SACH - Earnings call transcript Q4 2018

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Operator

Greetings, and welcome to the Sachem Capital Fourth Quarter 2018 Business Update Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Communications. Crescendo with Waldman David Thank you.

may You begin.

David Waldman

and Capital Sachem morning, for call. joining XXXX year you Corp's end Good thank business conference update

On financial Financial website. today Executive us press the release The the company's Villano XXXX a is call Co-Chief year also containing CPA, on end company is issued Officer which of Officer John Chief yesterday Sachem results, Capital. and with posted

annual on report Securities In XXth, on www.sec.gov. XX-K SEC's its addition, the be U.S. Commission company website with company's well also and can XXXX Exchange the website March filed which the at on as Form accessed as the

If you company, like the please would have contact Crescendo or XXX-XXX-XXXX. any after call Communications additional about the any information at questions

uncertainties for financial like for and call the of XXXX expectations Before plans, call, our statements. design, Mr. words may, forward-looking project, of terms will, future contained seek, occur, believe, forward-looking financial financial These statements strategy forward-looking operations operations, are words year this results assumptions everyone Annual it terms and statements. in risks, Because and for and future the as on Villano end statements XXXX in current All estimate, assumptions, and believes U.S. in condition regarding this materially with and Report company's we similar than would projections implied December other operations XXXX. and statements these and differ and Exchange operations, the plan, strategy, intend, reviews our company's statements. business and expect, this on risks, XX, could XX, events that those intended short-term events described conference to and XXXX, statements from discussed likely, to remind contain trends actual and on forward-looking of adversely statements. objectives condition, of largely identify conference are could, that XX-K to of forward-looking the financial the about of circumstances continue, should, company's statements might, anticipate, results the are forward-looking and several negative subject and These may and position, March may results based results may other uncertainties The the in Commission are such the including and not needs. facts at affect Form its or long-term and future anticipated expressions forward-looking filed and operating historical Securities conference call expectations company's

upon forward-looking future statements predictions as You rely events. should of not

that activity, it the the or the forward-looking Although, results, company believes statements expectations performance level future guarantee of reasonable, reflected achievements. in cannot are

responsibility The the of any In made call. addition, any the conference attributable other as the disclaims well cautionary company to are of accuracy as forward-looking these these and any company person for of company update qualified in completeness forward-looking entirety these nor others by any statements, statements. in All this their to duty statements. neither assumes statements expressly forward-looking

these of statements With ahead, evaluate now the the I’ll and go risks company that Villano. over John way, call context should John. the in all forward-looking of by the out to You Please made uncertainties. turn

John Villano

line Net half XX approximately year report thanks that for pleased XX% and deliver today. everyone am joining results. XXXX and December the million were positive we manner. This our year somewhat year half I and another revenues solid ’XX, to to we in to strong believe put of strong based David, for top continue profitable ability the tempered capital ended was to XXXX reflecting XXXX was to income on respectively Total and ongoing XXXX you, for on Thank $X.XX $XX.X finished Nevertheless, a due creative $X.X us first December which year to XX% a reflects to work XX, ended requests capital. had and continued $X.XX Sachem bottom XXXX. net increase year will be increase. in the backlog the compared million, our XX% share a per and versus funding. the income increases We current second of for constraints and and for

We continued In we to there are among success. will selective key continue factors believe numerous available to opportunities our the five us. be to meantime, the

our flexibility to all fourth, a is third, finally, relationship disciplined activity of due and suit maintaining including needs thereby strong First, loan portfolio background with extensive underwriting, loans borrower the borrower our term we second, diligence monitored in borrower. borrowers, loans analysis, structuring the throughout our

also of result reflects investors of XXXX the attractive providing our operational respect risk-adjusted of returns. total in bringing dividends $X.XX our a paid a to January This approximately dividend income. with payout not share $X.X success approximately we to performance, million. our represents dividend XXXX but continuing paid net fiscal As commitment our This year XX% strong high XXXX a only

December million December $XX.X XXXX of and more We a $XX XX, With levels XXXX. approximately I'm XXXX increase going year-end quarter an little our receivable of balance performance on on contains assets more were XX.X% then equity. As the an of as detail XX, peers. were from ended outlook. December with background, strategy our at million, December from shareholders million, XXXX. that $XX.X Total our compared and provide XX,’XX color approximately in XXXX, at leverage XX.X% XX, December increase approximately our Mortgages approximately a some give relatively sheet to low XX, to of over

increased million for to or million an revenue approximately and XXXX. This increase For compared Income costs mortgage from an an operations. expedite year income increase costs and December was XXX end portfolio Interest income the operating increase Origination fees processing overall XX,XXX. increase strong reflects XX% includes fees, ended of in-house and loans, other were originations And on $X.X expenses represents total was $XX.X approximately other XX.X%. finally, for year the year $X.X - fees an ended legal the every compared other by fees ’XX XXX,XXX. loan for compared year, The includes increase income approximately for XXXX. which XXXX of million increase compared by in fees of were as in XXXX modification charges, approximately and our by million $X and included income December the million $X.X $X in borrower ended in fund which ended late Total from million growth fees XX%. approximate year and increased approximately of fees, in to loans. loans million the revenue on to more approximately we loan increase more compared an This lending approximately $X.X costs our increased debt The million. million portfolio line lending Interest approximately for million XXXX to the took in XXXX. $X.X were expenses the $X end operations approximately deferred approximately loan XXXX. $X.X in in operating across to the amortization approximately to spread XXX,XXX XXXX, approximately approximately was item. of of our to revenues At and increase financing due to

to was costs. Approximately XXX,XXX compensation Another related including million compared compensation and operating XXXX in in $X.X that stock-based XXXX. expense increased

to in board number stock-based to increase compensation well an As our employees, adjustments including due our increase independent as members. noted of as our as in was employees the for XX-K, compensation as to well this management, payable the

diluted was build and We grow XX% Net necessary $X.X a will our income compared million to net represents continue per average to $X.XX share and for portfolio $X.XX for This was the XXXX Basic to increase. expand weighted for service infrastructure common to XXXX. $X.X and outstanding XXXX XXXX. operations. million compared for income

Turning our now sheet. to balance

As million of XX, of million $XX approximately XXXX. XX, to were approximately December assets XXXX $XX.X December total as compared

$X.X equity in million decrease in approximately and approximately of million liabilities XXX,XXX to $X.X the estate liabilities have The estate XXXX million are million sale. was XXXX. million, as XX, $X.X is of rental December as sold was million December nine finally, XXX,XXX to of owned owned which the estate XXXX. December real the of portfolio XX, and approximately million was seven ’XX XX, at for $XX.X December million December sale million which dividend $XX.X on were real real XXXX. decrease for the of compared outstanding marketed. approximately And of of our loan approximately of paid-in paid since million XXXX December Webster $XX.X been were XX, as approximately XX, retained shareholder's reflects total decrease Total held $X.X as million held $XX.X the and approximately was capital. and XXXX. to compared for actively approximately $X.X compared in as held $XX.X borrowers approximately $X.X approximately approximately including balance XXXX. classified fees properties million at approximately to December earnings attributable XX, other as million compared from million being increased approximately XX, receivable - to $XX.X Real facility XXX,XXX $X.X reflected as Our The compared was Interest from Of decrease reflected of million $XX.X a to Of estate as two a income. February to XXXX $X.X credit

operations. to our Turning back

those As loans market borrowers lenders more of than of to estate and structure have much traditional real the a changing needs non-bank to suit lender, environment. we flexibility our a

loans our and of conduct diligence due highest are well criteria by quality underwriting strict maintained secured the personal have collateral ensure that extensive and to guarantees. and We

suspect moved During neutral long-term. now XXXX, we interest they considered are and rise higher, rates will

a banks and it as fact, requirements are underwriting rising interest to difficult In find lending investors positive the other meet Sachem, of rates traditional for more sources.

banks our makes seen have real have competitive. we as raised local said, Connecticut rates, softening raised and the in other have market. That addition, more we rates our lenders which In estate some products their traditional not

decline values lengthened. Specifically, listing in has residential sale the from we've property to seen time and a

market, for we the versus distinction. opposed Overall, an softness available demand selective for the lender, the commercial XXXX, XX% numerous to strong a XXXX. versus among XX% as focus opportunities we base to As continue portfolio commercial us. Despite accounted residential loan to we collateral our be see continue residential highly asset products. the in In our in loans loan to package of on

with challenge Our biggest our Webster Bank. borrowing now we nearing limit right is are

working we that mentioned financing look to will As are starting I alternative for available earlier, increase our capital. transactions

our transaction that into and to to have financing offering. no market a As would to other of fund our aggregate. the in us November of loans raising ability XXXX, To the for than of common given shares This commitments have forgo. market prospectus the we $X.X quarter supplement started selling Starting with million filed has XXXX in S-X shares XXX,XXX have otherwise originate approximately we date, sold approximately statement. in that registration we at the the we we our first pursuant now, directly

the other of advantages fee. the warrants One is brokerage mechanisms shareholders. - mechanisms cost is our common sales There these only preference major other no of that are discounts, that or over provide

wrap strong, as especially our loans under separately of up, balance these The approximately for secured loan agreement million. our we and unable to demand. addition have the by the the right are in aggregate our loans continues are have loans with services markets demand under portfolio Webster, sustainable. we an solid that XXX,XXX, is lenders platform credit be already in principal and In properties. Currently $X.X traditional To service our to lending satisfy commercial products finance to

with Even believe real to criteria would thank fully to investors we open trend and the the questions. us are conservative lending we today. advantage. our returns. to Overall, At a markets. our this everyone the joining and like and suit needs of I would real address call has risk-adjusted and appropriately increased adjust committed our for in to origination strategies loan In goal estate to trends lending attractive integrated of by I structure loans for borrowers call flexibility outlook we long-term addition, distinct remain robust very our capital point, business encouraged future the to providing in financing to estate and market intend slowed, the our to though continue the platform our provides practices vertically like

Operator

be conducting [Operator a you. this time At question-and-answer Thank you. Instructions] Thank we'll session.

the comes with [ph]. Mark of question Please proceed from line [ph] first your & with question. Associates Our Deloitte International Deloitte

Unidentified Analyst

Good morning, John. How are you?

John Villano

you? Good Mark. are How morning,

Unidentified Analyst

quick down of and Massachusetts? expand a like have what's couple can your If the starts York, interest especially you enough arena? New down outside where but you say you're a not know, to loans slowing have loans, look just in I Connecticut slowed if Connecticut, know Connecticut you questions. there, to outside of outside - that I have you'd things intentions few you where getting

John Villano

this take in I'll to That's two try great parts. question.

from do hot away Those We we We in looking Rhode, in first, away Island. loans do have lend do County. for To Connecticut a us. our are Boston. loans correct to not have loans operations We are not have for So are question in saying, we our We in City. borders markets Weston, becomes expand Mass. in Westchester and us. you expand it York Connecticut New borders, in do lend from a little too capital do

now right the office. drive of we're an currently hour's So Mark, within

So the shore know, Branford - from on hour line our a is one of if if you just drive. semicircle you around drove - within you every where made properties an

ability So all we our have have our to review assets. the all - we

capital lock expand And serious need efficient have acquire us, we're the the that's want Sachem’s a this ground. future borders some Street buying to you to the trying him only his when area And We this us be is have We for feel way to what be buy smaller when and want We That's in thing want we the have the into they is importantly got area. We some safely. to inquiries Street ultimately a the want is build that consolidators. to to only don't interaction ability, assets - beyond an the in do way. we're and business, a on our brokers we're Wall going with - the borrowers. able this to in want not are not I have do but like most lender us to paper do that we here going to have from want to to game. good where we for small the shareholder. to move the our need just lending companies up and know, I've out, boots Wall we interest financial Sachem of as the

opportunity - safely. lot we a but got it's there's know, You move, of done be to to

he have enough make has to right the the conservative this And our assets individual. to for have game We to safe and in investors. have

Unidentified Analyst

And stock on to company? to get being dividends the you neutral have with it hear positive you pay to glad have that wash that. sell close the any it's comment slightly - creditive and I'm with you it. [ph] for income to in it you Do or ATM wouldn't Perfect. regards to appears ATM, off a of the the on what

John Villano

delve in little our going am this K. come I bit, from to - so let me a will

You facility. today have know, $XX.X currently million our on we Webster credit

as Our $XX maximum fully line is million. We look funded. that being at

We office. have a of in the significant backlog loans

construction We have commitment future a significant for draws.

just it moment's of the an I us dividend. show though in we've the to fact, loans really It's in office consider may invest give ourselves to funded some we really not line ATM. first used on opportunity to up a ability availability even that quarter we're the XXXX. to to using And here in using notice. make So we're It's - and fully meant on our provide finance the liquidity. have in the

Unidentified Analyst

Great. work think be time. - and what I shareholder all plan thought really Thanks are doing a you plan your as and guys so I That's for the for I input. appreciate that's significant to I one of long a sort to again -

John Villano

Mark. Thanks, Great questions.

Operator

you. Thank

next Advisory Our Service. with Jim your line Please comes Aviation question with from question. the proceed Altschul

Jim Altschul

if questions Good please. may morning. Two I

a signed shareholder? and loan there's shareholder explain can shareholder were liability that First And due to no to of transaction you which you the was? in all, a who

John Villano

can't specific you but the can on who I the was, Okay. tell I transaction. shareholder be

Jim Altschul

Okay.

John Villano

Okay.

management, shareholder what I is can that. and not you the we So - tell executive do

Jim Altschul

okay… Oh!,

John Villano

related Its not a party.

to up we and you in When individuals get We paper. to all reflected XXX operations XX.X% on time. our are you, may as and where partners times like. that was at not tight the $X.X our credit is formed notes. and I So And phone as like robust million we sheet a a we And earns It our expandable have we pool that to don't Sachem heard one independent purchased know, and Sachem would from in talked balance some the to and love our want facility and individuals it. money there of of provided We you've that opportunities, our of we – and will I I the the purchaser. two the buy paper note have get step fund that's was have need year that and or note is not existing the assignment on sell annual.

to or five our difference. corresponding strictly on a X% manages working let The be the transactions. was think loan yield, the the me gets therefore sold Sachem These liability to we've recorded And we've clear, are I receive capital six investor our so And and currently in in history notes. him. don't note books the

the in the for we monitor say still So service loan heard this to the and Sachem you've net individual. me and XX.X% we borrower case difference accrues this

Jim Altschul

Okay.

John Villano

help? that Does

Jim Altschul

That is for than a but next you statement. very question, is more fact a I’d more statement this I and thank a make and thorough of quite it. answer frankly The - one question a

to than from venture and which of bad appears an done I not not company company a But a would not life reference personal have policy. risk. encourage keyman thing. experience. adds to arrange already because to that huge a don't heavily real is a keyman I you're insurance I you your for you can on and brother it, considerably get small the you it If me dependent investors see is our two, operation and a element that run life company and the insurance speak your so I and smaller estate policies asked

I'd So to you it's consider. like something

John Villano

take will advisement. I that under

now in question that right the Board. - also is have same of our auditors And front the question. Our raised exact

we part it. considering as are request So an of auditor

Jim Altschul

very all you I have. much. That's Thank Okay.

John Villano

you. Okay, Jim. Thank

Operator

Capital Ethan Cox Our Please with from line next proceed comes with of Instructions] you. Thank Brown your question. Management. question [Operator

Ethan Brown

Hi, Good morning. John.

John Villano

Ethan. are Hi, How you?

Ethan Brown

good. Pretty Thanks.

several risen sheet looks the quarter. kind it gradually over and balance know the owned real So that like on this the reversed you has quarters past past of estate trend

I over that's So go wondering was year. think the you thoughts coming going to your where on

continue that we should think lumpiness or kind you If will see to trend if continue of some there?

John Villano

REO December We asset is on. is lot awful getting and we our to borrowers would recently Connecticut issue these our - in time on friendly four Connecticut on properties And units in sold an biggest in - is [ph] filing first very the IPO XXXX. something back. the we it and of spend know you obviously were

takes hang come shape as what's not sometimes They know, most But time. we - don't it we they So the in as around, next. coming cases good money. back lent you in when Ethan know

daily. You know, borrowers we monitor our

is all in with time. Our contact office the them

will know, a I provides borrowers. we're contact fraction in think here they like bit a our since capital sold on can our here if The if the loans. tiny triggers we're we're or inception, going about it's Ethan really to in and sit doing on be lost back. going a back. to triggers their they're calculations software They're to of And Our for the we is, with fraction money X%, properly, any act X% come little get lending diligent and you job to we've million get based Sachem if on $XXX and value loan of idea

Ethan Brown

Okay…

John Villano

Okay.

road small you if So if capital it's our we and bump right they job, should - managers it's said do get only and we're back like the just a still come in back. we good our

Ethan Brown

see. I Right.

question, any more know, do give is debt at exploring or alternative about how continue color my bit to And provide for that? you I there be equity be a you're financing, going to what it some was looking you hoping then And detail - options you at. you you're think can just more say you second helpful. that's Okay, when little could or

John Villano

Okay.

to over a a guys no and the our Street us to gives perfect perfect debt. here destroy world portfolio. large our going they in they you love paper in sadly interest Wall bit every a wonderful them buy the a in and They offers company, from have selling and come I'm model. in and we want little It shareholder you world buy paper. equity been of line as day to So our would select does boost our liquidity things. I know know, It We have would our debt bottom want for a business

the debt. efficient. their we one that's So like. It's line, bank. that a – had don't port significant we $XX portfolio to at had We've but offers has cash an of XX% call in be balance just It we to offer of the of portfolio, level liquidity crazy. bank what the We've leave had for for million

people dividend. we make build business. the and looking of pick I'll to goal make We we're We're needle for to a and and our are us. offering want to - to don't mistake it haystack want and a So is grab money here But being you out not to just great fit and very we're believe diligent. a be going know just me has the sit right our

sell, The question, going liquidity answer working selling We're do debt really We're doing know, to we know, trying that every dividend realize shareholders share doing there's to as putting equity we're And some we're number pay. well. ATM to So we're and we're - is that have loans. capital just it's to where on another orders that. it and not you that its we we your to manage the you doing because collars is that, now one. not we're not we're sell and not

to good use have we So for it. have

right way for for kind is burner know, now equity you ATM. back the our So on of except

do I ATM equity up, offering If well be works depends continue. as I'm well. lot market A so we'll on know, You sure. next the not the the know will when

Ethan Brown

Got it.

thank Well, you. Okay.

John Villano

Okay.

Operator

session. our concludes Villano that for floor I'll the Thank back question-and-answer Mr. comment. Ladies final you. any to turn gentlemen, and

John Villano

investment interest in best you, joining. and with The your us. come. you much for Sachem and Once thank Everybody again, Corp. Capital yet very stay We is thank appreciate your to

Operator

concludes This you. teleconference. today's Thank

this at you your time. participation. lines your disconnect may Thank You for

Sachem Capital (SACH) 2 Apr 192018 Q4 Earnings call transcript