Sachem Capital Corp.SACH
Sachem Capital Corp. Fair Value Disclosure
Fair Value Measurement
The Company uses estimated of fair value in applying various accounting standards for its consolidated financial statements on either a recurring or non-recurring basis. Fair value is defined as the price to sell an asset or transfer a liability in an orderly transaction between willing and able market participants. The Company groups its assets and liabilities measured at fair value in three hierarchy levels, based on the observability and transparency of the inputs.
A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.
The following table presents assets and liabilities measured at fair value on a recurring basis:
| Fair Value Measurement | ||||||||||||||
| (in thousands) | December 31, 2025 | December 31, 2024 | ||||||||||||
| Level 1 | ||||||||||||||
| Investment securities | $936 | $1,517 | ||||||||||||
Certain assets are measured at fair value on a nonrecurring basis; that is, not measured at fair value on an on going basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment.) The following table presents assets and liabilities measured at fair value on a nonrecurring basis:
| Fair Value Measurement | ||||||||||||||
| (in thousands) | December 31, 2025 | December 31, 2024 | ||||||||||||
| Level 3 | ||||||||||||||
| Individually evaluated loans, net of allowance for credit losses | $ | 114,028 | $ | 80,757 | ||||||||||
| Loans held for sale, net | — | 10,970 | ||||||||||||
| Real estate owned, net | 16,402 | 18,574 | ||||||||||||
Carrying amounts and fair values of financial instruments that are not carried at fair value at December 31, 2025 and December 31, 2024 in the Consolidated Balance Sheets are as follows:
| Carrying Amount | Fair Value Measurement | |||||||||||||||||||||||||
| (in thousands) | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||
| Level 1 | ||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 10,924 | $ | 18,066 | $ | 10,924 | $ | 18,066 | ||||||||||||||||||
| Notes payable | 171,349 | 231,241 | 163,854 | 194,810 | ||||||||||||||||||||||
| Level 2 | ||||||||||||||||||||||||||
| Repurchase agreements | — | 33,708 | — | 33,708 | ||||||||||||||||||||||
| Lines of credit | 19,000 | 40,000 | 19,000 | 40,000 | ||||||||||||||||||||||
| Level 3 | ||||||||||||||||||||||||||
| Loans held for investment, net | 363,678 | 356,571 | 363,678 | 356,571 | ||||||||||||||||||||||
| Loans held for sale, net | — | 10,970 | — | 10,970 | ||||||||||||||||||||||
| Interest and fees receivable and due from borrowers | 11,094 | 8,918 | 10,963 | 8,918 | ||||||||||||||||||||||
| Investments in limited liability companies | 39,132 | 53,942 | 39,132 | 53,942 | ||||||||||||||||||||||
| Advances from borrowers | 4,016 | 4,047 | 4,016 | 4,047 | ||||||||||||||||||||||
| Senior secured notes payable | 86,573 | — | 89,277 | — | ||||||||||||||||||||||
| Mortgage payable | 917 | 1,002 | 917 | 1,002 | ||||||||||||||||||||||
Following is a description of the methodologies used for assets and liabilities measured at fair value:
Stocks and ETFs (Level 1): Valued at the closing price reported in the active market in which the individual securities are traded.
Mutual funds (Level 1): Valued at the daily closing price reported by the fund. Mutual funds held by the Company are open-end mutual funds that are registered with the U.S. Securities and Exchange Commission. These funds are required to publish their daily net asset values and to transact at that price. The mutual funds held by the Company are deemed to be actively traded.
Debt securities: Valued at the closing price reported in the active market in which the individual securities are traded.
Preferred/Fixed rate cap securities: The company classifies preferred/fixed rate cap securities as Level 2 in the fair value hierarchy because their fair value is determined using observable inputs such as interest rates and credit spreads. These inputs are based on market data or pricing models rather than quoted prices for identical assets. Since the securities
are not actively traded, the company uses observable inputs to estimate their value, making Level 2 the appropriate classification.
Loans held for investment and related interest and fees receivables and due from/advances from borrowers: The fair value of mortgage loans held for investment and related receivable/liability balances is based on credit risk and discount rates that are not observable in the marketplace and therefore represents a Level 3 measurement.
Loans held for sale: The fair value of loans held for sale is determined by the lower of cost or market approach, where cost represents the carrying value of the loans, and market represents the fair value derived from a collateral analysis. Since this analysis involves significant judgment, including assumptions regarding the value of underlying collateral and potential recovery, it constitutes a Level 3 measurement. These assumptions are not readily observable in the market and require significant management estimation.
Individually evaluated loans, net of allowance for credit losses: This category consists of loans that were individually evaluated for credit losses, net of the related allowance for credit losses, and have been classified as Level 3 assets. All of the Company’s individually evaluated loans for 2025 and 2024, whether reporting a specific allowance allocation or not, are considered collateral-dependent. The Company utilized Level 3 inputs such as independent appraisals of the underlying collateral, which generally includes various Level 3 inputs which are not observable. Appraisals may be adjusted downward by management for qualitative factors such as economic conditions and estimated liquidation expenses. The Company estimates liquidation as a selling cost percentage in connection with the asset, which typically ranges from 1-8%. Please note this category is inclusive of foreclosed loans not held for sale, and is included in loans held for investment.
Real estate owned, net: Real estate owned, net, is classified as a Level 3 asset in the fair value hierarchy due to the significant use of unobservable inputs in determining its fair value. These unobservable inputs typically include estimates based on management’s judgment, such as the anticipated market value, property condition, location, and projected income potential. The Company may adjust such values downward for qualitative factors such as economic conditions and estimated liquidation expenses. The Company estimates liquidation as a selling cost percentage in connection with the asset, which typically ranges from 1%-8%. As no active markets or observable inputs exist for these assets, the valuation process involves a higher degree of subjectivity and relies on internal assumptions, appraisals, and models that are not directly observable.
Investments in Limited Liability Companies (LLCs): The Company holds noncontrolling interests in various LLCs accounted for using the measurement alternative under FASB ASC 321. These investments are carried at cost, less impairment, and adjusted for observable price changes.
Fixed rate debt: Publicly traded fixed rate debt is classified as Level 1 and its fair value is based on quoted prices for similar instruments or calculated utilizing model derived valuations in which significant inputs are observable in active markets. Private senior secured fixed rate debt is estimated using a discounted cash flow model based on the contractual coupon rate and a market yield assumption derived from observed yields on the Company’s publicly traded unsecured notes adjusted for secured credit spread.
Variable rate debt: Variable rate debt is classified as Level 2 and the fair values of our borrowings under our revolving credit facility and other variable rate debt are reasonably estimated at their notional amounts due to the predominance of floating interest rates, which generally reflect market conditions.
Mortgage payable: Mortgage payable is classified as Level 3 and the fair value of our borrowings are primarily based on unobservable inputs that effect the Company’s own assumptions about the factors that market participants would use in pricing the mortgage. The mortgage payable does not have a quoted market price in an active market, and significant inputs such as the interest rate, the probability of default, and the estimated repayment terms are not readily observable in the market.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 13, 2026 | Showing above |
| 2024 | Mar 31, 2025 | |
| 2023 | Apr 1, 2024 | |
| 2022 | Mar 31, 2023 | |
| 2021 | Mar 31, 2022 | |
| 2020 | Mar 31, 2021 | |
| 2019 | Mar 30, 2020 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.