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Sachem Capital Reports Revenue of $3.4 Million and Net Income of $2.1 Million for the Third Quarter of 2019

November 14, 2019

BRANFORD, Conn.--(BUSINESS WIRE)--Nov 14, 2019--

Sachem Capital Corp. (NYSE American: SACH) today announced its financial results for the third quarter ended September 30, 2019. In addition, the company announced that it will host a conference call on November 15, 2019 at 11:00 a.m. Eastern Standard Time to discuss its financial condition and operating results for the three and nine months ended September 30, 2019.

John Villano, CPA, co-chief executive officer and chief financial officer of Sachem Capital Corp., stated, “I am pleased to report that revenue for the third quarter of 2019 increased 10.7% to $3.4 million and net income increased 4.7% to $2.1 million, compared to the same period last year. In addition, our earnings per share for the third quarter improved sequentially to $0.10 compared to $0.06 for the second quarter of 2019. We believe these improved results validate our strategy to restructure our balance sheet as we have started to deploy the capital we raised during the first six months of the year. While we continue to be highly selective as we review lending opportunities, the demand for our products and services is robust and we are well capitalized with a much stronger balance sheet, which gives us greater flexibility to execute our growth strategy. With approximately $40 million of available capital, including the net proceeds from our recent note offering, we believe we are well positioned heading into the fourth quarter and 2020, in terms of both revenue growth and profitability. Overall, we believe we have built a highly scalable business model to drive both cash flow and value for our shareholders.”

Results of operations – three months ended September 30, 2019

Total revenue for the three months ended September 30, 2019 was approximately $3.4 million compared to approximately $3.1 million for the three months ended September 30, 2018, an increase of approximately 10.7%. Compared to the 2018 period, for the 2019 period, interest income was higher by approximately $171,000, origination fees were higher by approximately $114,000 and other income was higher by approximately $150,000. These increases were offset by reductions of approximately $107,000 in gain on sale of real estate and approximately $42,000 in late fee income.

Total operating costs and expenses for three months ended September 30, 2019 were approximately $1.3 million compared to $1.1 million for the three months ended September 30, 2018, an increase of approximately 21.6%. The increase in operating costs and expenses is primarily attributable to increases in interest and amortization of deferred financing costs of approximately $44,000 reflecting the increase in the mortgage loan portfolio, professional fees approximately $51,000 and compensation, fees and taxes of approximately $132,000 offset by stock-based compensation of approximately $25,000 and general and administrative expenses of approximately $11,000.

Net income for the three months ended September 30, 2019 was approximately $2.1 million, or $0.10 per share, compared to $2.0 million, or $0.13 per share for the three months ended September 30, 2018.

Results of operations – nine months ended September 30, 2019

Total revenue for the nine months ended September 30, 2019 was approximately $9.8 million compared to approximately $8.8 million for the nine months ended September 30, 2018, an increase of approximately $980,000, or 11.1%. The increase in revenue resulted from an increase in lending operations. For the 2019 period, interest income was approximately $7.5 million, net origination fees were approximately $1.2 million and other income was approximately $650,000. In comparison, for the nine months ended September 30, 2018, interest income was approximately $6.6 million, net origination fees were approximately $1.1 million and other income was approximately $675,000. Fee income increased by approximately $61,000. These increases were offset, in part, by a reduction in gain on the sale of real estate of approximately $100,000.

Total operating costs and expenses for nine months ended September 30, 2019 were approximately $4.5 million compared to $2.7 million for the nine months ended September 30, 2018, an increase of approximately 70.0%. The increase in operating costs and expenses is primarily attributable to $780,000 of expense incurred in connection with the termination of the Webster Credit Facility. In addition to that expense being a non-recurring charge, $439,446 represents a write-off of unamortized deferred financing costs, a non-cash item. Interest and amortization of deferred financing costs increased approximately $512,000 reflecting the increase in the mortgage loan portfolio, as well as an increase in the interest rate on the Webster Facility and the slightly higher cost of capital on our unsecured bonds, a $423,000 increase in compensation expense (including stock-based compensation) and an $86,000 increase in general and administrative expenses.

Net income for the nine months ended September 30, 2019 was approximately $5.3 million, or $0.30 per share. In comparison, net income for the nine months ended September 30, 2018 was $6.1 million, or $0.40 per share.

Investor Conference Call

The company will host a conference call on November 15, 2019 at 11:00 a.m., Eastern Standard Time, to discuss the company’s financial results for the third quarter ending September 30, 2019 as well as the company’s corporate progress and other meaningful developments.

Interested parties can access the conference call by calling 844-602-0380 for U.S. callers, or +862-298-0970 for international callers. The call will be available on the company’s website via webcast at https://www.sachemcapitalcorp.com. John Villano, Co-Chief Executive Officer and Chief Financial Officer will lead the conference call.

A 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 11:00 a.m. on November 29, 2019, and can be accessed by calling: 877-481-4010 for U.S. callers or +919-882-2331 for international callers and entering conference ID: 56830.

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 2018 filed with the U.S. Securities and Exchange Commission on March 29, 2019. 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.

BALANCE SHEETS

 

 

 

September 30,

 

 

December 31,

 

 

 

2019

 

 

2018

 

 

 

 

(Unaudited)

 

 

 

(Audited)

 

Assets

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

Cash

 

$

11,004,943

 

 

$

99,310

 

Cash - restricted

 

 

-

 

 

 

59,549

 

Escrow deposits

 

 

-

 

 

 

12,817

 

Mortgages receivable

 

 

89,020,538

 

 

 

78,011,653

 

Mortgages receivable, affiliate

 

 

-

 

 

 

879,457

 

Interest and fees receivable

 

 

1,431,414

 

 

 

1,397,038

 

Other receivables

 

 

222,237

 

 

 

155,000

 

Due from borrowers

 

 

843,409

 

 

 

695,218

 

Prepaid expenses

 

 

37,171

 

 

 

14,866

 

Property and equipment, net

 

 

1,320,424

 

 

 

1,180,107

 

Deposits on property and equipment

 

 

49,881

 

 

 

12,000

 

Real estate owned

 

 

5,310,523

 

 

 

2,943,438

 

Deferred financing costs

 

 

38,351

 

 

 

553,597

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

109,278,891

 

 

$

86,014,050

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders' Equity

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

Unsecured unsubordinated fixed rate notes (net of deferred financing costs of $1,242,192)

 

$

22,420,808

 

 

$

-

 

Line of credit

 

 

-

 

 

 

27,219,123

 

Mortgage payable

 

 

788,148

 

 

 

290,984

 

Accounts payable and accrued expenses

 

 

131,901

 

 

 

316,413

 

Security deposits held

 

 

7,800

 

 

 

7,800

 

Funds held in escrow

 

 

25,000

 

 

 

-

 

Advances from borrowers

 

 

498,504

 

 

 

317,324

 

Due to shareholder

 

 

-

 

 

 

1,200,000

 

Deferred revenue

 

 

1,067,667

 

 

 

1,058,406

 

Notes payable

 

 

68,634

 

 

 

-

 

Capital leases payable

 

 

11,573

 

 

 

-

 

Dividend payable

 

 

-

 

 

 

2,624,566

 

Accrued interest

 

 

3,323

 

 

 

176,619

 

Total liabilities

 

 

25,023,358

 

 

 

33,211,235

 

 

 

 

 

 

 

 

 

 

Commitments and Contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders' equity:

 

 

 

 

 

 

 

 

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

 

 

-

 

 

 

-

 

Common stock - $.001 par value; 50,000,000 shares authorized; 22,088,325 and 15,438,621 issued and outstanding

 

 

22,088

 

 

 

15,439

 

Paid-in capital

 

 

83,787,674

 

 

 

53,192,859

 

Retained earnings (accumulated deficit)

 

 

445,771

 

 

 

(405,483

)

Total shareholders' equity

 

 

84,255,533

 

 

 

52,802,815

 

Total liabilities and shareholders' equity

 

$

109,278,891

 

 

$

86,014,050

 

STATEMENTS OF OPERATIONS

(unaudited)

 

 

 

Three Months

 

 

Nine Months

 

 

 

Ended September 30,

 

 

Ended September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Interest income from loans

 

$

2,442,750

 

 

$

2,272,100

 

 

$

7,509,155

 

 

$

6,610,273

 

Origination fees, net

 

 

497,237

 

 

 

383,322

 

 

 

1,202,777

 

 

 

1,071,921

 

Late and other fees

 

 

18,149

 

 

 

59,949

 

 

 

205,182

 

 

 

144,031

 

Processing fees

 

 

44,870

 

 

 

30,680

 

 

 

121,470

 

 

 

101,480

 

Rental income, net

 

 

9,446

 

 

 

10,136

 

 

 

82,350

 

 

 

87,865

 

Other income

 

 

353,671

 

 

 

175,271

 

 

 

650,202

 

 

 

674,830

 

Net gain on sale of real estate

 

 

12,927

 

 

 

119,666

 

 

 

20,076

 

 

 

119,666

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue

 

 

3,379,050

 

 

 

3,051,124

 

 

 

9,791,212

 

 

 

8,810,066

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and amortization of deferred financing costs

 

 

537,878

 

 

 

493,992

 

 

 

1,611,332

 

 

 

1,098,912

 

Stock based compensation

 

 

4,107

 

 

 

29,250

 

 

 

12,327

 

 

 

29,250

 

Professional fees

 

 

105,053

 

 

 

54,330

 

 

 

259,275

 

 

 

212,789

 

Compensation, fees and taxes

 

 

476,404

 

 

 

344,266

 

 

 

1,325,822

 

 

 

886,024

 

Exchange fees

 

 

11,343

 

 

 

10,000

 

 

 

32,850

 

 

 

26,667

 

Other expenses and taxes

 

 

39,355

 

 

 

7,669

 

 

 

70,683

 

 

 

67,668

 

Expense in connection with termination of LOC

 

 

-

 

 

 

-

 

 

 

779,641

 

 

 

-

 

Excise tax

 

 

-

 

 

 

-

 

 

 

-

 

 

 

19,000

 

Depreciation

 

 

18,618

 

 

 

6,834

 

 

 

44,286

 

 

 

20,302

 

General and administrative expenses

 

 

131,206

 

 

 

142,119

 

 

 

400,561

 

 

 

314,839

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating costs and expenses

 

 

1,323,964

 

 

 

1,088,460

 

 

 

4,536,777

 

 

 

2,675,451

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

2,055,086

 

 

$

1,962,664

 

 

$

5,254,435

 

 

$

6,134,615

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted net income per common share outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.10

 

 

$

0.13

 

 

$

0.30

 

 

$

0.40

 

Diluted

 

$

0.10

 

 

$

0.13

 

 

$

0.30

 

 

$

0.40

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

21,336,870

 

 

 

15,433,000

 

 

 

17,622,480

 

 

 

15,421,555

 

Diluted

 

 

21,336,870

 

 

 

15,433,000

 

 

 

17,662,480

 

 

 

15,421,555

 

STATEMENTS OF CASH FLOW

(unaudited)

 

 

 

Nine Months

 

 

 

Ended September 30,

 

 

 

2019

 

 

2018

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

Net income

 

$

5,254,435

 

 

$

6,134,615

 

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

 

 

 

 

 

 

 

 

Amortization of deferred financing costs

 

 

159,872

 

 

 

90,165

 

Depreciation expense

 

 

44,286

 

 

 

20,302

 

Stock based compensation

 

 

12,327

 

 

 

29,250

 

Gain on sale of real estate

 

 

(20,076

)

 

 

(119,666

)

Abandonment of office furniture

 

 

12,000

 

 

 

-

 

Costs in connection with termination of line of credit

 

 

439,446

 

 

 

-

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

(Increase) decrease in:

 

 

 

 

 

 

 

 

Escrow deposits

 

 

12,813

 

 

 

111,189

 

Interest and fees receivable

 

 

(454,487

)

 

 

(916,672

)

Other receivables

 

 

(67,237

)

 

 

(150,520

)

Due from borrowers

 

 

2,122,939

 

 

 

(308,866

)

Prepaid expenses

 

 

(22,305

)

 

 

(23,093

)

Deposits on property

 

 

(37,881

)

 

 

-

 

(Decrease) increase in:

 

 

 

 

 

 

 

 

Due to note purchaser

 

 

(176,619

)

 

 

(723,478

)

Accrued interest

 

 

3,323

 

 

 

117,128

 

Accrued expenses

 

 

(159,512

)

 

 

(295,734

)

Deferred revenue

 

 

9,261

 

 

 

44,265

 

Advances from borrowers

 

 

180,889

 

 

 

(243,387

)

Total adjustments

 

 

2,059,039

 

 

 

(2,369,117

)

NET CASH PROVIDED BY OPERATING ACTIVITIES

 

 

7,313,474

 

 

 

3,765,498

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Proceeds from sale of real estate owned

 

 

362,136

 

 

 

672,538

 

Acquisitions of and improvements to real estate owned

 

 

(443,217

)

 

 

(104,799

)

Purchase of property and equipment

 

 

(196,603

)

 

 

(331,386

)

Principal disbursements for mortgages receivable

 

 

(42,163,704

)

 

 

(37,278,346

)

Principal collections on mortgages receivable

 

 

27,917,331

 

 

 

20,958,280

 

NET CASH USED FOR INVESTING ACTIVITIES

 

 

(14,524,057

)

 

 

(16,083,713

)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Proceeds from notes sold to shareholder

 

 

1,017,000

 

 

 

-

 

Repayment of notes sold to shareholder

 

 

(2,217,000

)

 

 

-

 

Proceeds from line of credit

 

 

42,720,829

 

 

 

61,067,401

 

Repayment of line of credit

 

 

(69,939,952

)

 

 

(43,648,867

)

Dividends paid

 

 

(7,027,746

)

 

 

(4,935,365

)

Pre-offering costs incurred

 

 

-

 

 

 

(853

)

Financing costs incurred

 

 

(6,836

)

 

 

(566,886

)

Proceeds from mortgage payable

 

 

795,000

 

 

 

-

 

Repayment of mortgage payable

 

 

(297,837

)

 

 

(7,535

)

Proceeds from notes payable, net

 

 

68,634

 

 

 

-

 

Proceeds from issuance of common stock

 

 

30,736,148

 

 

 

-

 

Cost associated with the issuance of common stock

 

 

(147,002

)

 

 

 

 

Proceeds from issuance of bonds

 

 

23,663,000

 

 

 

-

 

Cost associated with the issuance of notes

 

 

(1,307,571

)

 

 

-

 

NET CASH PROVIDED BY FINANCING ACTIVITIES

 

 

18,056,667

 

 

 

11,907,895

 

 

 

 

 

 

 

 

 

 

NET INCREASE (DECREASE) IN CASH AND RESTRICTED CASH

 

 

10,846,084

 

 

 

(410,320

)

 

 

 

 

 

 

 

 

 

CASH AND RESTRICTED CASH- BEGINNING OF YEAR

 

 

158,859

 

 

 

954,223

 

 

 

 

 

 

 

 

 

 

CASH AND RESTRICTED CASH - END OF PERIOD

 

$

11,004,943

 

 

$

543,903

 

STATEMENTS OF CASH FLOW (Continued)

 

 

 

September 30,

 

 

September 30,

 

 

 

2019

 

 

2018

 

 

 

 

(Unaudited)

 

 

 

(Unaudited)

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOWS

 

 

 

 

 

 

 

 

INFORMATION

 

 

 

 

 

 

 

 

Taxes paid

 

$

-

 

 

$

19,000

 

Interest paid

 

$

472,329

 

 

$

1,008,747

 

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES

During the nine months ended September 30, 2018, the Company purchased a mortgage receivable from a third party at a discount in the amount of $21,433.

Real estate acquired in connection with the foreclosure of certain mortgages, inclusive of interest and other fees receivable, during the nine months ended September 30, 2018 amounted to $2,369,196.

The reversal of previously accrued capitalized costs during the nine months ended September 30, 2018, amounted to $6,212.

Real estate acquired in connection with the foreclosure of certain mortgages, inclusive of interest and other fees receivable, during the nine months 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.

View source version on businesswire.com:https://www.businesswire.com/news/home/20191114005462/en/

CONTACT: Investor & Media Contact:

Crescendo Communications, LLC

David Waldman

Email:sach@crescendo-ir.com

Tel: (212) 671-1021

KEYWORD: UNITED STATES NORTH AMERICA CONNECTICUT

INDUSTRY KEYWORD: PROFESSIONAL SERVICES RESIDENTIAL BUILDING & REAL ESTATE COMMERCIAL BUILDING & REAL ESTATE FINANCE CONSTRUCTION & PROPERTY REIT BANKING

SOURCE: Sachem Capital Corp.

Copyright Business Wire 2019.

PUB: 11/14/2019 08:59 AM/DISC: 11/14/2019 08:59 AM

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