376.4 million and $468.8 million for the years ended December 31, 2025 and 2024, respectively. The effective yield on total loans held for investment was 8.6% and 9.2%. respectively.

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

• Average total performing loans held for investment were $269.3 million and $366.6 million for the years ended December 31, 2025 and 2024, respectively. The effective yield on performing loans was 12.0% and 11.8%, respectively.

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

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

Interest income from limited liability company investments - Interest income generated from the Company’s investments in the Shem Creek funds and direct loan co-investment vehicles decreased year over year. The decrease was primarily attributable to lower average capital deployed within certain direct loan co-investment vehicles during 2025. As underlying mortgage loans repaid, capital was returned to the Company and not redeployed at prior levels within those structures. In certain vehicles, the Company’s ownership percentage also declined during the period, further reducing its effective exposure.

The decrease in interest income was driven by lower average invested balances rather than changes in underlying loan yields or credit performance. The Shem Creek portfolios continue to consist primarily of short-duration, first mortgage loans, and there were no material changes in the contractual economics of those investments during the period.

The Company evaluates these minority investments as part of its broader capital allocation framework. Given the short-term nature of the underlying assets and the return of capital upon loan repayment, investment balances may fluctuate

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period to period depending on repayment activity and redeployment decisions. Capital returned from these vehicles may be redeployed into other investment opportunities or retained to support liquidity and balance sheet objectives.

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

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

During 2025, the Company, as a result of maturing unsecured notes payable, began repositioning its capital structure through the issuance of $100.0 million ($90.0 million drawn as of December 31, 2025) of Senior Secured Notes due 2030. The secured notes replaced a portion of lower rate unsecured notes and reduced reliance on repurchase agreements and lines of credit.

Management continues to evaluate refinancing strategies for upcoming maturities, with a focus on extending duration and optimizing cost of capital. Access to diversified funding sources remains a strategic priority as the Company balances liquidity, leverage, and shareholder returns.

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

Net Interest Margin

Net interest margin in 2025 was 3.1% compared to 4.4% in 2024. The 130 basis point decline in net interest margin reflects both structural and cyclical factors. Structurally, refinancing activity during the year increased the weighted average cost of capital. Cyclically, lower average earning assets and a higher concentration of nonaccrual loans reduced interest-earning balances.

While asset yields remained strong on performing loans, 12.0% in 2025 as compared to 11.8% in 2024, overall margin compression occurred due to balance sheet contraction and capital structure repositioning. Management expects margin stabilization to depend on continued resolution of nonperforming loans, normalization of earning asset levels, and disciplined origination activity at spreads consistent with current funding costs.

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

Credit risk management is central to our operating model. We seek to minimize credit losses through disciplined underwriting, active life-of-loan portfolio management, and targeted special servicing. We closely monitor portfolio credit performance, including delinquency trends and expected and realized credit losses, as a key indicator of overall operating results.

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

The Company continues to apply a conservative collateral-dependent methodology for loans in foreclosure and pending foreclosure status. Management evaluates the allowance quarterly based on updated appraisals, liquidation cost assumptions and macroeconomic forecasts under the CECL framework.

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

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

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

Change in valuation allowance related to loans held for sale - The valuation allowance adjustment reflects updated fair value estimates on loans classified as held for sale. The prior year included mark-to-market adjustments associated with loans moved to nonaccrual and pending foreclosure status.

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

Total other income

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

Fee income on loans - declined year over year primarily due to lower new loan origination volume. Origination and modification fees are recognized over the contractual life of the loan, and the decrease reflects the smaller average portfolio growth and reduced refinancing activity relative to the prior year.

Income from limited liability company investments - increased year over year due to reflecting a full year of earnings from the Shem Creek manager investment compared to a partial year in 2024. See Note 19 to the consolidated financial statements.

Other investment income - Other investment income varies based on the timing of realizations and performance of non-core investment holdings. The year-over-year change reflects reduced activity relative to the prior period.

Gain on equity securities - The current year includes both realized gains on disposition and net mark-to-market gains on equity securities held within the investment portfolio. These gains reflect changes in fair value and are inherently subject to market volatility. The prior year included smaller net gains due to less favorable equity market conditions during the period.

Other income - Other income consists primarily of ancillary revenue streams, including property-related income and miscellaneous recoveries. The increase year over year reflects rents recognized on certain investments in developmental real estate and real estate owned and certain non-recurring recoveries.

Total operating expenses

Our operating expenses primarily include compensation and benefits for our employees, general and administrative expense including occupancy costs, professional fees for legal, consulting, and advisory services, costs related to investments in developmental real estate, foreclosure pursuits and the resolution and disposition of real estate owned. Management monitors operating expenses in relation to profitability and the scale of our loan portfolio. Because origination volume and portfolio size influence the level and impact of operating expenses, we also closely monitor loan origination activity and key loan characteristics, including interest rates, loan-to-value ratios, estimated credit losses, and expected loan duration.

Management continues to align operating expense levels with portfolio scale while preserving asset management intensity. As origination activity and earning asset levels increase, the Company expects to benefit from operating leverage as fixed overhead costs are absorbed over a larger asset base.

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

Compensation and employee benefits - increased modestly year over year, reflecting strategic additions to personnel and performance-based compensation adjustments. Management continues to align staffing levels with portfolio scale and operational complexity.

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

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

Gain on sale of investments in developmental real estate, real estate owned and property and equipment, net - The current year reflects gains realized on the disposition of select real estate assets and developmental projects. These gains were driven by improved execution relative to carrying value and successful asset repositioning.The prior year included more limited disposition activity. See Note 5 to the consolidated financial statements.

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

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

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

• Lower credit provisioning

• Absence of large realized loan sale losses

• Stabilization of valuation allowances

• Improved capital structure positioning

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

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

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

Book value per common share

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

December 31,

Total shareholders’ equity

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

Total shareholders’ equity, net of preferred stock

Number of common shares outstanding at period end

Book value per common share

Book value per common share decreased $0.18 year over year. The decrease is primarily due to aggregate cash dividends declared and paid for the year ended December 31, 2025 on issued and outstanding common shares and shares of Series A Preferred Stock totaling $14.0 million, partially offset by net income for the year ended December 31, 2025 of $6.3 million. The calculation is also impacted by an increase in the liquidation preference for the Series A Preferred stock as we issued 6,010 shares during the year ended December 31, 2025 as well as an increase in common shares outstanding of approximately 720,000 shares.

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Liquidity and Capital Resources

Total assets at December 31, 2025 were $460.0 million compared to $492.0 million at December 31, 2024, a decrease of $(32.0) million, or (6.5)%. The decrease was due primarily to utilizing cash generated from investing activities to reduce long term debt by $23.4 million.

Total liabilities at December 31, 2025 were $285.1 million compared to $310.3 million at December 31, 2024, a decrease of $25.2 million, or 8.1%. This decrease was principally due to repaying in full our unsecured unsubordinated five-year notes that matured in September 2025 of $56.3 million, terminating the Churchill Credit Facility of $33.7 million, and reducing the balance on the Needham Credit Facility by $21.0 million. These decreases were partially offset by the five-year senior secured notes payable issued in June 2025 which totaled $86.6 million at year end.

As of December 31, 2025, the Company’s capital structure consisted of a mix of unsecured listed notes, senior secured notes, and revolving credit facilities. The increase in secured financing during 2025 reflects management’s strategy to diversify funding sources. While secured borrowings increased asset encumbrance, they also provide longer-term capital stability and improved liquidity flexibility. Management actively monitors asset coverage ratios, covenant compliance and refinancing risk associated with upcoming maturities.

Total shareholders’ equity at December 31, 2025 was $174.9 million compared to $181.7 million at December 31, 2024, a decrease of $6.8 million, or (3.7)%. This decrease was attributable to common stock dividends of $9.5 million and Series A Preferred stock dividends of $4.5 million partially offset by net income of $6.3 million and stock compensation expense of $0.8 million.

Historically, the Company has distributed a substantial portion of its earnings in order to maintain its REIT qualification. Dividend levels are determined by the Board of Directors based on taxable income, capital needs, liquidity, market conditions and regulatory requirements. Accordingly, dividend levels may fluctuate from period to period depending on operating performance, credit trends, asset repositioning activity and capital market access.

Sources and Uses of Funds

Our primary sources of cash include principal and interest payments on mortgage loans and various fees associated with such loans, proceeds from the sales of real property, net proceeds from offerings of equity securities and borrowings from our credit facilities. Our primary uses of cash include debt service payments (both principal and interest), new originations of loans held for investment, new investments in real estate, dividend distributions to our shareholders, and operating expenses.

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

Year Ended December 31,

One Year Change

Amount

Amount

Percentage

(in thousands)

Cash and cash equivalents, January 1

Net cash provided by operating activities

Net cash provided by investing activities

Net cash used in financing activities

Cash and cash equivalents, December 31

For a detailed breakdown of our cash flows during the years ended December 31, 2025 and 2024, see the statement of cash flows included in our audited financial statements.

We project anticipated cash requirements for our operating needs as well as cash flows generated from operating activities available to meet these needs. Our short-term cash requirements primarily include funding of loans, dividend payments, interest and principal payments on our indebtedness, including repayment/refinancing of the Notes maturing in December 2026, and payments for usual and customary operating and administrative expenses. Based on this analysis, we believe that our current cash balances, availability on our debt facilities, and our anticipated cash flows from operations will be sufficient to fund the operations for the next 12 months.

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Our long-term cash needs will include principal and interest payments on outstanding indebtedness including notes payable in the principal amount of $173.2 million maturing late in 2026 and in 2027, preferred stock dividends and funding of new mortgage loans. Specific to the maturing notes payable, management believes the Company will address these maturities through a combination of operating cash flow, credit facility capacity, secured financing alternatives and potential capital markets transactions, subject to market conditions. There can be no assurance that refinancing will occur on terms similar to existing obligations. The Company continues to proactively evaluate capital market access and balance sheet positioning in advance of these maturities. In general, funding for long-term cash needs will come from unused net proceeds from financing activities, operating cash flows, refinancing existing debt, and proceeds from sales of investment in developmental real estate and real estate owned.

Subsequent Events

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

Off-Balance Sheet Arrangements

We are not a party to any off-balance sheet transactions, arrangements or other relationships with unconsolidated entities or other persons that are likely to affect liquidity or the availability of our requirements for capital resources.

Contractual Obligations

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

(in thousands)

Total

Less than

1 year

years

years

More than

5 years

Unfunded portions of outstanding construction loans

Unfunded commitments - investments in limited liability companies

Total contractual obligations

Recent Accounting Pronouncements

See ‘‘Note 2 — Significant Accounting Policies’’ to the financial statements for explanation of recent accounting pronouncements impacting us.