Yahoo Finance Sachem Capital Corp (SACH) Q1 2024 Earnings Call Transcript Highlights: A Detailed Review of ...
Revenue: Grew by approximately 17% to $17.2 million in Q1 2024 from $14.7 million in Q1 2023.
Net Income: Decreased to $3.6 million in Q1 2024 from $4.2 million in Q1 2023.
Earnings Per Share (EPS): Declined to $0.08 in Q1 2024 from $0.10 in Q1 2023.
Total Operating Costs and Expenses: Increased to $12.5 million in Q1 2024 from $9.6 million in Q1 2023.
Loan Modifications and Extensions: Resulted in approximately $1.5 million in additional revenue.
Provision for Loan Losses: Recorded $1.3 million, primarily related to an office asset.
Total Assets: Valued at $626.5 million as of March 31, 2024.
Cash and Cash Equivalents: Approximately $18.4 million as of March 31, 2024.
Available Liquidity: $30 million available on credit facility as of March 31, 2024.
Loan Portfolio: Comprised of 273 loans with a total principal balance of approximately $490.7 million and a weighted average interest rate of 12.7%.
Non-Accrual Loans: Total principal balance of approximately $85.7 million in non-accrual status.
Release Date: May 10, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Sachem Capital Corp reported a revenue growth of approximately 17% to $17.2 million in Q1 2024 compared to $14.7 million in the same quarter of the previous year.
The company successfully modified or extended a total of 49 loans, resulting in gross fee income of approximately $1.2 million.
Sachem Capital Corp maintains a geographically diverse loan portfolio across 15 states, focusing on Southeastern growth markets, which includes a variety of property types such as multifamily, single-family, and other commercial real estate assets.
The company has maintained strong liquidity with total assets of $626.5 million as of March 31, 2024, including approximately $18.4 million in cash and cash equivalents.
Sachem Capital Corp continues to attract high-quality borrowers, enhancing the potential for stable and profitable loan originations despite a challenging lending environment.
Negative Points
Despite revenue growth, Sachem Capital Corp experienced a sharp reduction in loan originations during the quarter.
Total operating costs and expenses increased to approximately $12.5 million in Q1 2024 from about $9.6 million in the prior year quarter, driven by higher interest and amortization of deferred financing costs.
The company recorded a $1.3 million provision for loan losses, primarily related to an office asset, indicating potential risk in loan repayments.
Sachem Capital Corp reported a decrease in net income attributable to common shareholders to approximately $3.6 million in Q1 2024 from about $4.2 million in the same quarter last year.
The company faces ongoing challenges with non-accrual loans and foreclosures, with approximately $85.7 million in non-accrual status, including 60 loans in pending foreclosure.
Q & A Highlights
Q: John, thank you for the comments on Q4 on the financial strategy going forward, home on the topic of balancing lending and liquidity, should we read into the that you're going to be lowering the leverage on the balance sheet? A: Chris, unfortunately, we are in the leverage business, um, I would like to say yes, we are. But in truth, I know we're really limited by our debt covenant ratio. Our debt covenants on our unsecured notes, 1.5 times debt coverage. So it's kind of a governor on how fast we can grow our business. And the coverage ratio, while limiting at times does allow us to sleep at night. So it's a it's not a very aggressive covenant on what we're doing is we're basically lending what we collect. And this goes back to the early days of COVID where there were so much unchanged certainty. Needless to say, demand was strong advantage. It's strong now, but the uncertainty going forward is very concerning, and we would really just playing close to the vest. And as I mentioned in the in our script in our discussion, and we just want to be clear, we're being I'm very conservative going forward. We don't want to be caught on the wrong side. And until we see clarity, we're just going to play it very close to the vest pursuit.
Q: Then on the wider fee, higher yields that you go on your investments in this quarter, should we see next quarter or another step-up in yields? Is more loans reprice or were sort of trend? Do you see our own development over the past year or so? A: A lot of our on, I'll say, COVID era, low interest rate. Aero loans are now coming back through and getting repriced on once again, our basic rates going forward, 12% interest, 2% for origination fees. And if there's a construction component, we have one or 2%, it is a construction service fee though those are stay steadfast on or not. We don't have the ability to really raise that goes on for as much as we would like to I mean at the rate at some point become damaging to the project at hand so on. But I think the 12 and two going forward is a really good benchmark for us. On. And also we're not chasing the lower yielding opportunities to be clear.
Q: Thank you. Good morning. I wanted to ask you on the one fully one provision that you talked about on our of office asset this quarter or for them to get some more color on that loan. A: Yes, and I can help a little bit on anyway, I'm asked Nick Marcellus to provide more clarity, but here's my take on. We did an asset up in Maine and the project failed on our borrower could not perform, Tom. We have a friendly buyer has shown up in and purchase the asset. And we feel that a change of the structure of the project and change of use funds can be a great outcome for us. Unfortunately, grab these things take so much time. And as much as I would like to say one, it's down the road a bit. So on the change of use is very positive on. We have funds available to do the work. We have contractors to finish the project. And in the next year or so, we'll be reporting back as to how that all worked out.
Q: On the second question on the on the net funding, but I think you said 40 to $1.7 million on net fundings this quarter since. Or just just want to clarify all of that loan modifications and construction draws? There was no new loan originations and that number up? A: No. There were new loan originations on it was not tremendously significant. Nick, do you have the exact of them new loan originations for the quarter?
Q: Hey, good morning, guys. Thanks for taking the question. I believe you said 85 million in non-accruals, 64 in foreclosure. If I'm wrong there, please please correct me, but could you talk a little bit about what's going on with this? You know whether if it's a borrower issue, Tom money-wise or if it's a construction plan it out, could you just expand on those a little bit tight? A: Yes, on the total was 85 on the number is we just broke the number into two pieces for you from what we've been doing over the past few quarters is really going through a cleansing of our portfolio. We do have some loans that are too small for us. Those are not being extended or renewed. In some cases. We do have loans that require time to complete where on labor and material shortages have caused delays. We have we have projects where labor and material pricing has kind of blown out construction budgets and those require the assistance of our Bain unit to get back on track and and redirect. But what we're doing, it's an ongoing plan to continued cleansing the portfolio. And unfortunately, as I mentioned earlier on these things take time. And in the past week, we've had two properties that came back through foreclosure. They were under contract and sold within the week and with great results of for us. And it's just it's just a question of getting our hands on the asset. And it's our biggest problem to date, of course, move very slowly in some cases. And honestly, a borrower that fears of failed project there sometimes slow to pick up there in this can help them work this out and gets gets where, again, we're usually able to get things back on track, but it's been a process on. I think you'll see elsewhere in our industry that a lot of our competition, which they're significantly larger than us, they're running into the same type of issues. It's not always the project is not the borrower. It's a combination of a lot of things. And I could sit here all day and say, hey, look, it's planning and zoning. It's material costs, real estate to tough game and he can't get the projects sold or refinanced potential problem. And it turns into a problem quick because we're very expensive. So I'm not having a counterparty to refinance. Our borrowers is really putting a lot of loans in jeopardy to be quite honest. We do think a cutting of the rates, you know, when that happens from will be great for us. It'll it'll get us back on track, will hit our stride back on, but not having a counterparty keeps the borrowers tied to us a little bit. So we continue to work with them and we continue to protect our assets going forward.
Q: Got it. That's helpful. And then could you talk a little bit about the investment securities portfolio? A: And you know, from a modeling perspective
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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