Business Wire | Aug 10, 2020 08:00AM EDT

Sachem Capital Reports Revenue Increase of 41% and Net Income Increase of 98% for Q2 2020

Aug. 10, 2020

BRANFORD, Conn.--(BUSINESS WIRE)--Aug. 10, 2020--Sachem Capital Corp. (NYSE American: SACH) announces its financial results for the second quarter ended June 30, 2020. The company will host a conference call on Tuesday, August 11th, 2020 at 8:00 a.m. Eastern Daylight Saving Time to discuss in greater detail its financial condition and operating results for the second quarter of 2020.

Results of operations - three months ended June 30, 2020

Total revenue for the three months ended June 30, 2020, was approximately $4.3 million compared to approximately $3.1 million for the three months ended June 30, 2019, an increase of approximately 41%. For the second quarter of 2020, interest income and net origination fees were approximately $3.3 million and $647,000, respectively. In comparison, for the three months ended June 30, 2019, interest income and net origination fees were approximately $2.3 million and $341,000, respectively.

Total operating costs and expenses for the three months ended June 30, 2020, were approximately $2.0 million compared to $1.9 million for the three months ended June 30, 2019, an increase of approximately 6%. Compared to the 2019 period, in the 2020 period interest expense and amortization of deferred financing costs increased approximately $700,000 due to the increase in the company's overall indebtedness, which was $59.0 million at June 30, 2020, compared to $23.8 million at June 30, 2019.

In light of the COVID-19 pandemic, in the second quarter of 2020 the company made a strategic and purposeful decision to restrict lending and conserve cash. These prudent actions temporarily slowed the growth of our loan portfolio and associated revenue growth. This also accounted for the increase in investment income of approximately $33,000.

Net income for the three months ended June 30, 2020 was approximately $2.3 million, or $0.10 per share, compared to $1.1 million, or $0.06 per share per share for the three months ended June 30, 2019.

Results of operations - six months ended June 30, 2020

Total revenue for the six months ended June 30, 2020 was approximately $8.6 million compared to approximately $6.4 million for the six months ended June 30, 2019, an increase of approximately 34%. Revenue growth for the six months ended June 30, 2020, is directly related to the increase in loans funded during the first quarter of 2020. For the six months ended June 30, 2020, interest income was approximately $6.2 million and net origination fees were approximately $1.2 million, respectively.

Total operating costs and expenses for the six months ended June 30, 2020, were approximately $4.1 million compared to $3.2 million for the six months ended June 30, 2019, an increase of approximately 28%. The increase in operating costs and expenses is primarily attributable to the increase in the company's lending operations.

Net income for the six months ended June 30, 2020, was approximately $4.5 million, or $0.20 per share, compared to $3.2 million, or $0.19 per share for the six months ended June 30, 2019.

Financial Condition

Overall, total assets increased by approximately $2.2 million as of June 30, 2020, compared to December 31, 2019, and total liabilities increased approximately $350,000 during the same period.

On July 21, 2020, the Company 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 July 31, 2020. The dividend was paid on August 7, 2020.

John Villano, CPA, the company's Chief Executive and Chief Financial Officer stated: "We continue to generate strong financial performance despite the COVID-19 pandemic, as evidenced by a 41% increase in revenue and 98% increase in net income. In response to COVID-19 and the potential impact on the overall business environment, in early March we took immediate action- by temporarily putting our growth strategy on hold and focusing on preservation of capital and careful maintenance of our existing portfolio. Since that time, it is important to note that forbearance requests dropped from 42 at the end of the first quarter 2020 to just 23 at the end of the second quarter, which we believe illustrates an overall improvement in the market and validation of our strategy. Looking ahead, we will continue to prudently deploy capital and we are pursuing opportunistic expansion and diversification of our loan portfolio. Our loan pipeline is robust and we are cautiously optimistic heading into the second half of the year."

Investor Conference Call

The company will host a conference call on Tuesday, August 11th, 2020 at 8:00 a.m., Eastern Daylight Saving Time, to discuss in greater detail its financial results for the second quarter ending June 30, 2020, as well as its outlook for the balance of 2020 and strategy for dealing with the impact of the COVID-19 pandemic. 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 August 25, 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: 36572.

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



June 30, 2020 December 31, 2019

(Unaudited) (Audited)

Assets

Assets:

Cash and cash equivalents $ 4,647,973 $ 18,841,937

Investments 15,961,433 15,949,802

Mortgages receivable 111,430,500 94,348,689

Interest and fees receivable 1,557,092 1,370,998

Other receivables 116,397 141,397

Due from borrowers 1,243,580 840,930

Prepaid expenses 73,175 24,734

Property and equipment, net 1,377,992 1,346,396

Deposits on property and equipment - 71,680

Real estate owned 7,023,382 8,258,082

Deferred financing costs 16,258 16,600



Total assets $ 143,447,782 $ 141,211,245



Liabilities and Shareholders' Equity

Liabilities:

Notes payable (net of deferred financing costs $ 55,711,382 $ 55,475,810of $2,451,618 and $2,687,190)

Mortgage payable 775,901 784,081

Accounts payable and accrued expenses 301,715 249,879

Other loans 257,845 -

Security deposits held 13,416 7,800

Advances from borrowers 1,012,201 848,268

Deferred revenue 858,885 1,205,740

Notes payable 65,402 75,433

Accrued interest 3,272 3,416

Total liabilities 59,000,019 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 22,117 22,117and outstanding

Paid-in capital 83,806,169 83,856,308

Accumulated other comprehensive income (loss) 35,189 (50,878)

Retained earnings (accumulated deficit) 584,288 (1,266,729)

Total shareholders' equity 84,447,763 82,560,818

Total liabilities and shareholders' equity $ 143,447,782 $ 141,211,245

SACHEM CAPITAL CORP.STATEMENTS OF COMPREHENSIVE INCOME(unaudited)



Three Months Ended Six Months

June 30, Ended June 30,

2020 2019 2020 2019

Revenue:

Interest income $ 3,265,677 $ 2,315,325 $ 6,167,083 $ 5,066,405from loans

Interest income on 33,162 - 130,678 -investments

Loss (gain) on saleof investment (8,925) - 437,159 -securities

Origination fees, 647,499 340,823 1,158,555 705,540net

Late and other fees 21,099 140,537 35,880 187,033

Processing fees 39,665 41,805 86,123 76,600

Rental income, net 29,456 47,255 40,184 72,904

Other income 283,009 179,391 567,283 296,531

Net gain on sale of - - 7,149real estate

Total revenue 4,310,642 3,065,136 8,622,945 6,412,162



Operating costs and expenses:

Interest andamortization of 1,152,302 452,406 2,302,255 1,073,454deferred financingcosts

Compensation, fees 383,968 465,193 724,355 849,420and taxes

Stock based 4,107 4,107 8,214 8,214compensation

Professional fees 110,104 70,215 242,413 154,222

Other expenses and 6,534 17,139 35,238 31,332taxes

Exchange fees - 11,219 7,273 21,507

Expense inconnection with - 779,641 - 779,641termination of LOC

Impairment 245,000 - 495,000 -

Net loss on sale of - - 4,460 -real estate

Depreciation 14,688 18,164 30,971 25,667

General andadministrative 127,460 103,909 267,674 269,358expenses



Total operating 2,044,163 1,921,993 4,117,852 3,212,815costs and expenses



Net income 2,266,479 1,143,143 4,505,093 3,199,347

Other comprehensive income

Unrealized gain oninvestment 221,449 - 86,067 -securities



Comprehensive $ 2,487,928 $ 1,143,143 $ 4,591,160 $ 3,199,347income



Basic and dilutednet income per common shareoutstanding:

Basic $ 0.10 $ 0.06 $ 0.20 $ 0.19

Diluted $ 0.10 $ 0.06 $ 0.20 $ 0.19



Weighted averagenumber of common shares outstanding:

Basic 22,117,301 18,499,531 22,117,301 17,144,104

Diluted 22,117,301 18,499,531 22,117,301 17,144,104

SACHEM CAPITAL CORP.STATEMENTS OF CASH FLOW(unaudited)



Six Months

Ended June 30,

2020 2019

CASH FLOWS FROM OPERATING ACTIVITIES

Net income $ 4,505,093 $ 3,199,347

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

Amortization of deferred financing costs 235,913 94,323

Depreciation expense 30,971 25,667

Stock based compensation 8,214 8,214

Impairment loss 495,000 -

Loss(gain) on sale of real estate 4,460 (7,149)

Abandonment of office furniture - 12,000

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

Realized gain on investments (437,159) -

Changes in operating assets and liabilities:

(Increase) decrease in:

Escrow deposits - 12,817

Interest and fees receivable (186,094) (449,809)

Other receivables 25,000 25,000

Due from borrowers (597,776) 780,320

Prepaid expenses (48,441) (48,013)

Deposits on property and equipment 71,680 (177,481)

(Decrease) increase in:

Due to note purchaser - (176,619)

Accrued interest (144) -

Accounts payable and accrued expenses 51,836 (5,706)

Deferred revenue (346,855) 50,088

Advances from borrowers 163,933 (54,560)

Total adjustments (529,462) 528,538

NET CASH PROVIDED BY OPERATING ACTIVITIES 3,975,631 3,727,885



CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of investments (17,428,603) -

Proceeds from the sale of investments 17,940,198 -

Proceeds from sale of real estate owned 1,762,775 264,809

Acquisitions of and improvements to real (1,027,533) (342,598)estate owned

Purchase of property and equipment (62,567) (165,263)

Security deposits held 5,616 -

Principal disbursements for mortgages (42,303,747) (28,516,128)receivable

Principal collections on mortgages receivable 25,417,062 21,098,466

NET CASH USED FOR INVESTING ACTIVITIES (15,696,799) (7,660,714)



CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from line of credit - 42,720,829

Repayment of line of credit - (69,939,952)

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

Principal payments on mortgage payable (8,180) (2,947)

Principal payments on notes payable (10,031) -

Dividends paid (2,654,076) (4,679,293)

Financing costs incurred (58,353) (12,113)

Proceeds from other loans 257,845 -

Proceeds from mortgage payable - 795,000

Repayment of mortgage payable - (290,984)

Proceeds from notes payable, net - 71,820

Issuance of common stock ATM, net - 15,460,427

Gross proceeds from issuance of fixed rate - 23,000,000notes

Financing costs incurred in connection with - (1,270,000)fixed rate notes

NET CASH (USED IN)PROVIDED BY FINANCING (2,472,795) 6,869,787ACTIVITIES



NET (DECREASE) INCREASE IN CASH AND CASH (14,193,964) 2,936,958EQUIVALENTS



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



CASH AND CASH EQUIVALENTS - END OF YEAR $ 4,647,973 $ 3,095,818

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



Six months

Ended June 30,

2020 2019

SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION

Taxes paid $ - $ -

Interest paid $ 2,066,341 $ 979,131

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 June 30, 2019 amounted to $1,962,669.

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