Sachem Capital Corp. (NYSE American: SACH) announces its financial results for the third quarter ended September 30, 2022. The company will host a conference call tomorrow, Thursday, November 10, 2022, at 8:00 a.m. Eastern Standard Time to discuss in greater detail its financial condition and operating results for the third quarter ended September 30, 2022, as well as its outlook for the balance of the year.

John Villano, CPA, the company’s Chief Executive Officer stated: “Revenue for the third quarter of 2022 increased 58.9% to $13.5 million and we achieved $4.1 million of net income attributable to common shareholders, as well as $5.2 million of non-GAAP Adjusted Earnings, reflecting the strength of our business and specifically our loan portfolio in a very challenging interest rate environment. We continue to take appropriate measures to further reduce risk and insulate our loan portfolio, including additional enhancements to our underwriting process and limiting the term of new loans. In addition, we recently announced the acquisition of Urbane New Haven, LLC, which brings expertise in all phases of development and construction, including architecture, design, contracting, and marketing. This acquisition provides us the ability to reduce risks associated with distressed properties, as well as provide us with new income streams to help ensure the highest level of oversight and planning diligence on all construction projects.   In turn, we believe this acquisition should enable us to take on larger and more profitable construction loans, as well as further vertically integrate our lending platform. Importantly, we continue to witness strong demand for our loan products as developers prefer to borrow from us because of the flexibility we provide in structuring loans to suit their needs, as well as our ability to close quickly. Overall, our business model has proven to be highly scalable and resilient, as evidenced by our continued strong performance during the quarter.”

Results of operations- three months ended September 30, 2022

Total revenue for the three months ended September 30, 2022, was approximately $13.5 million compared to approximately $8.5 million for the three months ended September 30, 2021, an increase of approximately $5.0 million, or 58.9%. The increase in revenue is primarily attributable to an increase in our lending operations. For the 2022 period, interest income was approximately $11.5 million compared to approximately $6.1 million for the 2021 period, representing an increase of approximately $5.4 million or 89.5%. Origination and modification fees were approximately $1.7 million compared to approximately $1.3 million for the 2021 period, representing an increase of approximately $400,000 or 31.6%. For the three months ended September 30, 2022, revenue was partially offset by approximately $1.1 million of unrealized losses on investment securities. There was no such offset in the comparable 2021 period.

Total operating costs and expenses for three months ended September 30, 2022, were approximately $8.5 million compared to approximately $4.2 million for the three months ended September 30, 2021, an increase of approximately $4.3 million, or 101.0%. The increase in operating costs and expenses is primarily attributable to the increase in our indebtedness, which was the fuel for our revenue growth, and an increase in the cost of funds. In the 2022 period, interest and amortization of deferred financing costs was approximately $6 million compared to approximately $2.6 million in the same 2021 period, an increase of approximately $3.4 million or 130.7%. The balance of the increase in operating expenses was primarily attributable to (i) compensation, fees and taxes which increased approximately $738,000, a 95.7% increase over the comparable 2021 amount, and (ii) general and administrative expenses, which increased approximately $237,500, a 49.6% increase over the comparable 2021 amount.

For the quarter ended September 30, 2022, we reported an unrealized loss on investment securities of approximately $132,000 reflecting a decrease in the market value of certain securities since June 30, 2022. For the quarter ended September 30, 2021, we reported an unrealized loss on investment securities of approximately $500,000 reflecting the decrease in the market value of certain securities since June 30, 2021.

Net income attributable to common shareholders for the three months ended September 30, 2022, was approximately $4.1 million, or $0.11 per share, compared to approximately $3.4 million, or $0.12 per share for the three months ended September 30, 2021.

Results of operations- nine months ended September 30, 2022

Total revenue for the nine months ended September 30, 2022, was approximately $36.4 million compared to approximately $20.9 million for the nine months ended September 30, 2021, an increase of approximately $15.5 million, or 73.7%. The increase in revenue is primarily attributable to the growth in our lending operations. For the 2022 period, interest income was approximately $30.5 million compared to approximately $15.3 million for the 2021 period, representing an increase of approximately $15.2 million or 99.2%. Origination and modification fees increased to approximately $5.8 million for the 2022 period compared to approximately $2.8 million for the 2021 period, an increase of approximately $3.0 million, or 106.6%. Income from partnership investments increased to approximately $1.1 million for the 2022 period compared to approximately $90,000 for the 2021, an increase of approximately $1.0 million. Fee and other income was approximately $2.0 million for the 2022 period compared to approximately $1.9 million for the 2021 period, an increase of approximately $100,000. For the nine months ended September 30, 2022, revenue was offset by approximately $3.6 million of unrealized losses on investment securities. There was no such offset in the comparable 2021 period.

Total operating costs and expenses for nine months ended September 30, 2022, were approximately $21.8 million compared to approximately $11.9 million for the nine months ended September 30, 2021, an increase of approximately $9.9 million, or 82.6%. The increase in operating costs and expenses is primarily attributable to the increase in our overall indebtedness and the increase in our cost of funds. In the 2022 period, interest and amortization of deferred financing costs was approximately $15.1 million compared to approximately $7.5 million in the same 2021 period, an increase of $7.6 million, or 100.0%. The balance of the increase in operating expenses was attributable to (i) compensation, fees and taxes which increased approximately $1.5 million, or 69.7%, (ii) general and administrative expenses which increased approximately $625,000, or 45.6%, and (iii) impairment loss which increased approximately $322,000, or 68.6%.

For the nine months ended September 30, 2022, we reported an unrealized loss on investment securities of approximately $81,500 reflecting the decrease in the market value of such securities since December 31, 2021. For the nine months ended September 30, 2021, we reported an unrealized loss on investment securities of approximately $612,000 reflecting the decrease in the market value of such securities since December 31, 2020.

Net income attributable to common shareholders for the nine months ended September 30, 2022 was approximately $11.9 million, or $0.32 per share, compared to $8.1 million, or $0.32 per share for the nine months ended September 30, 2021.

Non-GAAP Metrics -- Adjusted Earnings

We invest our excess cash in marketable securities. Under GAAP, those securities are required to be “marked to market” at the end of each reporting period. Accordingly, if the value of certain of those securities increases, the increase is reported as revenue, whereas the remaining increase is reported as a change in accumulated other comprehensive income. On the other hand, if the value decreases, as has been the case in the first three quarters of 2022, the decrease in value of certain of the securities reduces our revenues. For income tax purposes, we do not report the gain or loss on those securities until they are sold. This creates a discrepancy between our GAAP net income and our taxable income. To maintain our status as a REIT, we are required to distribute, on an annual basis, at least 90% of our taxable income. Thus, to give our shareholders a better perspective of our taxable income, we use a metric called Adjusted Earnings.

Adjusted Earnings is calculated as net income attributable to common shareholders, prior to the effect unrealized gains (losses) on securities available-for-sale. Adjusted Earnings should be examined in conjunction with net income (loss) as shown in our statements of comprehensive income. Adjusted Earnings should not be considered as an alternative to net income (loss) (determined in accordance with GAAP), or to cash flows from operating activities (determined in accordance with GAAP), as a measure of our liquidity, nor is Adjusted Earnings indicative of funds available to fund our cash needs or available for distribution to shareholders. Rather, Adjusted Earnings is an additional measure we use to analyze our business performance because it excludes the effects of certain non-cash charges that we believe are not necessarily indicative of our operating performance. It should be noted that our manner of calculating Adjusted Earnings may differ from the calculations of similarly-titled measures by other companies. In addition, there may be other differences between GAAP and tax accounting that would impact Adjusted Earnings, which are not reflected in the table below.

    For the Three Month Period Ended September 30, 2022   For the Nine Month Period Ended September 30, 2022
Adjusted Earnings:        
Net income attributable to common shareholders   $ 4,131,873   $ 11,867,385
Add: Unrealized losses on investment securities     1,076,836     3,607,498
Adjusted earnings attributable to common shareholders   $ 5,208,709   $ 15,474,883

For the three months ended September 30, 2022, Adjusted Earnings per share was $0.13. For the nine months ended September 30, 2022, Adjusted Earnings per share was $0.42. There were no unrealized gains or losses on investment securities reported in net income for the three- and nine-month periods ended September 30, 2021.

Financial Condition

Total assets at September 30, 2022 were approximately $561.8 million compared to approximately $418.0 million at December 31, 2021, an increase of approximately $143.8 million, or 34.4%. The increase was due primarily to the increase of our mortgage loan portfolio of approximately $156.2 million, an increase in investments in partnerships of approximately $16.5 million, offset in part by a decrease in cash and cash equivalents and investment securities of approximately $32.8 million.

Total liabilities at September 30, 2022, were approximately $342.5 million compared to approximately $237.9 million at December 31, 2021, an increase of approximately $104.6 million, or 44.0%. This increase is principally due to increases in the repurchase facility of approximately $24.0 million, or 125.8%, and the notes payable, net of deferred financing costs, of approximately $119.0 million, or 74.1%, offset primarily by decreases in the accounts payable and accrued liabilities and accrued dividends of approximately $3.5 million, line of credit of approximately $29.6 million and advances from borrowers of approximately $5.1 million.

Total shareholders’ equity at September 30, 2022 was approximately $219.3 million compared to approximately $180.1 million at December 31, 2021, an increase of approximately $39.2 million, or 21.8%. This increase was due primarily to net proceeds of $36.7 million from the sale of common shares and our net income attributable to common shareholders of approximately $11.9 million, offset by dividends paid on our Series A Preferred Stock and common shares of $2.8 million and $9.6 million, respectively.

The company currently operates and qualifies as a Real Estate Investment Trust (REIT) for federal income taxes and intends to continue to qualify and operate as a REIT. Under federal income tax rules, a REIT is required to distribute a minimum of 90% of taxable income each year to its shareholders and the company intends to comply with this requirement for the current year.

Investor Conference Call

The company will host a conference call on Thursday, November 10, 2022, at 8:00 a.m., Eastern Standard Time, to discuss in greater detail its operations and financial results for the third quarter ended September 30, 2022.

Interested parties can access the conference call via telephone by dialing toll free 1- 877-545-0523 for U.S. callers or +1 973-528-0016 for international callers and entering the entry code: 134954. A webcast of the call may be accessed at https://www.webcaster4.com/Webcast/Page/2304/47085 or on Sachem’s website at https://ir.sachemcapitalcorp.com/ir-calendar.

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 Thursday, November 24, 2022, and can be accessed by dialing 877-481-4010 for U.S. callers or +1 919-882-2331 for international callers and by entering replay passcode: 47085.

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 2021 filed with the U.S. Securities and Exchange Commission on March 31, 2022, as supplemented by our subsequently filed Quarterly Reports on Form 10-Q. 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.

Investor & Media Contact:Crescendo Communications, LLCEmail: sach@crescendo-ir.comTel: (212) 671-1021

(tables follow)

SACHEM CAPITAL CORP.BALANCE SHEETS

             
       September 30, 2022      December 31, 2021
    (unaudited)   (audited)
Assets              
Assets:              
Cash and cash equivalents   $ 35,464,257     $ 41,938,897  
Investment securities     34,351,374       60,633,661  
Mortgages receivable     448,524,665       292,301,209  
Interest and fees receivable     5,746,907       3,693,645  
Due from borrowers     5,055,146       3,671,016  
Real estate owned     5,615,940       6,559,010  
Investments in partnerships     22,542,941       6,055,838  
Property and equipment, net     3,397,812       2,172,185  
Other assets     1,122,342       936,290  
Total assets   $ 561,821,384     $ 417,961,751  
             
Liabilities and Shareholders’ Equity              
Liabilities:              
Notes payable (net of deferred financing costs of $8,844,137 and $5,747,387)   $ 279,557,613     $ 160,529,363  
Repurchase facility     43,100,146       19,087,189  
Mortgage payable     750,000       750,000  
Line of credit     3,542,853       33,178,031  
Accrued dividends payable           3,927,600  
Accounts payable and accrued liabilities     1,162,170       697,403  
Advances from borrowers     9,936,828       15,066,114  
Deferred revenue     4,471,800       4,643,490  
Total liabilities     342,521,410       237,879,190  
             
Commitments and Contingencies              
             
Shareholders’ equity:              
Preferred shares - $.001 par value; 5,000,000 shares authorized; 1,903,000 shares of Series A Preferred Stock issued and outstanding     1,903       1,903  
Common shares - $.001 par value; 200,000,000 shares authorized; 40,080,672 and 32,730,004 issued and outstanding     40,081       32,730  
Paid-in capital     222,520,783       185,516,394  
Accumulated other comprehensive loss     (557,541 )     (476,016 )
Accumulated deficit     (2,705,252 )     (4,992,450 )
Total shareholders’ equity     219,299,974       180,082,561  
Total liabilities and shareholders’ equity   $ 561,821,384     $ 417,961,751  

SACHEM CAPITAL CORP.STATEMENTS OF COMPREHENSIVE INCOME(unaudited)

                         
    Three Months Ended   Nine Months Ended
    September 30,    September 30, 
       2022        2021        2022        2021  
Revenue:                            
Interest income from loans   $ 11,545,748     $ 6,094,165     $ 30,490,694     $ 15,307,692  
Investment gains, net     238,225       532,163       586,166       911,005  
Income from partnership investments     523,067       35,983       1,112,560       90,225  
Origination and modification fees, net     1,669,034       1,268,624       5,759,650       2,788,498  
Fee and other income     641,749       591,441       2,048,921       1,851,031  
Unrealized losses on investment securities     (1,076,836 )           (3,607,498 )      
Total revenue     13,540,987       8,522,376       36,390,493       20,948,451  
                         
Operating costs and expenses:                            
Interest and amortization of deferred financing costs     5,974,975       2,589,847       15,083,228       7,541,536  
Compensation, fees and taxes     1,509,518       771,373       3,691,421       2,175,603  
Other expenses     90,899       137,607       320,231       248,581  
General and administrative expenses     715,994       478,484       1,993,812       1,369,328  
Loss (Gain) on sale of real estate     962       94,450       (121,381 )     111,545  
Impairment loss     195,000       150,000       790,500       469,000  
Total operating costs and expenses     8,487,348       4,221,761       21,757,811       11,915,593  
Net income     5,053,639       4,300,615       14,632,682       9,032,858  
Preferred stock dividend     (921,766 )     (913,791 )     (2,765,297 )     (932,089 )
Net income attributable to common shareholders     4,131,873       3,386,824       11,867,385       8,100,769  
                         
Other comprehensive loss                        
Unrealized gain (loss) on investment securities     (131,569 )     (500,188 )     (81,525 )     (611,998 )
Comprehensive income   $ 4,000,304     $ 2,886,636     $ 11,785,860     $ 7,488,771  
Basic and diluted net income per common share outstanding:                            
Basic   $ 0.11     $ 0.12     $ 0.32     $ 0.32  
Diluted   $ 0.11     $ 0.12     $ 0.32     $ 0.32  
Weighted average number of common shares outstanding:                            
Basic     38,829,610       27,973,249       36,723,305       24,968,885  
Diluted     38,829,852       27,977,095       36,729,184       24,972,837  

SACHEM CAPITAL CORP.STATEMENTS OF CASH FLOW (unaudited)

             
    Nine Months Ended
    September 30, 
       2022        2021  
CASH FLOWS FROM OPERATING ACTIVITIES              
Net income   $ 14,632,682     $ 9,032,858  
Adjustments to reconcile net income to net             
cash provided by operating activities:            
Amortization of deferred financing costs and bond discount     1,664,822       839,418  
Write-off of deferred financing costs           72,806  
Depreciation expense     66,533       61,286  
Stock based compensation     357,321       126,632  
Impairment loss     790,500       469,000  
(Gain) Loss on sale of real estate     (121,381 )     111,545  
Unrealized loss on investment securities     3,607,498       (212,449 )
Loss on sale of investment securities     148,565        
Debt Forgiveness           (257,845 )
Changes in operating assets and liabilities:             
(Increase) decrease in:            
Interest and fees receivable     (2,154,704 )     (885,380 )
Other assets - other receivables     (418,176 )     (361,084 )
Due from borrowers     (1,505,785 )     (1,405,352 )
Other assets - prepaid expenses     153,842       (14,500 )
(Decrease) increase in:            
Accounts payable and accrued liabilities - accrued interest     431,110       (3,344 )
Accounts payable and accrued liabilities - accounts payable and accrued expenses     53,818       (179,992 )
Deferred revenue     (171,690 )     1,779,960  
Advances from borrowers     (5,129,286 )     8,201,117  
Total adjustments     (2,227,013 )     8,341,818  
             
NET CASH PROVIDED BY OPERATING ACTIVITIES     12,405,669       17,374,676  
             
CASH FLOWS FROM INVESTING ACTIVITIES              
Purchase of investment securities     (39,715,900 )     (160,896,229 )
Proceeds from the sale of investment securities     62,160,599       141,709,658  
Purchase of interests in investment partnerships, net     (16,487,103 )     (1,804,217 )
Proceeds from sale of real estate owned     1,571,467       1,839,977  
Acquisitions of and improvements to real estate owned, net     (101,168 )     (333,435 )
Purchase of property and equipment     (1,292,160 )     (817,785 )
Security deposits held           (11,416 )
Principal disbursements for mortgages receivable     (252,370,675 )     (154,810,007 )
Principal collections on mortgages receivable     95,173,969       90,463,016  
Other assets - costs in connection with SPAC offering     (166,360 )     (281,191 )
NET CASH USED FOR INVESTING ACTIVITIES     (151,227,331 )     (84,941,629 )
             
CASH FLOWS FROM FINANCING ACTIVITIES              
Net proceeds from (repayment of) line of credit     (29,635,178 )     2,000,511  
Net proceeds from repurchase facility     24,012,957        
Repayment of mortgage payable           (767,508 )
Accounts payable and accrued liabilities - principal payments on other notes     (20,161 )     (17,184 )
Dividends paid on common shares     (13,507,787 )     (8,778,392 )
Dividends paid on Series A Preferred Stock     (2,765,297 )     (932,089 )
Financings costs incurred           (450,651 )
Proceeds from issuance of common shares, net of expenses     36,654,419       30,883,928  
Proceeds from issuance of Series A Preferred Stock, net of expenses           45,462,626  
Gross proceeds from issuance of fixed rate notes     122,125,000        
Financings costs incurred in connection with fixed rate notes     (4,516,931 )      
NET CASH PROVIDED BY FINANCING ACTIVITIES     132,347,022       67,401,241  
             
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS     (6,474,640 )     (165,712 )
             
CASH AND CASH EQUIVALENTS- BEGINNING OF YEAR     41,938,897       19,408,028  
             
CASH AND CASH EQUIVALENTS - END OF PERIOD   $ 35,464,257     $ 19,242,316  

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

             
    Nine Months Ended
    September 30, 
       2022      2021
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION              
Interest paid   $ 13,012,805   $ 6,745,109

Real estate acquired in connection with the foreclosure of certain mortgages, inclusive of interest and other fees receivable, during the period ended September 30, 2022 amounted to $1,091,348.

 

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