Executive Summary

Q2 2025 returned to profitability: net income to common of $0.8M ($0.02 EPS) on revenue of $10.8M, driven by a sharp reduction in credit loss provisioning; revenue fell 28.9% YoY and 5.8% QoQ as lower net originations and elevated NPLs/REO weighed on interest income .
Mixed vs estimates: EPS beat ($0.02 vs $0.014 cons.) while revenue missed ($10.8M vs $11.30M cons.) as deployment stayed disciplined amid credit clean-up and capital preservation efforts. Consensus values are from S&P Global Market Intelligence*.
Balance sheet flexibility improved: closed a new $100M senior secured notes facility due 2030, drew $50M at close; management expects to repay ~$56.3M of notes maturing late September via this facility and loan cash flows, limiting portfolio compression .
Credit stabilization progressing but key single-name risk remains: Naples, FL loans ($50.4M net book, ~42% of NPLs) remain on nonaccrual with ~$450k/month earnings drag; a mediation milestone was scheduled the week of the call and is a near-term catalyst for resolution .

What Went Well and What Went Wrong

What Went Well

Provision normalization and cost control: Total operating costs fell to $9.7M from $18.3M YoY, primarily from an ~$7.6M (89.1%) drop in provision for credit losses; this swing was the main driver of a positive GAAP net income of $1.9M and $0.02 EPS to common .
Liquidity and capital access: Closed a $100M senior secured notes private placement (due 2030); drew $50M, with remaining $50M drawable through May 15, 2026, providing capacity for both refinancing and selective growth .
Diversified income contributions: LLC income of ~$1.0M in Q2 (part of ~$3.0M YTD) from Shem Creek funds; management reiterated a low double-digit yield (10–12%) on ~$41.2M invested, adding resilient cash flow amid slower originations .

“Building on the momentum from the first quarter, we… closed our new $100 million senior secured notes due June 2030. This… allows us to repay existing obligations and accelerate the origination of new accretive loans” .

What Went Wrong

Top-line pressure: Total revenue fell to $10.8M from $15.1M YoY, reflecting materially lower net new origination over the last 12 months, reduced UPB, and elevated nonperforming loans and REO .
Concentration and earnings drag: Naples exposure ($50.4M net book) accounts for ~42% of NPLs and remains nonaccrual, costing ~$450k per month in forgone income; resolution timing depends on legal processes .
Fee/interest income down: Interest income from loans declined to $7.5M (from $11.8M YoY) amid portfolio compression and NPL levels; fee income was $1.8M vs $2.1M YoY .

Financial Results

Headline results and estimates

Metric	Q2 2024 Actual	Q1 2025 Actual	Q2 2025 Consensus*	Q2 2025 Actual	vs Consensus
Revenue ($M)	15.15	11.44	11.30*	10.78	(0.52)
EPS (GAAP) ($)	(0.09)	(0.00)	0.014*	0.02	+0.006

Consensus values marked with * are from S&P Global Market Intelligence (GetEstimates). Values retrieved from S&P Global.

Revenue composition

Revenue Component ($M)	Q2 2024	Q2 2025
Interest income from loans	11.75	7.48
Fee income from loans	2.08	1.77
LLC income	1.22	0.98
Other income (incl. rental)	0.02	0.53
Total revenues	15.15	10.78

Profitability and operating drivers

($M except per-share)	Q2 2024	Q1 2025	Q2 2025
Operating income (loss)	(3.12)	1.03	1.07
Net income (GAAP)	(3.06)	0.90	1.89
Net income to common	(4.12)	(0.21)	0.77
EPS to common ($)	(0.09)	(0.00)	0.02
Total operating costs	18.26	10.41	9.71
Provision for credit losses (HFI)	8.50	1.05	0.93

Selected balance sheet and portfolio KPIs

KPI	Q4 2024	Q1 2025	Q2 2025
Total assets ($M)	492.0	491.4	501.8
Total liabilities ($M)	310.3	312.1	323.9
Shareholders’ equity ($M)	181.7	179.3	177.9
Cash & equivalents ($M)	18.07	24.41	22.47
Net loans HFI ($M)	356.6	347.5	364.5
Loans HFS (net) ($M)	10.97	10.97	8.83
REO (net) ($M)	18.57	18.87	18.63
Book value / share ($)	2.64	2.57	2.54
Debt outstanding ($M)	301.2	305.6	315.5
Debt-to-equity (approx.)	62%/38%	62%/38%	64.6%/35.4%
NPL UPB ($M, gross/net)	—	107.6/94.3 (as of 3/31)	119.6/107.0 (as of 6/30)
Naples exposure (net, $M)	—	—	50.4; ~42% of NPLs

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Liquidity/notes repayment	Sep 2025 maturity	N/A	Expect to repay ~$56.3M notes due end-September via senior secured facility drawdowns and cash flows	New specificity
Capital facility	Through May 15, 2026	N/A	$100M senior secured notes due 2030; $50M initial draw; remaining $50M available	New facility
Dividend cadence	Ongoing	N/A	Align common and preferred declarations/payments in Mar/Jun/Sep/Dec	Policy update reaffirmed
Common dividend	Q2 2025 (paid Jun 30)	N/A	$0.05 per share paid	Actual disclosed
Preferred dividend	Q2 2025 (paid Jun 30)	N/A	$0.484375 per share paid	Actual disclosed
Origination pricing	Ongoing	12% + 2% target	Maintaining 12% & 2% on most loans; occasional 11%; not below 10%	Maintained

Note: Company does not provide formal revenue/EPS guidance; disclosures focus on capital/liquidity, dividend cadence, and underwriting parameters.

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4’24, Q1’25)	Current Period (Q2’25)	Trend
NPL resolution	Q4: NPL net ~$102.9M; portfolio “stabilized,” shift to one-off resolutions . Q1: NPL net rose to ~$124M incl. Naples moving to NPL .	NPL UPB gross/net ~~$119.6M/~~$107.0M; REO flat; ~$5M resolutions post-6/30 and ~+$12.5M expected in Q3; Naples mediation imminent .	Improving resolution velocity; concentrated risk remains
Capital access	Q4: New Needham Bank $50M facility; retiring/unwinding baby bonds without equity . Q1: Two new facilities in negotiation (one term w/delayed draw) .	Closed $100M secured notes due 2030; drew $50M; plan to repay Sep notes from facilities/cash .	Strengthened
Origination pipeline & yields	Q4/Q1: Pipeline robust but constrained by capital; target 12% & 2% .	Pipeline exceeds capacity; maintaining 12% & 2% (occasionally 11%; not <10%) .	Stable pricing; selective growth
Urbane development	Q4: 4 projects; Westport 50% leased; resi planning; Coconut Grove homes under construction .	Westport remains 50% leased (~$1.3M GAAP rent); Coconut Grove homes targeting late-2025/1H-2026 sales .	Advancing
Shem Creek partnership	Q4: ~$48.9M invested; $5.1M 2024 revenue; 20% manager stake .	~$41.2M invested; ~$1.0M Q2 income ( ~$3.0M 1H ); 10–12% yield reiterated .	Continuing contributor
Macro/rates	Q4/Q1: Elevated rates, tight bank lending; focus on multifamily & single-family .	Elevated rates persist; bank constraints create selective opportunities; focus on experienced sponsors .	Unchanged backdrop

Management Commentary

“We are pleased with the closing of our new $100 million senior secured notes due June 2030… allowing us to repay existing obligations and accelerate the origination of new accretive loans” .
“While we still have approximately $119.6 million [gross]… of nonperforming loans… we continue to make meaningful progress… critical to unlocking value and supporting future dividend growth” .
“Book value per common share at June 30, 2025, was $2.54… the year-to-date decrease of $0.10 is solely driven by… dividends paid in excess of booked net earnings” .
“We’re doing our best to stay with 12% and 2%… on a rare occasion, we’ll go down to 11%. We’re not getting into below 10% in any case” .

Q&A Highlights

LLC/Urbane/Shem Creek: Q/Q variability in LLC income was timing-driven; Shem Creek continues to earn low double-digit yields on ~$41.2M; Urbane pipeline being rebuilt with intent to have projects “rolling off” quarterly .
REO/NPL activity: While REO headline balance looked flat, churn occurred; management sees accelerating resolutions post quarter-end and into Q3 (~$5M completed, another ~$12.5M expected) .
Naples exposure: Two cross-collateralized Naples loans (~$50.4M net) comprise ~42% of NPLs; mediation scheduled during the week of the call; earnings drag ~ $450k/month while on nonaccrual .
Leverage and loan sales: Debt/Equity ~1.8x; no plan for large bulk loan sales like Q4 2024; loans held for sale to be worked individually .
Originations & repayments: Q2 disbursements ~$39.7M; repayments ~$23.7M; second $50M tranche draw will depend on origination opportunities and quarter progression .

Estimates Context

S&P Global consensus for Q2 2025 EPS was $0.014* vs actual $0.02 (beat); revenue consensus was $11.30M* vs actual $10.78M (miss). Number of estimates: EPS (5), Revenue (4)*. Values retrieved from S&P Global.
Implications: EPS beat primarily reflects sharply lower provisioning and operating expense, while revenue miss stems from reduced earning asset base and elevated NPLs/REO suppressing interest income, as disclosed by management .

Key Takeaways for Investors

Earnings inflected positive as provisioning normalized; sustaining profitability hinges on accelerating NPL/REO resolutions and redeploying capital into high-yielding loans .
Capital overhang addressed: new $100M secured notes due 2030 and expected repayment of Sep-2025 notes reduce refinancing risk and enable selective growth .
Watch the Naples resolution: it’s the largest driver of earnings drag and capital unlock; legal milestones are near-term stock catalysts .
Deployment pacing: pipeline exceeds capacity; maintaining 12% & 2% pricing supports future NIM once UPB rebuilds; occasional dips to 11% acceptable; no sub-10% lending .
Book value stable (-$0.10 YTD) despite dividends; unlocking NPL capital is key to dividend sustainability and potential growth .
Expect continued conservative underwriting, focus on single- and multifamily, and use of partners (Urbane, Shem Creek) to diversify and stabilize cash flows .
Near-term trade setup: monitor Q3 resolution cadence, any additional draw on the secured facility, and Naples developments; revenue may lag until asset base rebuilds, but EPS can benefit from lower provisioning and fee/rental contributions .

Footnotes:

- Consensus estimates are from S&P Global Market Intelligence (GetEstimates). Values retrieved from S&P Global.
“vs Consensus” is calculated from cited actuals and S&P Global consensus values.

Sachem Capital Corp. (SACH)·Q2 2025 Earnings Summary