Business Wire | Nov 9, 2020 08:00AM EST

Sachem Capital Reports Revenue Increase of 26% for Q3 2020

Nov. 09, 2020

BRANFORD, Conn.--(BUSINESS WIRE)--Nov. 09, 2020--Sachem Capital Corp. (NYSE American: SACH) announces its financial results for the third quarter ended September 30, 2020. The company will host a conference call on Tuesday, November 10th, 2020 at 8:00 a.m. Eastern Standard Time to discuss in greater detail its financial condition and operating results for the third quarter of 2020.

John Villano, CPA, the company's Chief Executive and Chief Financial Officer stated: "We continue to achieve strong financial performance despite the COVID-19 pandemic, as evidenced by a 26% increase in third quarter 2020 revenue versus the same period last year. Importantly, the fix-and-flip market has continued to improve in our traditional markets, as evidenced by an increase in the number of loan pay-offs and new loans. As a result, we have relaxed some of the precautionary measures we put in place due to COVID-19, increasing our loan-to-value ratio back to 70% while still maintaining a cautionary approach. Moreover, we are aggressively expanding our mortgage loan portfolio in new markets such as Florida."

"Looking ahead, our loan pipeline is more robust than ever. For this reason, we recently completed a public offering for gross proceeds of $14 million to fund new real estate loans. Nevertheless, we remain focused on prudently deploying this capital as well as maintaining disciplined underwriting and a conservative loan-to-value ratio. As a result, we remain highly encouraged by the outlook for the rest of this year and our prospects for 2021."

Results of operations - three months ended September 30, 2020

Total revenue for the three months ended September 30, 2020, was approximately $4.3 million compared to approximately $3.4 million for the three months ended September 30, 2019, an increase of approximately 26%. For the third quarter of 2020, interest income and net origination fees were approximately $3.5 million and $393,000, respectively. In comparison, for the three months ended September 30, 2019, interest income and net origination fees were approximately $2.4 million and $497,000, respectively.

Total operating costs and expenses for the three months ended September 30, 2020, were approximately $2.1 million compared to $1.3 million for the three months ended September 30, 2019. Compared to the 2019 period, in the 2020 period interest expense and amortization of deferred financing costs increased approximately $724,000 due to the increase in the company's overall indebtedness, which was $85.6 million at September 30, 2020, compared to $24.5 million at September 30, 2019.

Net income for the three months ended September 30, 2020 was approximately $2.1 million, or $0.10 per share, compared to $2.1 million, or $0.10 per share for the three months ended September 30, 2019.

Results of operations - nine months ended September 30, 2020

Total revenue for the nine months ended September 30, 2020 was approximately $12.9 million compared to approximately $9.8 million for the nine months ended September 30, 2019, an increase of approximately 32%. For the nine months ended September 30, 2020, interest income was approximately $9.6 million and net origination fees were approximately $1.6 million, respectively. In comparison, for the nine months ended September 30, 2019, interest income and net origination fees were approximately $7.5 million and $1.2 million, respectively.

Total operating costs and expenses for the nine months ended September 30, 2020, were approximately $6.3 million compared to $4.5 million for the nine months ended September 30, 2019. The increase in operating costs and expenses is primarily attributable to the increase in the company's lending operations.

Net income for the nine months ended September 30, 2020 was approximately $6.7 million, or $0.30 per share, compared to approximately $5.3 million, or $0.30 per share for the nine months ended September 30, 2019.

Financial Condition

Overall, total assets increased by approximately $28.4 million as of September 30, 2020, compared to December 31, 2019, and total liabilities increased approximately $27.1 million during the same period. In addition, shareholders' equity increased by approximately $1.3 million compared to December 31, 2019.

During the third quarter of 2020, the Company sold $14.36 million aggregate principal amount of its 7.75% unsecured, unsubordinated notes due 2025. The net proceeds of the offering were approximately $13.62 million after payment of underwriting discounts and commissions and estimated offering expenses. In October 2020, the Company subsequently sold an additional $14 million aggregate principal amount of its 7.75% unsecured, unsubordinated notes due 2025. The net proceeds of the offering were approximately $13.4 million after payment of underwriting discounts and commissions and estimated offering expenses.

On October 16, 2020, the Company's board of directors authorized and declared a quarterly dividend of $0.12 per share to be paid to shareholders of record as of the close of trading on the NYSE American on October 26, 2020. The dividend was paid on November 4, 2020.

Investor Conference Call

The company will host a conference call on Tuesday, November 10th, 2020 at 8:00 a.m., Eastern Standard Time, to discuss in greater detail its financial results for the third quarter ending September 30, 2020, as well as its outlook for the balance of 2020. Interested parties can access the conference call by calling 844-407-9500 for U.S. callers, or 862-298-0850 for international callers. The call will be available on the company's website via webcast at https://www.sachemcapitalcorp.com. John Villano, the company's Chief Executive and Chief Financial Officer will lead the conference call.

The webcast will also be archived on the company's website and a telephone replay of the call will be available approximately one hour following the call, through Tuesday, November 24, 2020, and can be accessed by calling: 877-481-4010 for U.S. callers or 919-882-2331 for international callers and entering conference ID: 38542.

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, non-banking loans (sometimes referred to as "hard money" loans) to real estate investors to fund their acquisition, renovation, development, rehabilitation or improvement of properties located primarily in Connecticut. The company does not lend to owner occupants. The company's primary underwriting criteria is a conservative loan to value ratio. The properties securing the company's loans are generally classified as residential or commercial real estate and, typically, are held for resale or investment. Each loan is secured by a first mortgage lien on real estate. Each loan is also personally guaranteed by the principal(s) of the borrower, which guaranty may be collaterally secured by a pledge of the guarantor's interest in the borrower. The company also makes opportunistic real estate purchases apart from its lending activities. The company believes that it qualifies as a real estate investment trust (REIT) for federal income tax purposes and has elected to be taxed as a REIT beginning with its 2017 tax year.

Forward Looking Statements

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

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

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

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

SACHEM CAPITAL CORP.

BALANCE SHEETS

September 30, December 31, 2020 2019

(Unaudited) (Audited)

Assets

Assets:

Cash and cash equivalents $ 5,384,073 $ 18,841,937

Investments 27,688,794 15,949,802

Mortgages receivable 124,131,879 94,348,689

Interest and fees receivable 1,551,333 1,370,998

Other receivables 87,307 141,397

Due from borrowers 1,501,470 840,930

Prepaid expenses 106,816 24,734

Property and equipment, net 1,418,442 1,346,396

Deposits on property and equipment 172,210 71,680

Real estate owned 7,523,584 8,258,082

Deferred financing costs 66,086 16,600



Total assets $ 169,631,994 $ 141,211,245



Liabilities and Shareholders' Equity

Liabilities:

Notes payable (net of deferred financing costs $ 69,452,636 $ 55,475,810of $3,074,115 and $2,687,190)

Mortgage payable 771,785 784,081

Line of credit 12,080,569 -

Accounts payable and accrued expenses 522,453 249,879

Other loans 257,845 -

Security deposits held 13,416 7,800

Advances from borrowers 1,413,974 848,268

Deferred revenue 1,114,721 1,205,740

Notes payable 60,130 75,433

Accrued interest 80,672 3,416

Total liabilities 85,768,201 58,650,427

Commitments and Contingencies



Shareholders' equity:

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

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

Paid-in capital 83,810,276 83,856,308

Accumulated other comprehensive loss (37,596) (50,878)

Retained earnings (accumulated deficit) 68,996 (1,266,729)

Total shareholders' equity 83,863,793 82,560,818

Total liabilities and shareholders' equity $ 169,631,994 $ 141,211,245

SACHEM CAPITAL CORP.

STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

Three Months Ended

Nine Months

September 30,

Ended September 30,

2020

2019

2020

2019

Revenue:

Interest income from loans

$

3,473,304

$

2,442,750

$

9,640,387

$

7,509,155

Interest income on investments

32,483

28,148

163,161

28,148

Gain/(loss)on sale of investment securities

(21,858)

-

415,301

-

Origination fees, net

393,097

497,237

1,551,652

1,202,777

Late and other fees

10,955

18,149

46,835

205,182

Processing fees

37,445

44,870

123,568

121,470

Rental income, net

9,593

9,446

49,777

82,350

Other income

336,789

325,523

904,071

622,054

Net gain on sale of real estate

-

12,927

-

20,076

Total revenue

4,271,808

3,379,050

12,894,752

9,791,212

Operating costs and expenses:

Interest and amortization of deferred financing costs

1,262,278

537,878

3,564,533

1,611,332

Compensation, fees and taxes

496,058

476,404

1,220,412

1,325,822

Stock based compensation

4,107

4,107

12,321

12,327

Professional fees

158,206

105,053

400,868

259,275

Other expenses and taxes

26,247

39,355

61,484

70,683

Exchange fees

22,713

11,343

29,986

32,850

Expense in connection with termination of LOC

-

-

-

779,641

Impairment

-

-

495,000

-

Net loss on sale of real estate

2,816

-

7,276

-

Depreciation

15,348

18,618

46,318

44,286

General and administrative expenses

145,251

131,206

412,677

400,561

Total operating costs and expenses

2,133,024

1,323,964

6,250,875

4,536,777

Net income

2,138,784

2,055,086

6,643,877

5,254,435

Other comprehensive income (loss)

Unrealized gain (loss) on investment securities

(72,785)

-

13,282

-

Comprehensive income

$

2,065,999

$

2,055,086

$

6,657,159

$

5,254,435

Basic and diluted net income per common share outstanding:

Basic

$

0.10

$

0.10

$

0.30

$

0.30

Diluted

$

0.10

$

0.10

$

0.30

$

0.30

Weighted average number of common shares outstanding:

Basic

22,117,301

21,336,870

22,117,301

17,662,480

Diluted

22,117,301

21,336,870

22,117,301

17,622,480

SACHEM CAPITAL CORP.

STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

Three Months Ended Nine Months

September 30, Ended September 30,

2020 2019 2020 2019

Revenue:

Interest income $ 3,473,304 $ 2,442,750 $ 9,640,387 $ 7,509,155 from loans

Interest income 32,483 28,148 163,161 28,148 on investments

Gain/(loss)onsale of (21,858) - 415,301 - investmentsecurities

Origination fees, 393,097 497,237 1,551,652 1,202,777 net

Late and other 10,955 18,149 46,835 205,182 fees

Processing fees 37,445 44,870 123,568 121,470

Rental income, 9,593 9,446 49,777 82,350 net

Other income 336,789 325,523 904,071 622,054

Net gain on sale - 12,927 - 20,076 of real estate

Total revenue 4,271,808 3,379,050 12,894,752 9,791,212



Operating costs and expenses:

Interest andamortization of 1,262,278 537,878 3,564,533 1,611,332 deferredfinancing costs

Compensation, 496,058 476,404 1,220,412 1,325,822 fees and taxes

Stock based 4,107 4,107 12,321 12,327 compensation

Professional fees 158,206 105,053 400,868 259,275

Other expenses 26,247 39,355 61,484 70,683 and taxes

Exchange fees 22,713 11,343 29,986 32,850

Expense inconnection with - - - 779,641 termination ofLOC

Impairment - - 495,000 -

Net loss on sale 2,816 - 7,276 - of real estate

Depreciation 15,348 18,618 46,318 44,286

General andadministrative 145,251 131,206 412,677 400,561 expenses



Total operatingcosts and 2,133,024 1,323,964 6,250,875 4,536,777 expenses



Net income 2,138,784 2,055,086 6,643,877 5,254,435



Othercomprehensive income (loss)

Unrealized gain(loss) on (72,785) - 13,282 - investmentsecurities



Comprehensive $ 2,065,999 $ 2,055,086 $ 6,657,159 $ 5,254,435 income



Basic and dilutednet income per common shareoutstanding:

Basic $ 0.10 $ 0.10 $ 0.30 $ 0.30

Diluted $ 0.10 $ 0.10 $ 0.30 $ 0.30



Weighted averagenumber of common sharesoutstanding:

Basic 22,117,301 21,336,870 22,117,301 17,662,480

Diluted 22,117,301 21,336,870 22,117,301 17,622,480

SACHEM CAPITAL CORP.

STATEMENTS OF CASH FLOW

(unaudited)

Nine Months

Ended September 30,

2020

2019

CASH FLOWS FROM OPERATING ACTIVITIES

Net income

$

6,643,877

$

5,254,435

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

Amortization of deferred financing costs

357,497

159,872

Depreciation expense

46,318

44,286

Stock based compensation

12,321

12,327

Impairment loss

495,000

-

Loss (gain) on sale of real estate

7,276

(20,076)

Abandonment of office furniture

-

12,000

Costs in connection with termination of line of credit

439,446

Realized gain on investments

(415,301)

-

Changes in operating assets and liabilities:

(Increase) decrease in:

Escrow deposits

-

12,813

Interest and fees receivable

(180,335)

(454,487)

Other receivables

54,090

(67,237)

Due from borrowers

(273,202)

2,122,939

Prepaid expenses

(82,082)

(22,305)

Deposits on property and equipment

(100,530)

(37,881)

(Decrease) increase in:

Due to note purchaser

-

(176,619)

Accrued interest

77,256

3,323

Accounts payable and accrued expenses

272,574

(159,512)

Deferred revenue

(91,019)

9,261

Advances from borrowers

565,706

180,889

Total adjustments

745,569

2,059,039

NET CASH PROVIDED BY OPERATING ACTIVITIES

7,389,446

7,313,474

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of investments

(37,216,177)

-

Proceeds from the sale of investments

25,905,769

-

Proceeds from sale of real estate owned

1,816,522

362,136

Acquisitions of and improvements to real estate owned

(1,584,300)

(443,217)

Purchase of property and equipment

(118,364)

(196,603)

Security deposits held

5,616

-

Principal disbursements for mortgages receivable

(68,029,798)

(42,163,704)

Principal collections on mortgages receivable

37,859,270

27,917,331

NET CASH USED FOR INVESTING ACTIVITIES

(41,361,462)

(14,524,057)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from line of credit

14,080,569

42,720,829

Repayment of line of credit

(2,000,000)

(69,939,952)

Proceeds from notes sold to shareholder

-

1,017,000

Repayment of notes sold to shareholder

-

(2,217,000)

Principal payments on mortgage payable

(12,296)

-

Principal payments on notes payable

(15,303)

-

Dividends paid

(5,308,152)

(7,027,746)

Financing costs incurred

(108,353)

(6,836)

Proceeds from other loans

257,845

-

Proceeds from mortgage payable

-

795,000

Repayment of mortgage payable

-

(297,837)

Proceeds from notes payable, net

-

68,634

Proceeds from issuance of common stock

-

30,736,148

Costs associated with the issuance of common stock

-

(147,002)

Gross proceeds from issuance of fixed rate notes

14,363,750

23,663,000

Financing costs incurred in connection with fixed rate notes

(743,908)

(1,307,571)

NET CASH PROVIDED BY FINANCING ACTIVITIES

20,514,152

18,056,667

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

(13,457,864)

10,846,084

CASH AND CASH EQUIVALENTS- BEGINNING OF YEAR

18,841,937

158,859

CASH AND CASH EQUIVALENTS - END OF PERIOD

$

5,384,073

$

11,004,943

SACHEM CAPITAL CORP.

STATEMENTS OF CASH FLOW

(unaudited)

Nine Months

Ended September 30,

2020 2019

CASH FLOWS FROM OPERATING ACTIVITIES

Net income $ 6,643,877 $ 5,254,435

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

Amortization of deferred financing costs 357,497 159,872

Depreciation expense 46,318 44,286

Stock based compensation 12,321 12,327

Impairment loss 495,000 -

Loss (gain) on sale of real estate 7,276 (20,076)

Abandonment of office furniture - 12,000

Costs in connection with termination of 439,446 line of credit

Realized gain on investments (415,301) -

Changes in operating assets and liabilities:

(Increase) decrease in:

Escrow deposits - 12,813

Interest and fees receivable (180,335) (454,487)

Other receivables 54,090 (67,237)

Due from borrowers (273,202) 2,122,939

Prepaid expenses (82,082) (22,305)

Deposits on property and equipment (100,530) (37,881)

(Decrease) increase in:

Due to note purchaser - (176,619)

Accrued interest 77,256 3,323

Accounts payable and accrued expenses 272,574 (159,512)

Deferred revenue (91,019) 9,261

Advances from borrowers 565,706 180,889

Total adjustments 745,569 2,059,039

NET CASH PROVIDED BY OPERATING ACTIVITIES 7,389,446 7,313,474



CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of investments (37,216,177) -

Proceeds from the sale of investments 25,905,769 -

Proceeds from sale of real estate owned 1,816,522 362,136

Acquisitions of and improvements to real (1,584,300) (443,217) estate owned

Purchase of property and equipment (118,364) (196,603)

Security deposits held 5,616 -

Principal disbursements for mortgages (68,029,798) (42,163,704) receivable

Principal collections on mortgages 37,859,270 27,917,331 receivable

NET CASH USED FOR INVESTING ACTIVITIES (41,361,462) (14,524,057)



CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from line of credit 14,080,569 42,720,829

Repayment of line of credit (2,000,000) (69,939,952)

Proceeds from notes sold to shareholder - 1,017,000

Repayment of notes sold to shareholder - (2,217,000)

Principal payments on mortgage payable (12,296) -

Principal payments on notes payable (15,303) -

Dividends paid (5,308,152) (7,027,746)

Financing costs incurred (108,353) (6,836)

Proceeds from other loans 257,845 -

Proceeds from mortgage payable - 795,000

Repayment of mortgage payable - (297,837)

Proceeds from notes payable, net - 68,634

Proceeds from issuance of common stock - 30,736,148

Costs associated with the issuance of - (147,002) common stock

Gross proceeds from issuance of fixed rate 14,363,750 23,663,000 notes

Financing costs incurred in connection with (743,908) (1,307,571) fixed rate notes

NET CASH PROVIDED BY FINANCING ACTIVITIES 20,514,152 18,056,667



NET (DECREASE) INCREASE IN CASH AND CASH (13,457,864) 10,846,084 EQUIVALENTS



CASH AND CASH EQUIVALENTS- BEGINNING OF 18,841,937 158,859 YEAR



CASH AND CASH EQUIVALENTS - END OF PERIOD $ 5,384,073 $ 11,004,943

SACHEM CAPITAL CORP.

STATEMENTS OF CASH FLOW (Continued)

(unaudited)

Nine Months Ended

September 30,

2020

2019

SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION

Taxes paid

$

-

$

-

Interest paid

$

2,093,080

$

472,329

SUPPLEMENTAL INFORMATION-NON-CASH

Dividends declared and payable

$

-

$

-

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES

Real estate acquired in connection with the foreclosure of certain mortgages, inclusive of interest and other fees receivable, during the period ended September 30, 2019 amounted to $2,265,927.

During the nine months ended September 30, 2019, the Company purchased equipment for $13,005 subject to a capital lease.

During the nine months ended September 30, 2019, Mortgages receivable, affiliate in the amount of $879,457 were reduced to $0 as the underlying loans were transferred to the Company and are included in Mortgages receivable.

Real estate acquired in connection with the foreclosure of certain mortgages, inclusive of interest and other fees receivable, during the period ended September 30, 2020 amounted to $170,383.

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