SACH - Earnings call transcript Q2 2024

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Operator

Greetings, and welcome to the Sachem Capital Corp.

Second Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Stephen Swett, Investor Relations. Thank you, sir.

You may begin.

Stephen Swett

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

On the Officer, release The call for its Executive company's the Officer, financial from the announced is the Sachem Capital Villano, company www.sachemcapitalcorp.com. of XX, website, and posted today quarter CPA; condition ended on Chief XXXX, operating as press Financial its Nick June morning, John Marcello. This results is and Chief date. that

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

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

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

the call, call GAAP our these that, this John. financial about certain discussing information now SEC the During directly More to measures to will measures. the contained turn in company reconciliations I'll measures are most financial non-GAAP non-GAAP over filings. With be and financial comparable

John Villano

you, Thank to joining for today. thanks everyone us and

During maintained approach balance activities. our management XXXX, of towards lending the and prudent our quarter sheet second we

could available. availability will cut said, have markets has trending With optimistic That of we accretive disciplined in the it back capital market prospects landing, direction. from year in our opportunities right we for a the be improved investment potential for the approach anticipating that stabilized, are rate appears and Fed the the latter half continue a and until soft

revenue. This million quarter, we in $XX.X approximately generated

us postpone could are a for environment, positions protect for that our patient until potentially revenue. comfortable feel believe mentioned growth. to in Sachem. includes borrowing in which the term better to be last near we up we significant of avoiding portion our We quarter, earnings long-term the And remaining earnings As fees capital, rates origination more at capital prepared growth make dilutive

As extend said before, are willing possess stringent we modify with or provided to loans, meet capital and we our work to reserves. necessary process have they the our borrowers reunderwriting

produced XXXX comparable the origination income notable reduced fee During volume. a in the period change revenue million we in from from from of $X.X quarter, loans,

of The $X.X ability loans. to reflecting half XXXX, we first in REO, only manage million added efficiently our nonperforming

move approach, Our from firsthand nonperforming knowledge hands-on coupled performing. our a to usually of can borrower, with loan

period, Additionally, on generated this always gain of $XXX,XXX sales we a does approximately result net demonstrating from foreclosing a loss. REO property not that during in

to portfolio an reviewing an Our approximately loans of and and regular in across our meticulously sector additional industry, for services loans broadly losses many provision basis. Similar CECL we related all added companies management to take credit seasoned asset-by-asset continues million. in approach, more team financial inspecting our asset $X.X on the a to

item, a liquidity that is underlines with further within the impact persists estate it commercial this to uncertainty particularly estate While assets. the real real noncash valuations and market,

discuss brings tools hand impressive the would confident continue this we in Nick greatly that Marcello, I financials. recently like cycle-tested that Officer, to Chief will as environment and process. our to forward, provides the appointed effectively. Nick to financial that, With to am I with us navigate As to look call experience Financial Nick? this needed second acumen has quarter over our aid

Nicholas Marcello

Thank John. you,

$XX.X to year. recorded the quarter XXXX, Sachem second the revenue $XX.X of million same in quarter prior the of For million compared

off. to XXXX believes capital, commitment Opportunities are continues approximately were the costs $XX.X mentioned, to impact company source and second operating loan still to we to it are accretive million John in to within approach of and the As loans previously expenses our hold but cash to reduced guide continue remain, and prudent hand of is we until prior on the originations, sector compared as year able experiencing for pay strategy. Total quarter. diligent steadfast million our quarter liquidity managing approximately the our $XX.X

the to commercial quarter estate For XXXX, for second credit challenges for million account $X.X of the real in ongoing market. the we provisions losses of had additional

on of compensation million, was our financing balance. $X costs increase a in call, employee in offset deferred earnings This we prevailing As related environment. losses noted puts and current anticipated last of of in provisions on value and our prior to of costs, receivable due to approximately CECL provisions increase for $XX.X challenged. credit reserves our X% an allowance residential macroeconomic exhibited the control $X.X assets, basis. The benefits relative mortgages to testament the uncertainty which year for to to the as and quarter, G&A real mortgage compared as $X.X or are costs amortization million, the its approximately held a been of partially by ability have these at company's portfolio million originations approximately estate principal unpaid Most interest commercial against continues decreases of hold all million approximately to

income in a attributable As to year or a period $X.XX compared of common for prior $X.X gain the second XXXX share, shareholders comparing to net the to million diluted shareholders quarter attributable and net approximately approximately of common was loss result, $X.XX respectively. per $X.X loss million

on for maintaining quarterly Board importance XX, balancing the share July financial our requirements tax record of of dividend As per basis, declared operational July of discussed long-term our shareholders in XXXX. dividend federal ongoing of On XX, flexibility. evaluates our policy as $X.XX prior an regularly performance, Board the and quarters, distribution a

sidelines we staying persisting, remain we our robust selective very to activities. With portfolio as even current down, on within pipeline originations markets be the capital capital past the the to remains given strong. Turning our will Like continue challenges believe loan industry financing for demand were quarters, and environment. but banks the

metrics single-family assets growing favorable. Our core remains the on focus remain and residential in markets, where multifamily

of of we from fundings and $XX.X the paydowns. were million loans, approximately approximately loan mortgage principal modifications that For construction quarter, by $XX.X including had net draws offset million

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

As interest excluding XX.X%, comprised of portfolio loans, fees. unpaid a $XXX.X principal XXX balance XX, of approximately with total rate of our weighted million and June average

diverse, loan covering is the with in with a in the markets growth markets Southeast, focus Our on balance geographically states, Northeast. more portfolio stable XX

was the of for June for we loans $XX.X only in unpaid principal $XXX,XXX Additionally, as million charges. our end, rental sale. including representing $XXX.X with principal investments nonaccrual and XX.X% had includes of million interest of but of balance, loans and a by owned XX, approximately million held estate XXXX, Real balance held outstanding including company, $X.X quarter borrower and $X.X the accrued XX which properties. At are office approximately in status, million foreclosure

sheet strong maintaining company. a remains our focus balance now financial and primary Let's where position, discuss liquidity the for

of had As XXXX, cash, June million, of we in by cash XX, assets equivalents million securities, including $X.X and $XXX.X million debt offset $XX.X of million investment $XXX.X of outstanding. total total

available on end, our facility. Needham liquidity quarter had of credit at we $XX million Additionally,

to back current manage continue existing the notes notably credit debt unsecured, drawdowns the from $XX.X now turn million closing from and maturities, remarks. XX, of will John We December mortgage amount hand call loans principal cash utilize to XXXX. I for our to on repayments upcoming facilities, our will due on principal unsubordinated

John Villano

excellent a at periods. approximately At as a volatile value public most we increased and value reliable end, per inception stood stream an book importantly, our company platform, quarter book of built Since market paid $X.XX Nick. and have dividends XXXX, during share. robust lending Thanks, in some

markets $X.XX to also until and company. In shareholders selective per to first underwriting have closing, prudent highly in our returned dividends in as we liquidity approach quarter continue We share of a being improve. our approximately since will public uphold managing

Our back their and diversified portfolio and in our strong support to performance. the our confidence dedication XXXX. growing get to our business for gratitude financial to future hard like I work, express contributions the would in ongoing team work undeniable Sachem foundation to we entire as to my

now questions. open will the We for call

Operator

[Operator comes Gaurav Partners. Mehta Instructions] Our question first with Global Alliance from

Gaurav Mehta

follow maturity? to wanted much that refinancing the how loan $XX.X you, currently to to sheet, do December. get on due color balance the plans more have balance sheet the loan ask loan, on that's million I your on capacity wanted address that to up on and I you I in some wanted

John Villano

question, That's a Gaurav. great

we So facilities handle including liquidity repurchase December if or our credit on the balance hand, have cash at in look of million you we almost to million cash. maturity. XX our from not have sheet, did agreements Currently, June $XX.X $XX

shape. we're really good So in

Gaurav Mehta

cash after $XX XQ? So on hand million

John Villano

That's correct.

Gaurav Mehta

Okay.

color As a follow-up, where the you were more rates could on interest I to are, if you was some provide wondering debt? if new issue

John Villano

I you didn't again? it. Can that repeat sorry. catch I'm

Gaurav Mehta

your Just as some need wanted I rates where new in color get for company are you case to on debt. follow-up, a issue the more to

John Villano

Okay.

business model. we sheet for sure hurt expensive if opportunities the of offering. just to of perhaps terms offering down off our eventually inefficient closed and to we things as fit we a call, rate. right? months are backed you markets we've The terms do to better the were such, can't us in pay when do well X.X I'm it, from It's provisions kind for deal as our on business, in in shareholders. debt box, has debt. It's trying So raising, to our ago, aware, about call accretive not shrink our Sachem, away debt where an institutional note you're were rates kind balance And an the rates it of and and detrimental no It doesn't Those other wait of come meaning should early, they improve. best

try market us to stay manage rates take and away that lend and things of book not to have be in a [ reach as where the are quite certainly are interest aggressive. for our still money, it. to ], not those this Marshall trying from, So but we easier course, we're grow to continue Cash to to it'd

Gaurav Mehta

credit Okay. can lastly some credit you quarter, color reserves? that provide the loss in those had on reserves And loss then you the on

John Villano

ask the I'll provisions. in with Go to occurrence What Nick treatment the do actual He's to more tune ahead, accounting and I'll Marcello Nick. contribute of is this. the

Nicholas Marcello

yes. so Gaurav, Yes.

company increased the reserve. its So

had that this it we all sector. approach. that rest to We kind market improved bucket -- the I loans, a incurred nonaccrual an conditions based think on provision that took applied the considers performing we've since of We on haven't The inception. losses the position of has historical asset-by-asset loans across much. company of saw and sort the

are company for have initially. punitive taking market the a that for the reserve nonperforming, the So million bucket, in million again, of, the was which asset loans just reserve that that nonperforming. general declines don't direct so as of as as underlying additional is fairly our refinance roughly was really balance in $X probably opportunity still in really what an $X.X were individual approach across against borrowers, right million now valuation $X.X plan conditions result are well business cases to lot applied as $X a they as just of seeing collateral both loans that of or you're their about The million are for to

banks uptick our as been -- withstand sort how long. Just takeout of a our looking we're result, you're about can only our in CECL offer our to guys seeing haven't as for able kind XX% so financing, And reserve. an of

Operator

Our next from Batory question Oppenheimer. comes with Tyler

Tyler Batory

here. Congratulations responsibilities to the Nick on new

First that the quarter, that question, John, of just million from that extra just follow $XX $XX had million, extra said the you increase I'm just Is right prior to have of million correct? there's assuming at that through, now? repayments principal I the that on comments. you the one come up have of think $XX some cash you end

John Villano

line let you're somewhat defensive, bottom I cash the have And right, it clear, does think here. Tyler. being is of [ me ], performance. effect correct. And be hurting That Marshalling perfectly coming

have December do notes So pay or to cash. $XX We yes, rate the you're save we're absolutely Currently, interest early not. we million those right. off the should whether approximately deciding on in

coming pike. Board a the that's down that's So decision

Tyler Batory

think bit in million some you prior And quarter. said of in in the million I of Okay. provided, a up change nonaccrual, $XXX versus the a little foreclosure, tick I numbers then think $XX the you

and spot what's you there, now? maybe So what just go there's numbers kind those that you could potential if right given think more couple quarters? even in little higher about of a of a talk bit next going good Or have the you're on

John Villano

Yes.

a spot, but to So all, right, love in is I'd good big clarity, issue first I'm right now. say a of

fighting believers rapidly cut, throw prices business interest COVID comes still point material labor the is out We of of X.X some kind costs, it if now prices only problems and through decreasing solve that it and not industry. We're but plans not that and in comes, going increasing whack. excesses, still to are when the

through a We're to REITs, mortgage of political, the not ridiculous or to tune get taking have certainly ability fellow out money. coming, was with there's defaults. And but by of election can't. this to We Gaurav his our don't. month. period questions, an competition, going a We uncertainty, they say, wars month wanting right? with kind chase lot where And not going of lever there's have there. We're in We

walking earn that's the plank, can't off these that. to don't we So you're We that feel really through -- we yourself just do things. want and

think better didn't just like Those we yesterday, time that pay million an months, on is on us full that We're for industrial growth wagon. So to the pay. back defense. X to a $X.XX XXXX Hey, things loan, we in a property received happen. get playing

portfolio So still you did million is in $XX the And last X.X noted, raise moving. the as we months.

out is turning. But go. they're distress quite getting with with borrowers up. difficult. just we the jammed the And respect there, Nick very we're them and happy nowhere we're that, gets risk is still to So issue real run is at vibe the into mentioned, how portfolio for that once to XXX% There's as appraisals

running can say, you time What in if some a that, you what us we're for XX%?" clarity a just you same time. into So at forward. little I of moving little a distress know, those It's give we're get going So off to the take I bit to fighting "Hey, if borrower where XX%? give of

Tyler Batory

Okay.

last Okay. how about for forward, There's policy, about in are Great. kind that. And question me. dividend, dividend industry. people given ask out, going we the the think of dividend the lot a then Appreciate where of to reach the

could that helpful. shareholders, address be you would if for So that please,

John Villano

us our earnings, done liquidity to we dividend book, we we're let's we've Well, to like much a dividend. call on we've paying yield to. of for no $X.XX was used tax our The instead greater. What don't here is our, there's kind way common worked a GAAP bit. of maintain our earnings grow down have it, actually When here out

So still dividend on But cash couple cash. once is again, little down it back a we're the liquidity and We just in Again, we strong hope conserving be bit. king. that have quarters trying We're we the of this. to a to train future. more near scale feel

So to or next the a I here have X. mean for going I we're think dividend reduced quarter

Nicholas Marcello

Yes.

Just non-GAAP add taxable to that. paying now. right We're

about our about is net think you more, don't taxable earnings So some could CECL as think that disclosed. taxable kind And reduce distributable peers of like you and of income. reserves

for $X.XX quarter. those So -- an to if those we that add sort look back, you closer number as at that of distributed you get the

Operator

Citizens from Our JMP. Chris question next comes Muller with

Christopher Muller

the on Nick, Congrats, new role.

to you touch nature guys did reserves? drove the So what that of And from quickly I the Is that guess, I the the so about. modifications the assets with million changed specific guess, I kind reserves there? wanted of they quarter? talked given on the for $X.X specific last not short-term your of reserve, loans, what qualify

John Villano

property, We the borrower re-underwrite go of a things When that. finding a basically we that in What didn't going for example, through of the modification, like our is our loan. up, we're is not same it's kind lease also forward. find shape may

be a to the of with more being where bunch aggressive to it's write-down, realistic occurrences. respect sits, we're the respect portfolio we're and not with So different trying to

Just trying realizable for net value a be. get what to may feel

Christopher Muller

coin and REO, in really Got And increase other then haven't guess side over the on it. more these REO you side the the you do I a bucket. be that quarters to go Should expect successful the jump with on through we loans? have you'll things modification work big we to of seen Or that see of as think REO? of next some couple won't

John Villano

tons a properties. The it, or is able issue now in best for in world get business. getting the Our in and opinion, foreclosure. thing sale good okay? the control Once a forward respect make our of property They bad, complete from of frivolous, we're phenomena very keeps Chris, processes, the quite money, the to a there's or renovation a stall we a is an it move really attorney our interesting moving back biggest us fighting with property. to to

process. up weeks the sold So we within a In back, after the is the in are is hung it things foreclosure cases, when it. these getting most property issue few get

It the testament happy do the property. good we just for around a back and getting the where into REO them our long, some can underwriting. that. So to doesn't about hands is quite we're stick It's with

Operator

Christopher with comes next Thalmann. Our from question Ladenburg Nolan

Christopher Nolan

Nick, or of a on on that congratulations step. John, LTVs is cash for or a reserves, combination? the function allowance flows the the lower lower property

John Villano

It's a an mixed cases, bag, Chris. it's In some LTV.

be We have run We do cash talked and we publicly about risk. we It could appraisal -- also to have that. into continue flows.

properties doesn't is rented rent rents, roll, where perfect. bank into one with and meaning magnificent We our of I situations the refi premium they're have mean, trust fully rents, too run

refi the discount offer and rents to they is the out So less.

that into a are So all them sudden, perfect, and the And we're properties to continue. running expect of performing perfectly. too don't now are rents they

we're also, the get your or willingness to a appraisal. affects project. distressed So running into to issues, it all we a of sudden, and on in developer loan capital, a next street banks into property developer a bag a the loan sells that of mixed then And have

it's of try we to differently. little us. So again, time one handle a But mixed have a more little deal to kind with bag We for a each this.

Christopher Nolan

Okay.

a that assuming chunk of -- provisioning. the is that? LTV read cut CECL it into may a Is a reasonable that So giving is relief related, it a rate little on be you good

John Villano

not I yes. issues, think would our only don't our say one issues. I cut industry solve but rate will

steady estate of start we get and also and is for change I projects wet the think great have a by and in think we just, whistle X the own deals. One cut best. pipeline once together, I our putting to for our to X their Federal let's policy fixed. if buyer, from with the coming come a these things do it be doing refilling or investor Reserve, but But hope time sees only to start the not a real would them distress,

Christopher Nolan

Final on structure. question capital is

that's about Following a now to capital more forward. what of improved also considering the expect And it bit you are the balance structure know really if sounds starting going more that sheet getting notes approach like flow withdrawal should do with. of you're to you like pricing, I'm think case, little And we guys to got deleveraged deal than a your sort offering, it the the sounds how because sense you different.

as why raise well? prices not so And

John Villano

notes, Lowering right our do money I We is do have X our December And and something go think now. our opinion, do are replace shareholders [ like out to thing [ looking deal the in would which flow. certainly that and deals. X with can't world exactly I XX the significant uglier. leverage our None maybe or ] ] to of or types it move. is, for something appreciate that of XX, our pay even

not is on. We the ship ]. lights still the when book can sink we're position by I X defense, and to price. respect still We looking of growth, just going So business. little [ turned a strong grow get We mean still pricing. to really our be to have us think playing to we're with XX to the back

service It's severely. just have income not our fee. fee we're We construction our deals, down doing origination is many so

Operator

Erdner comes Our Matthew with next from question Trading. Jones

Matthew Erdner

sure off. to the just million back, this repeat by of Net in $XX.X $XX.X I numbers, then paydowns. million right I and offset want fundings first got make

So million? getting growth net about like portfolio I'm of $X.X

John Villano

right. about It's

Nicholas Marcello

That's correct. Yes.

Matthew Erdner

$XX the million pace? remainder expectation your of it year? expect at then continue to that is of the we payoffs for for Okay. And Should what kind

John Villano

$XXX of work project shoes like cash probably projection, hard There's would deals We're still good like look getting refinanced on to our lot to had We where able into better books portfolio -- a X to ago. to which quarter. not if maybe things of that. -- say, of year, loans something and I that robust. years some Matt. I the jumping are million still probably would going be a over that. $XX quite used we the the raise whole are million fundings growth, a ton expect it's a to to I repayments, payoffs do Payoffs out a doing used end We

guess. be probably would to million $XX be So around net growth it's my going best

Matthew Erdner

it kind then as you the And keeping weigh the versus posture, hand continue money to sheet defend of and on cash the sheet balance guys have the just you. take of you new kind of to keeping Got how current do defensive balance care lending on and capital that out structure?

John Villano

make quite of our to can buy in office honestly. here, tug war the we The shares There's investment here. best a is right

We at are to a lender. the We want waste cash buying don't shares moment.

king buying is may may right be on at goes, and depending So little you stock after what there There I think, bit where look, see shares price this moment. here some some cash call. and a happens the

So things. available cash those we have to do

COVID to thing. knowing we it's I'm available lend. cash a at hit, a night, very easy to able have had honestly, scenario, sleep much great And -- quite We like that COVID cash. And when

know So problems we earn to want we outearn try to -- because is. end don't our the where don't out just

So to ends. we prudent just be a guys this have where cash you to do with things. We're of ask we and quarters see going to cash, couple give our to us

So clarity clear in Middle I and have but start on should to elections East, the what's things probably think we'll after up. the some going

Matthew Erdner

size? mentioned had Right. throw like facility Right. on credit something turning to? repurchase then of facility, had possibly left helpful. about to I the the you kind you bank discussions And demand to guys a increasing a the any what's credit you Have agreement or [ new there. think on the ] for That's million side $XX the And ones

John Villano

Bank. We Needham great have relationship a with

likely been But probably upsize. see with to do. Most of an again, thing not line they if discussed have ton a they've the a they partner using a that don't us for it's great us. We sitting cash, want

business. at do a have push lot Churchill price. there's room. real no a a They, we're it our look, we're play appreciate accretive to comes posture think facility to more I too, do right And from hopefully, now, it taking. Hey, comes great they looking always safe us capital And of with for We for want that unless additional give Needham. the grow cash. liquidity

Operator

question-and-answer This the our concludes We teleconference. today's session. have reached of end

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

Sachem Capital (SACH) 14 Aug 242024 Q2 Earnings call transcript