Sachem Capital Reports Revenue Increase of 41% and Net Income Increase of 98% for Q2 2020

Conference Call and Webcast to be held at 8:00 AM EDT on Tuesday, August 11, 2020

BRANFORD, Conn.--()--Sachem Capital Corp. (NYSE American: SACH) announces its financial results for the second quarter ended June 30, 2020. The company will host a conference call on Tuesday, August 11th, 2020 at 8:00 a.m. Eastern Daylight Saving Time to discuss in greater detail its financial condition and operating results for the second quarter of 2020.

Results of operations – three months ended June 30, 2020

Total revenue for the three months ended June 30, 2020, was approximately $4.3 million compared to approximately $3.1 million for the three months ended June 30, 2019, an increase of approximately 41%. For the second quarter of 2020, interest income and net origination fees were approximately $3.3 million and $647,000, respectively. In comparison, for the three months ended June 30, 2019, interest income and net origination fees were approximately $2.3 million and $341,000, respectively.

Total operating costs and expenses for the three months ended June 30, 2020, were approximately $2.0 million compared to $1.9 million for the three months ended June 30, 2019, an increase of approximately 6%. Compared to the 2019 period, in the 2020 period interest expense and amortization of deferred financing costs increased approximately $700,000 due to the increase in the company’s overall indebtedness, which was $59.0 million at June 30, 2020, compared to $23.8 million at June 30, 2019.

In light of the COVID-19 pandemic, in the second quarter of 2020 the company made a strategic and purposeful decision to restrict lending and conserve cash. These prudent actions temporarily slowed the growth of our loan portfolio and associated revenue growth. This also accounted for the increase in investment income of approximately $33,000.

Net income for the three months ended June 30, 2020 was approximately $2.3 million, or $0.10 per share, compared to $1.1 million, or $0.06 per share per share for the three months ended June 30, 2019.

Results of operations – six months ended June 30, 2020

Total revenue for the six months ended June 30, 2020 was approximately $8.6 million compared to approximately $6.4 million for the six months ended June 30, 2019, an increase of approximately 34%. Revenue growth for the six months ended June 30, 2020, is directly related to the increase in loans funded during the first quarter of 2020. For the six months ended June 30, 2020, interest income was approximately $6.2 million and net origination fees were approximately $1.2 million, respectively.

Total operating costs and expenses for the six months ended June 30, 2020, were approximately $4.1 million compared to $3.2 million for the six months ended June 30, 2019, an increase of approximately 28%. The increase in operating costs and expenses is primarily attributable to the increase in the company’s lending operations.

Net income for the six months ended June 30, 2020, was approximately $4.5 million, or $0.20 per share, compared to $3.2 million, or $0.19 per share for the six months ended June 30, 2019.

Financial Condition

Overall, total assets increased by approximately $2.2 million as of June 30, 2020, compared to December 31, 2019, and total liabilities increased approximately $350,000 during the same period.

On July 21, 2020, the Company authorized and declared a quarterly dividend of $0.12 per share to be paid to shareholders of record as of the close of trading on the NYSE American on July 31, 2020. The dividend was paid on August 7, 2020.

John Villano, CPA, the company’s Chief Executive and Chief Financial Officer stated: “We continue to generate strong financial performance despite the COVID-19 pandemic, as evidenced by a 41% increase in revenue and 98% increase in net income. In response to COVID-19 and the potential impact on the overall business environment, in early March we took immediate action- by temporarily putting our growth strategy on hold and focusing on preservation of capital and careful maintenance of our existing portfolio. Since that time, it is important to note that forbearance requests dropped from 42 at the end of the first quarter 2020 to just 23 at the end of the second quarter, which we believe illustrates an overall improvement in the market and validation of our strategy. Looking ahead, we will continue to prudently deploy capital and we are pursuing opportunistic expansion and diversification of our loan portfolio. Our loan pipeline is robust and we are cautiously optimistic heading into the second half of the year.”

Investor Conference Call

The company will host a conference call on Tuesday, August 11th, 2020 at 8:00 a.m., Eastern Daylight Saving Time, to discuss in greater detail its financial results for the second quarter ending June 30, 2020, as well as its outlook for the balance of 2020 and strategy for dealing with the impact of the COVID-19 pandemic. Interested parties can access the conference call by calling 844-407-9500 for U.S. callers, or 862-298-0850 for international callers. The call will be available on the company’s website via webcast at https://www.sachemcapitalcorp.com. John Villano, the company’s Chief Executive and Chief Financial Officer will lead the conference call.

The webcast will also be archived on the company’s website and a telephone replay of the call will be available approximately one hour following the call, through August 25, 2020, and can be accessed by calling: 877-481-4010 for U.S. callers or 919-882-2331 for international callers and entering conference ID: 36572.

About Sachem Capital Corp.

Sachem Capital Corp. specializes in originating, underwriting, funding, servicing, and managing a portfolio of first mortgage loans. It offers short term (i.e., three years or less) secured, non­banking loans (sometimes referred to as “hard money” loans) to real estate investors to fund their acquisition, renovation, development, rehabilitation or improvement of properties located primarily in Connecticut. The company does not lend to owner occupants. The company’s primary underwriting criteria is a conservative loan to value ratio. 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 secured by a first mortgage lien on real estate. Each loan is also personally guaranteed by the principal(s) of the borrower, which guaranty may be collaterally secured by a pledge of the guarantor’s interest in the borrower. The company also makes opportunistic real estate purchases apart from its lending activities. The company believes that it qualifies as a real estate investment trust (REIT) for federal income tax purposes and has elected to be taxed as a REIT beginning with its 2017 tax year.

Forward Looking Statements

This press release may contain forward-looking statements. All statements other than statements of historical facts contained in this press release, including statements regarding our future results of operations and financial position, strategy and plans, and our expectations for future operations, are forward-looking statements. The words “anticipate,” “estimate,” “expect,” “project,” “plan,” “seek,” “intend,” “believe,” “may,” “might,” “will,” “should,” “could,” “likely,” “continue,” “design,” and the negative of such terms and other words and terms of similar expressions are intended to identify forward- looking statements.

We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, strategy, short-term and long-term business operations and objectives and financial needs. These forward-looking statements are subject to several risks, uncertainties and assumptions as described in our Annual Report on Form 10-K for 2019 filed with the U.S. Securities and Exchange Commission on March 30, 2020. Because of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this press release may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. In addition, neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. We disclaim any duty to update any of these forward-looking statements.

All forward-looking statements attributable to us are expressly qualified in their entirety by these cautionary statements as well as others made in this press release. You should evaluate all forward-looking statements made by us in the context of these risks and uncertainties.

SACHEM CAPITAL CORP.
BALANCE SHEETS

 

 

 

 

 

 

 

 

 

June 30, 2020

 

December 31, 2019

 

 

(Unaudited)

 

(Audited)

Assets

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

4,647,973

 

$

18,841,937

Investments

 

 

15,961,433

 

 

15,949,802

Mortgages receivable

 

 

111,430,500

 

 

94,348,689

Interest and fees receivable

 

 

1,557,092

 

 

1,370,998

Other receivables

 

 

116,397

 

 

141,397

Due from borrowers

 

 

1,243,580

 

 

840,930

Prepaid expenses

 

 

73,175

 

 

24,734

Property and equipment, net

 

 

1,377,992

 

 

1,346,396

Deposits on property and equipment

 

 

 

 

71,680

Real estate owned

 

 

7,023,382

 

 

8,258,082

Deferred financing costs

 

 

16,258

 

 

16,600

 

 

 

 

 

 

 

Total assets

 

$

143,447,782

 

$

141,211,245

 

 

 

 

 

 

 

Liabilities and Shareholders' Equity

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

Notes payable (net of deferred financing costs of $2,451,618 and $2,687,190)

 

$

55,711,382

 

$

55,475,810

Mortgage payable

 

 

775,901

 

 

784,081

Accounts payable and accrued expenses

 

 

301,715

 

 

249,879

Other loans

 

 

257,845

 

 

Security deposits held

 

 

13,416

 

 

7,800

Advances from borrowers

 

 

1,012,201

 

 

848,268

Deferred revenue

 

 

858,885

 

 

1,205,740

Notes payable

 

 

65,402

 

 

75,433

Accrued interest

 

 

3,272

 

 

3,416

Total liabilities

 

 

59,000,019

 

 

58,650,427

Commitments and Contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders' equity:

 

 

 

 

 

 

Preferred shares - $.001 par value; 5,000,000 shares authorized; no shares issued

 

 

 

 

Common stock - $.001 par value;100,000,000 shares authorized; 22,117,301 issued
and outstanding

 

 

22,117

 

 

22,117

Paid-in capital

 

 

83,806,169

 

 

83,856,308

Accumulated other comprehensive income (loss)

 

 

35,189

 

 

(50,878)

Retained earnings (accumulated deficit)

 

 

584,288

 

 

(1,266,729)

Total shareholders' equity

 

 

84,447,763

 

 

82,560,818

Total liabilities and shareholders' equity

 

$

143,447,782

 

$

141,211,245

SACHEM CAPITAL CORP.
STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months

 

 

June 30,

 

Ended June 30,

 

 

2020

 

2019

 

2020

 

2019

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Interest income from loans

 

$

3,265,677

 

$

2,315,325

 

$

6,167,083

 

$

5,066,405

Interest income on investments

 

 

33,162

 

 

 

 

130,678

 

 

Loss (gain) on sale of investment securities

 

 

(8,925)

 

 

 

 

437,159

 

 

Origination fees, net

 

 

647,499

 

 

340,823

 

 

1,158,555

 

 

705,540

Late and other fees

 

 

21,099

 

 

140,537

 

 

35,880

 

 

187,033

Processing fees

 

 

39,665

 

 

41,805

 

 

86,123

 

 

76,600

Rental income, net

 

 

29,456

 

 

47,255

 

 

40,184

 

 

72,904

Other income

 

 

283,009

 

 

179,391

 

 

567,283

 

 

296,531

Net gain on sale of real estate

 

 

 

 

 

 

 

 

 

7,149

Total revenue

 

 

4,310,642

 

 

3,065,136

 

 

8,622,945

 

 

6,412,162

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Interest and amortization of deferred financing costs

 

 

1,152,302

 

 

452,406

 

 

2,302,255

 

 

1,073,454

Compensation, fees and taxes

 

 

383,968

 

 

465,193

 

 

724,355

 

 

849,420

Stock based compensation

 

 

4,107

 

 

4,107

 

 

8,214

 

 

8,214

Professional fees

 

 

110,104

 

 

70,215

 

 

242,413

 

 

154,222

Other expenses and taxes

 

 

6,534

 

 

17,139

 

 

35,238

 

 

31,332

Exchange fees

 

 

 

 

11,219

 

 

7,273

 

 

21,507

Expense in connection with termination of LOC

 

 

 

 

779,641

 

 

 

 

779,641

Impairment

 

 

245,000

 

 

 

 

495,000

 

 

Net loss on sale of real estate

 

 

 

 

 

 

4,460

 

 

Depreciation

 

 

14,688

 

 

18,164

 

 

30,971

 

 

25,667

General and administrative expenses

 

 

127,460

 

 

103,909

 

 

267,674

 

 

269,358

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating costs and expenses

 

 

2,044,163

 

 

1,921,993

 

 

4,117,852

 

 

3,212,815

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

2,266,479

 

 

1,143,143

 

 

4,505,093

 

 

3,199,347

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain on investment securities

 

 

221,449

 

 

 

 

86,067

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income

 

$

2,487,928

 

$

1,143,143

 

$

4,591,160

 

$

3,199,347

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted net income per common share outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.10

 

$

0.06

 

$

0.20

 

$

0.19

Diluted

 

$

0.10

 

$

0.06

 

$

0.20

 

$

0.19

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

22,117,301

 

 

18,499,531

 

 

22,117,301

 

 

17,144,104

Diluted

 

 

22,117,301

 

 

18,499,531

 

 

22,117,301

 

 

17,144,104

 

SACHEM CAPITAL CORP.
STATEMENTS OF CASH FLOW
(unaudited)

 

 

 

 

 

 

 

 

 

Six Months

 

 

Ended June 30,

 

 

2020

 

2019

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Net income

 

$

4,505,093

 

$

3,199,347

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Amortization of deferred financing costs

 

 

235,913

 

 

94,323

Depreciation expense

 

 

30,971

 

 

25,667

Stock based compensation

 

 

8,214

 

 

8,214

Impairment loss

 

 

495,000

 

 

Loss(gain) on sale of real estate

 

 

4,460

 

 

(7,149)

Abandonment of office furniture

 

 

 

 

12,000

Costs in connection with termination of line of credit

 

 

 

 

 

439,446

Realized gain on investments

 

 

(437,159)

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

(Increase) decrease in:

 

 

 

 

 

 

Escrow deposits

 

 

 

 

12,817

Interest and fees receivable

 

 

(186,094)

 

 

(449,809)

Other receivables

 

 

25,000

 

 

25,000

Due from borrowers

 

 

(597,776)

 

 

780,320

Prepaid expenses

 

 

(48,441)

 

 

(48,013)

Deposits on property and equipment

 

 

71,680

 

 

(177,481)

(Decrease) increase in:

 

 

 

 

 

 

Due to note purchaser

 

 

 

 

(176,619)

Accrued interest

 

 

(144)

 

 

Accounts payable and accrued expenses

 

 

51,836

 

 

(5,706)

Deferred revenue

 

 

(346,855)

 

 

50,088

Advances from borrowers

 

 

163,933

 

 

(54,560)

Total adjustments

 

 

(529,462)

 

 

528,538

NET CASH PROVIDED BY OPERATING ACTIVITIES

 

 

3,975,631

 

 

3,727,885

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

Purchase of investments

 

 

(17,428,603)

 

 

Proceeds from the sale of investments

 

 

17,940,198

 

 

Proceeds from sale of real estate owned

 

 

1,762,775

 

 

264,809

Acquisitions of and improvements to real estate owned

 

 

(1,027,533)

 

 

(342,598)

Purchase of property and equipment

 

 

(62,567)

 

 

(165,263)

Security deposits held

 

 

5,616

 

 

Principal disbursements for mortgages receivable

 

 

(42,303,747)

 

 

(28,516,128)

Principal collections on mortgages receivable

 

 

25,417,062

 

 

21,098,466

NET CASH USED FOR INVESTING ACTIVITIES

 

 

(15,696,799)

 

 

(7,660,714)

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

Proceeds from line of credit

 

 

 

 

42,720,829

Repayment of line of credit

 

 

 

 

(69,939,952)

Proceeds from notes sold to shareholder

 

 

 

 

1,017,000

Principal payments on mortgage payable

 

 

(8,180)

 

 

(2,947)

Principal payments on notes payable

 

 

(10,031)

 

 

Dividends paid

 

 

(2,654,076)

 

 

(4,679,293)

Financing costs incurred

 

 

(58,353)

 

 

(12,113)

Proceeds from other loans

 

 

257,845

 

 

Proceeds from mortgage payable

 

 

 

 

795,000

Repayment of mortgage payable

 

 

 

 

(290,984)

Proceeds from notes payable, net

 

 

 

 

71,820

Issuance of common stock ATM, net

 

 

 

 

15,460,427

Gross proceeds from issuance of fixed rate notes

 

 

 

 

23,000,000

Financing costs incurred in connection with fixed rate notes

 

 

 

 

(1,270,000)

NET CASH (USED IN)PROVIDED BY FINANCING ACTIVITIES

 

 

(2,472,795)

 

 

6,869,787

 

 

 

 

 

 

 

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

 

 

(14,193,964)

 

 

2,936,958

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS- BEGINNING OF YEAR

 

 

18,841,937

 

 

158,859

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS - END OF YEAR

 

$

4,647,973

 

$

3,095,818

SACHEM CAPITAL CORP.
STATEMENTS OF CASH FLOW (Continued)
(unaudited)

 

 

 

 

 

 

 

 

 

Six months

 

 

Ended June 30,

 

 

2020

 

2019

SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION

 

 

 

 

 

 

Taxes paid

 

$

 

$

Interest paid

 

$

2,066,341

 

$

979,131

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES

Real estate acquired in connection with the foreclosure of certain mortgages, inclusive of interest and other fees receivable, during the period ended June 30, 2019 amounted to $1,962,669.

Contacts

Investor & Media Contact:
David Waldman
Crescendo Communications, LLC
Email: sach@crescendo-ir.com
Tel: (212) 671-1021

Release Summary

Sachem Capital Reports Revenue Increase of 41% and Net Income Increase of 98% for Q2 2020

Contacts

Investor & Media Contact:
David Waldman
Crescendo Communications, LLC
Email: sach@crescendo-ir.com
Tel: (212) 671-1021