SACH - Earnings call 3 2023 | Sachem Capital Corp.

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Operator

Good day, and welcome to the Sachem Capital Third Quarter 2023 Earnings Conference Call. [Operator Instructions] Please note that this is being recorded.

I'd like to turn the call over to Mr. Kevin Reed, Investor Relations. ahead. go Please

Kevin Reed

and Third everyone, for Sachem joining Good XXXX thank Conference Corp.'s Quarter Call. Capital morning, you

On the CPA; call Officer from Nick Sachem Capital today Chief of and Officer, Marcello. President and is Financial John Vice Villano, and Finance Operations, Interim Chief Executive

company press for quarter Yesterday, www.sachemcapitalcorp.com. on company's release XX, is announced ended of as operating financial website its posted and condition its that September results the the XXXX, date. The the

Securities Form In as Commission, and addition, website U.S. company with the on well website SEC's Exchange quarter-end can company's XX-Q accessed its the be at which www.sec.gov. the filed the as

you additional after information If our the any company, the would please visit like questions any about website. call have or

include As forward-looking statements. made a call reminder, remarks on today's may conference

subject statements that results uncertainties new are light statements not may those today. and forward-looking risks differ information to future any We to our in actual undertake update discussed do from materially events. of or to cause obligation Forward-looking

more detailed to our For refer that to quarter for this filings. the release our please discussion and affect factors a recent results, earnings SEC company's of the most may

During financial most call, SEC and these measures. about More to the non-GAAP contained non-GAAP filings. be financial company information certain this discussing the measures GAAP directly financial our comparable reconciliations are measures will in

now that, I'll turn With the call John. over to

John Villano

attributable capital. Federal approximately quarter has in same high common our market's Sachem third direction us am Stubbornly the and shareholders share. Reserve's $X.X $XX.X compared pleased XX% I prudent or with achieved the XXXX, the income today. in revenue million, of a to to the shareholders' With discipline this macroeconomic as and of per joining produced to measured guide, in net to Kevin, uncertainty kept $X.XX to million and growth quarter our approach for us with you, Sachem solid everyone policy the coupled Thank results to thanks persistently of inflation, report as backdrop. despite difficult

Our revenue balance our and deliberate growth direct in-house a result of underwriting, is a solid sheet liquidity.

difficult resilient cycles, produce cycles over allowed of returns. on navigating Further, loans a in Having learned our has structured is to protection to in quality experiences of of and with knowledge billion watchful past build a us experience from perspective through $X forward-looking lending ongoing grounded steady a that above-average an underwritten risk-adjusted we credit our multitude have eye the assets. portfolio

rates interest institutions real weeks, due Sachem rise It nonbank longer is news not past estate have no Furthermore, years. the have dramatic that to like trickle, the in originations the stopped slowed as to residential an third recent the commercial quarter. loan X loans in in areas some over in many as increase a financial reported nonperforming lenders midsized well in in a if and sector completely

to market While and we view management opportunistic an this way we share, situation resources. capital are of grow also mindful as portfolio our

made some significant reducing loans them approximately in we quarter-over-quarter. the Specifically, XX% nonperforming by progress regarding quarter,

Lastly, to X-month are slightly loan the ago down year period. impairments compared

underwriting. in Sachem's the our portfolio the resides loans diversity our diligence The and health of of of

commercial portfolio and assets. mortgage asset across diversified a a of including multifamily, single-family have real We other variety classes, estate

Southeast. Our is loan it grow our past, intent states. across in said And in the responsibly portfolio as we is have diversified the to XX

Additionally, it of record is our a to profiles performance. underwriting strong proven practice and to borrowers with lend credit

term in nature. are loans Our structured short to be

loans of term at XX.X% less. our in As or X a end, portfolio XXX of of year the quarter or

margins to rate process, our to rising of in protect capital environment. interest part this reprice our us better allows As structure this quickly

million loans, have levels. below $XX $XX.X including of largest keeping A million our approximately by X marketplace, to net of loan significant projects third resulting portion construction of with our Sachem's construction of the date, offset million of were plan. fundings business continued trend approach approximately our of lending In historical Sarasota, of paydowns successful view in recent had the and quarter, that of originations and principal our completion the the mortgage execution disciplined ongoing highlighting the In cautionary our $XX we from loan paydowns. our modifications draws to Florida,

While our the curtailed others construction been originations to continue similar industry, in build and loans. pipeline for to a robust have we modifications

into are As poised to our sponsors. continues yielding loans capital cycle, higher we to well-capitalized with redeploy

appropriate. capital, We opportunistic, get capitalize when situations selective can therefore, be have and sufficient to on deemed

primarily remains lack where, due demand focus a remained on multifamily supply, to loans, and Our residential prices of housing stable. and have relatively

we maintained and on macro uncertainty liquidity. Due the have to stance strong disciplined front, our

sheet cash, debt of $XXX.X total outstanding. assets, have million marked balance a $XXX in cash investment equivalents securities, and million in million by We with including $XX.X offset

alternatives In liquidity on hand capital. addition, provides to invested approximately significant allocate credit for liquidity of million facilities. us our us positions the available Having a $XX select on affords prudently our in we liquidity This have strength selective best capital flexibility manner. to and market

more key metrics addition the strong financial growth some on touch financial me Let in revenue flexibility. and to

approximately of increased quarter approximately increase compared approximately change cost the higher the and this due operating million $X.X $XX.X fees, was were quarter the Total third in other to Interest to expenses taxes XX.X%. of interest third amortization compensation, and of quarter $X.X costs, for to expenses. deferred costs million of or $X approximately deferred financing and amortization million and XXXX of for approximately a from million SG&A, $X.X XXXX. quarter, financing million The

third XXXX to third of the for the for XXXX. compared third quarter per million was attributable Earnings quarter common million to $X.XX income Net quarter of in for quarter approximately were $X.XX XXXX. of $X.X the approximately versus $X.X shareholders share the

principal. $XX.X unpaid had of loans, XX.X%, by of million, as a loans total with which $XXX.X XXXX, interest with a of September the nonaccrual approximately balance portfolio, rate approximately loans $XX.X pending our to in fees in balance principal XX principal we a regards average approximately earned. not had status, representing XX, includes We weighted of With of million million with foreclosure inclusive XXX of company,

the supplementing fee origination modified extended quarter, or These income. a approximately fee loans. of resulted total reduced the gross modifications in our company During $X.X income of XX million,

discussed work pay the other interest considered, utilized income, is overall value of in value, have It troubled usually and its we the resulting losses is a total that As amount the to expertise fees Historically, collateral are situations. are resolutions origination from the in we Sachem's on or experienced loses the exceeds the loan minimal tribute distressed loans record is all the to term the believe of profitable. our difficult over impaired workout due. and past, rarely the out loan, transaction of successful. quite and

months the sales impaired loss company of of $XXX,XXX XXXX, loans September owned and had the ended estate approximately XX, $XX,XXX. a real X of For on the

owned $X.X million estate XXXX. at $X.X was As of XX, September year-end compared million XXXX, approximately to real

real sale. held owned included $XXX,XXX Specifically, held estate rental, for approximately $X.X for approximately million and

dividend, share November Board XXXX. of $X.XX per an of paid With the October XXXX, regard authorized X, XX, shareholders to to dividend our on record as

our policy of Our basis, and Board tax performance, ongoing federal operational our financial regularly an evaluates balancing on distribution flexibility. importance maintaining dividend requirements long-term the

and approach for growth our the has our continued In profitability positioned ongoing business operating portfolio to in and closing, us future. our disciplined managing

portfolio us result which, in earnings. in the cash may on we and well-diversified understand confidence built financial near short-term potentially We fully strong flexibility, means environment. navigate the term, which current liquidity, a a as have our a We balance drag resilient, sheet, gives increasing

team this to believes Our environment. be management action this prudent in

continue continue have will We the and build eye long-term clear asset value. on platform to a protection to to expand shareholder

the will now for open that, Operator? call With questions. we

Operator

from be Nolan will Christopher question First Instructions] [Operator Ladenburg with Thalmann.

Christopher Nolan

quarter How earlier term versus Is would characterize third more it in extend borrowers of forth? so average the are and year? the John. you loan in longer asking just to the a

John Villano

question, Good Chris.

is rare where months are we or Those of may There circumstances, term. the we're XX refinance a long there coming seeing end are are In now one normal is if rare. a circumstances this taking even XX go holding option just be long-term of either So now, for X-year to right And our every a refinance the time. would is What months. is or them. our a loans a to sale term. borrower

And loan accordance and we're we're And them if additional is the is loan giving what the so in time. performing always agreed we've doing with docs. is this as

the what a modify loans as time or are refi project. to to time now is going we little give -- we're a complete bit longer them finding So to even

to contract reasonable with from probably XX still average moving but term months. work portfolio-wide, of our are XX Overall, is out borrowers less So to extending we we're their chance to us. the than XX give a

Christopher Nolan

is I build And use that given Got have maturing increased June up the pay noticed a due in that to your and that quarter. the in to have holdings down the then bond? idea it. cash bonds unrestricted you just cash XXXX, And

John Villano

yes. resort, last a As

later not one a due in building for it's the in June, are we So upcoming war in chest, the December. only year also bond coming

So we we the that is liquid macroeconomic we're operating wanted cash to in, I consider valuable. think when and be first, environment

we're need So need for for then our opportunity bonds, the cash now safety. for the cash blending the cash and

prudent tug on of shareholders' a a our little of bit going to trying there's war with So here, be capital.

clear what's eye a due on have We coming June. in

bit at [ ready a we believe the we bonds cry can We loosen series of for far are up I It's are a refinance. X from ] be that markets and it. where first will Hopefully, of kind X/X. today.

our get it, have we earning is any but, be [ bank plus ]. markets may cash to if in X the nonaccretive case, it in So to to XX go

So out. we're figure still trying that to

Christopher Nolan

at Is estimate to over to leverage run Great. little idea the spreads Is leverage widened back with levels? is also your given you leverage that you quarter. the similar question. and release, given reserve the can allowance just And maybe the that the thought final investment than did before? or the I keep a -- dial a less

John Villano

is portfolio wise every based nor on penny this prudent We do lend single world have, we which our in. wouldn't bond What covenants. can that manage in we're be we we the

lot of covenants. top a widened So a bond our of have Yes, the margins bit. space end our between remaining

] projects are deals are not workable some seeing and We level, those at and this now, XX% [ pressure where X the rates. at in quarter,

moment. looking are those fund. end our So at be to back XX% customary top us the X points, that falling is deals and and we're to the getting And origination for still

Operator

Next from from Oppenheimer. question will Batory be Tyler

Tyler Batory

thinking a quarters? about about be pipeline think the What like? does John, this run approach your rate here? can couple originations talk to is look the you of QX next to number good You

John Villano

So yes, loan which have due $XX some million. doing large quarter. originations the that payoffs increase $XX of planning do vicinity number. we're we're on million through somewhere kind the in may We third figuring expected on of coming in But

a push have this wouldn't week. going wouldn't bunch further be -- I than that. But We I

consistent will us that think for be number very I a with. work to

Tyler Batory

approach different competitive kind to the terms the may well peers, And opportunity for then doing. environment, that some a I'm they're in have of of less Great. can that how be your be about some And a you? just capitalized, talk business, really if Okay. of potential that some interested

John Villano

of Yes, all, is first certainly, it's it opportunity. an --

assisted a a Just last with refinance of week, small in a lender, we public lender. smaller Central loan a Florida

But step guidelines. capitalized. when So of lot as have, told, ongoing little deals not there if up we is from well that not cash let bit and operations certain shareholders balance same that funds, and to not opposed may the constraints strong. partners our They truth panic. they lenders the as a are be will have extract distressed The have They we cash demand was as a sheet the they're meet do of capital struggling. that a

competition the do. I'll throw know there's a They that lenders done. lot to distress, -- They bank struggling, The mix. deals get and are but local into So don't what all, of struggling. business banks first on can't of, regular is from the

deals that offer. be can be these should seeing be great better that It's not are rates they much here at borrowers at a and bank. SBA, getting they there. just through We should a bank, come They should be should we

have the borrower level. tightness you So at marginal

banks You have from tightness great and getting the it. service, expects that with great not borrower rates better the they're

a have to they're of right pretty look guidelines, at of moment. now. good and get We're lot at all stiff asking So we're and the this, our pretty getting questions, here a a loan resume I'd a

that -- not. is an like $XXX fund extra of are million they're love trouble the getting case we funds. But from capital is we So to competition we and this. distressed We not They and really to kind yet, go having think need. wish to There people projects, fierce had with. distressed, complete looking everything the work they

Operator

will JonesTrading. be Matthew question from Next Erdner from

Matthew Erdner

is? a new tell on line estate. rental I that sheet, Could the item investments on saw kind you of real balance what that me in and expand

John Villano

Yes.

is It by their quarter, commercial real which play the to piece on at of bought reduce the purchased during of we former of owned residential working Bridgewater is office Bridgewater, the completion project. Part is the PE will X/X A corporate there estate. firm estate, Ray Dalio. to an into a project offices. is the property It So leased. portion We a It of portion housing, our property moment. we're residential of our in XX%. develop successful the the basis the

way in think our project. long-term business. interest had if it's a exposure commercial We Westport, us from for piece We've feet you a Matt, hold. large it's is Sachem reduce The building good take of good square think a leasing that didn't The we a in some know, office the Connecticut. So approximately. great product. very project, and to very it's players. project XX,XXX is will a And

Matthew Erdner

then is you should on we that guys value felt onetime could a And some just opportunity like things forward? expect and this capitalize add this there? going like Or Got you provide it.

John Villano

No, a good this is question.

me in out look and with and project. right accretive onetime of are involved. they'll us They with downtown. them year brought projects sale XX-unit It We the bear by for project this up now group. wrapping building go answer. ago. a We're the condo that is is this So us, they're a a on bought to river Urbane they It which search on a a our is out, them to Westport, project

also develop this for do The is So residential. team the the they've property. going identified permitting the same building, to

Operator

from JMP Securities. of Chris be [Operator Muller question will Next Instructions]

Christopher Muller

Guys. a nice on Congrats quarter.

John, talked past levels doing of the in competition given lower out So about the loans you there. larger

as regular are way of your continuing the larger? guess, I returns XXXX what market? more loans outlook competition new And So to trend that is to the for into

John Villano

margins in, our debt developer used terms anymore. Well, that factor have of can't service, whether priced. the profits the it And project even smaller be they you in don't here Properties to done get cost, smaller are fairly loans the renovation when to. just permitting the or

So we're room to slip the he developer focusing should has on larger where, deals bit, a succeed.

And with for most of capitalized little to looking of a deals will quality Very projects a larger better go off we're hitch. few deal, sponsor. So we've sponsor, without better that which these take bit had better success margins, that. often you a have better

Christopher Muller

is driven behind reduction last the more on the Got the CECL it. asset-specific and is That's it changing I then macro more recovery, NPL like improvements? helpful. picture guess And from from that the quarter? Or

John Villano

mind this of this Chris, He For Nick call Marcello, the Accounting. question, is here. would one? and Finance on Is me with our you President Nick, helping Vice

Nicholas Marcello

Yes, absolutely. Chris.

recovery that -- result mortgage quarter. during of a So the the a CECL portfolio shrinking bit that the of is -- CECL

portfolio Our basis. done on is CECL a reserve

shrinkage quarter-over-quarter, a call. of So large you that as little you'll balance whole a on in see as John the the payoff bit saw of result referenced that mortgage a

Operator

That concludes our question-and-answer session.

to Now Mr. closing back like over call the turn John remarks. for I'd to Villano

John Villano

quarter. next updating Thank again you you. joining look us for We today. you, Thank to forward everyone,

Operator

attending Conference has now presentation. concluded. today's Thank you for

disconnect. now may You

Sachem Capital (SACH) 14 Nov 232023 Q3 Earnings call transcript