Form 8-K - Current report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): August 14, 2024

SACHEM CAPITAL CORP.

(Exact name of Registrant as specified in its charter)

New York		001-37997		81-3467779
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification No.)

568 East Main Street, Branford, Connecticut		06405
(Address of Principal Executive Office)		(Zip Code)

Registrant's telephone number, including area code (203) 433-4736

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Ticker symbol(s)	Name of each exchange on which registered
Common Shares, par value $.001 per share	SACH	NYSE American LLC
6.875% Notes due 2024	SACC	NYSE American LLC
7.75% notes due 2025	SCCC	NYSE American LLC
6.00% notes due 2026	SCCD	NYSE American LLC
6.00% notes due 2027	SCCE	NYSE American LLC
7.125% notes due 2027	SCCF	NYSE American LLC
8.00% notes due 2027	SCCG	NYSE American LLC
7.75% Series A Cumulative Redeemable Preferred Stock, Liquidation Preference $25.00 per share	SACHPRA	NYSE American LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter)

Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Item 2.02.

Results of Operations and Financial Condition.

On August 14, 2024, Sachem Capital Corp. (the “Company”) issued a press release, a copy of which is attached hereto as Exhibit 99.1 and is incorporated herein by reference, announcing its financial results for the three and six month periods ended June 30, 2024.

Item 7.01.

Regulation FD Disclosure.

On August 14, 2024, the Company hosted a conference call for investors to discuss its financial condition and operating results for the three and six month periods ended June 30, 2024. A transcript of the call is attached hereto as Exhibit 99.2.

The information furnished pursuant to this Item 7.01 shall not be deemed to constitute an admission that such information is required to be furnished pursuant to Regulation FD or that such information or exhibits contain material information that is not otherwise publicly available. In addition, the Company does not assume any obligation to update such information in the future.

Item 9.01.

Financial Statements and Exhibits.

(d) Exhibits

Exhibit No.	Description
99.1	Press release, dated August 14, 2024, announcing financial results for the three and six month periods ended June 30, 2024.
99.2	Transcript of investor conference call held on August 14, 2024.
104	Cover Page Interactive Data File (embedded with the Inline XBRL document).

In accordance with General Instruction B.2 of Form 8-K, the information in this Current Report on Form 8-K, furnished pursuant to Items 2.02 and 7.01, including Exhibits 99.1 and 99.3, respectively, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

* * * * *

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	Sachem Capital Corp.

Dated: August 15, 2024	By:	/s/ John L. Villano
		John L. Villano, CPA
		President and Chief Executive Officer

Exhibit Index

Exhibit No.	Description
99.1	Press release, dated August 14, 2024, announcing financial results for the three and six month periods ended June 30, 2024.
99.2	Transcript of investor conference call held on August 14, 2024.

Exhibit 99.1

SACHEM CAPITAL REPORTS SECOND QUARTER 2024 RESULTS –

REPORTS QUARTERLY REVENUES OF $15.1 MILLION

- Company to Host Webcast and Conference Call -

BRANFORD, Conn., August 14, 2024 (GLOBE NEWSWIRE) -- Sachem Capital Corp. (NYSE American: SACH), a real estate lender that specializes in originating, underwriting, funding, servicing, and managing a portfolio of loans secured by first mortgages on real property, today announced its financial results for the second quarter ended June 30, 2024.

John Villano, CPA, Sachem Capital’s Chief Executive Officer, stated: “During the second quarter, we maintained our disciplined approach across our business by retaining cash, being selective with our lending, and exercising prudence in our borrowing. Specifically, in the second quarter we reduced the total amount of our indebtedness by $33.8 million, which includes a repayment of $23.7 million of unsecured unsubordinated notes. We will continue to build our platform and strengthen our balance sheet for the remainder of 2024 with a view towards growth in 2025 as accretive capital becomes available. Lastly, since our inception as a public company in February 2017, management has built a reliable and robust lending platform, paid an excellent stream of dividends and, most importantly, increased book value during some volatile market periods.”

Results of operations for quarter ended June 30, 2024

Total revenue for the quarter was $15.1 million, compared to $16.3 million for the quarter ended June 30, 2023. Interest income totaled $11.8 million, compared to $11.9 million in the same quarter in 2023. The decrease in interest income was due primarily to lower number of loans originated, modified or extended in comparison to the quarter ended June 30, 2023. As a result, fee income from loans, primarily made up of origination fees, were down approximately 37.2% compared to the quarter ending June 30, 2023.

Total operating costs and expenses for the quarter ended June 30, 2024 were $18.5 million compared to $10.3 million for the same 2023 period. The increase is primarily attributable to a $8.5 million provision for credit losses compared to $94,000 for the quarter ended June 30, 2023. This increase was partially offset by a decrease in compensation and employee benefits of $0.2 million because of a decrease in headcount between periods.

Net loss attributable to common shares for the three months ended June 30, 2024 was $4.1 million, or $0.09 per share, compared to net income attributable to common shares of $4.8 million, or $0.11 per share, for the three months ended June 30, 2023. The change is mainly attributable to the larger provision for credit losses reserves as mentioned above.

Balance Sheet

Total assets were $586.3 million at June 30, 2024 compared to $625.5 million at December 31, 2023. At June 30, 2024, cash and cash equivalents were $10.6 million and investments in partnerships were $47.0 million. Net mortgages receivable for the quarter were $485.7 million. Total liabilities at June 30, 2024 were $356.2 million compared to $395.5 million at December 31, 2023.

Total indebtedness at June 30, 2024 was $338.9 million. This includes: $259.9 million of unsecured notes payable (net of $4.8 million of deferred financing costs), $55.0 million outstanding on the Needham Bank revolving credit facility, $23.0 million outstanding on the Churchill master repurchase financing facility and $1.0 million outstanding on a New Haven Bank mortgage loan. We intend to repay $34.5 million of unsecured unsubordinated notes due in December 2024 either by refinancing them or with a combination of drawdowns on its existing credit facilities, current cash on hand and principal repayments of its mortgage loans.

Total shareholders’ equity at June 30, 2024 rose $0.1 million to $230.2 million compared to $230.1 million at December 31, 2023. The change was primarily due to additional paid-in capital of $6.1 million and a partly-offsetting increase in accumulated deficit of $5.7 million and a decrease in accumulated other comprehensive income of $0.3 million.

Dividends

On August 6, 2024, we paid a quarterly dividend of $0.08 per share to shareholders of record on July 29, 2024.

Sachem 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 Webcast and Call

The Company is hosting a webcast and conference call Wednesday, August 14, 2024 at 8:00 a.m. Eastern Time, to discuss in greater detail its financial results for the quarter ended June 30, 2024. A webcast of the call may be accessed on the Company’s website at https://ir.sachemcapitalcorp.com/ir-calendar.

Interested parties can access the conference call via telephone by dialing toll free 877-704-4453 for U.S. callers or +1-201-389-0920 for international callers.

Replay

The webcast will also be archived on the Company’s website and a telephone replay of the call will be available through Wednesday, August 28, 2024 and can be accessed by dialing 1-844-512-2921 for U.S. callers or +1 412-317-6671 for international callers and by entering replay passcode: 13746956.

About Sachem Capital Corp

Sachem Capital Corp. is a mortgage REIT that specializes in originating, underwriting, funding, servicing, and managing a portfolio of loans secured by first mortgages on real property. It offers short-term (i.e., three years or less) secured, nonbanking loans to real estate investors to fund their acquisition, renovation, development, rehabilitation, or improvement of properties. The Company’s primary underwriting criteria is a conservative loan to value ratio. The properties securing the 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 and is personally guaranteed by the principal(s) of the borrower. The Company also makes opportunistic real estate purchases apart from its lending activities.

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. These forward-looking statements are based primarily on management’s current expectations and projections about future events and trends that management believes may affect the Company’s 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 the Annual Report on Form 10-K for 2023 filed with the U.S. Securities and Exchange Commission on April 1, 2024. 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 the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, level of activity, performance, or achievements. In addition, neither the Company nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. The Company disclaims any duty to update any of these forward-looking statements. All forward-looking statements attributable to the Company 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 the Company in the context of these risks and uncertainties.

Investor & Media Contact:

Email: investors@sachemcapitalcorp.com

SACHEM CAPITAL CORP.

CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except share data)

(unaudited)

	June 30, 2024			December 31, 2023
				(audited)
Assets
Cash and cash equivalents	$	10,577		$	12,598
Investment securities (at fair value)		1,798			37,776
Mortgages receivable		500,133			499,235
Less: Allowance for credit losses		(14,405	)		(7,523	)
Mortgages receivable, net of allowance for credit losses		485,728			491,712
Interest and fees receivable, net		7,769			8,475
Due from borrowers, net		5,636			5,597
Real estate owned		3,872			3,462
Investments in partnerships		46,952			43,036
Investments in rental real estate, net		11,904			10,554
Property and equipment, net		3,277			3,373
Other assets		8,808			8,956
Total assets	$	586,321		$	625,539

Liabilities and Shareholders’ Equity
Liabilities:
Notes payable (net of deferred financing costs of $4,826 and $6,048)	$	259,913		$	282,353
Repurchase facility		22,993			26,461
Mortgage payable		1,042			1,081
Lines of credit		55,000			61,792
Accrued dividends payable		—			5,144
Accounts payable and accrued liabilities		2,800			2,322
Advances from borrowers		8,893			10,998
Below market lease intangible		665			665
Deferred revenue		4,847			4,647
Total liabilities		356,153			395,463

Commitments and Contingencies

Shareholders’ equity:
Preferred shares - $.001 par value; 5,000,000 shares authorized; 2,903,000 shares designated as Series A Preferred Stock; 2,206,128 and 2,029,923 shares of Series A Preferred Stock issued and outstanding at June 30, 2024 and December 31, 2023, respectively	$	2		$	2
Common shares - $.001 par value; 200,000,000 shares authorized; 47,547,051 and 46,765,483 issued and outstanding at June 30, 2024 and December 31, 2023		48			47
Additional paid-in capital		255,928			249,826
Accumulated other comprehensive income		—			316
Accumulated deficit		(25,810	)		(20,115	)
Total shareholders’ equity		230,168			230,076
Total liabilities and shareholders’ equity	$	586,321		$	625,539

SACHEM CAPITAL CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

(dollars in thousands, except share and per share data)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2024			2023			2024			2023
Revenues
Interest income from loans	$	11,754		$	11,898		$	24,395		$	22,882
Fee income from loans		2,083			3,319			4,699			5,489
Income from partnership investments		1,217			1,006			2,413			1,556
Other investment income		70			34			386			633
Other income		22			16			57			30
Total revenues		15,146			16,273			31,950			30,590

Operating expenses
Interest and amortization of deferred financing costs		6,973			7,139			14,442			14,012
Compensation and employee benefits		1,365			1,562			3,308			3,342
General and administrative expenses		1,258			1,317			2,496			2,215
Provision for credit losses related to loans		8,503			94			9,868			197
Other expenses		362			213			866			297
Total operating expenses		18,461			10,325			30,980			20,063
Income before other income (loss)		(3,315	)		5,948			970			10,527

Other income (loss)
Impairment loss		(77	)		(413	)		(77	)		(413	)
Gain (loss) on sale of real estate and property and equipment, net		275			(21	)		264			127
Gain on equity securities		61			184			458			577
Total other income (loss), net		259			(250	)		645			291
Net income (loss)		(3,056	)		5,698			1,615			10,818
Preferred stock dividend		(1,068	)		(925	)		(2,091	)		(1,850	)
Net income (loss) attributable to common shareholders	$	(4,124	)	$	4,773		$	(476	)	$	8,968

Basic earnings (loss) per common share	$	(0.09	)	$	0.11		$	(0.01	)	$	0.21
Diluted earnings (loss) per common share	$	(0.09	)	$	0.11		$	(0.01	)	$	0.21
Basic weighted average common shares outstanding		47,504,875			43,844,285			47,415,630			43,321,303
Diluted weighted average common shares outstanding		47,504,875			43,844,285			47,415,630			43,321,303

SACHEM CAPITAL CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(dollars in thousands)

	Six Months Ended
	June 30,
	2024			2023
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	1,615		$	10,818
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of deferred financing costs and bond discount		1,275			1,225
Depreciation expense		189			109
Stock-based compensation		437			396
Provision for credit losses related to loans		9,868			197
Impairment Loss		77			413
(Gain) on sale of real estate and property and equipment, net		(264	)		(127	)
(Gain) on equity securities		(458	)		(577	)
Changes in operating assets and liabilities:
Interest and fees receivable, net		411			(1,456	)
Other assets		80			(700	)
Due from borrowers, net		(624	)		(1,521	)
Accounts payable and accrued liabilities		478			153
Deferred revenue		200			455
Advances from borrowers		(2,105	)		2,694
Total adjustments		9,564			1,261
NET CASH PROVIDED BY OPERATING ACTIVITIES		11,179			12,079

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investment securities		(7,767	)		(18,347	)
Proceeds from the sale of investment securities		43,964			6,560
Purchase of interests in investment partnerships, net		(3,916	)		(4,568	)
Proceeds from sale of real estate owned		1,403			191
Acquisitions of and improvements to real estate owned, net		—			(180	)
Purchases of property and equipment		(26	)		(722	)
Improvements in investment in rental real estate		(1,424	)		—
Principal disbursements for mortgages receivable		(84,328	)		(114,468	)
Principal collections on mortgages receivable		79,628			66,356
Other assets – pre-offering costs		—			19
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES		27,534			(65,159	)

CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from (repayment of) lines of credit		(6,792	)		32,313
Net proceeds from (repayment of) repurchase facility		(3,468	)		7,976
Proceeds from (repayment of) mortgage payable		(39	)		899
Dividends paid on common shares		(10,363	)		(11,048	)
Dividends paid on Series A Preferred Stock		(2,091	)		(1,850	)
Proceeds from issuance of common shares, net of expenses		2,050			9,689
Repurchase of common shares		—			(225	)
Proceeds from issuance of Series A Preferred Stock, net of expenses		3,616			517
Gross proceeds from (repayment of) notes payable		(23,647	)		6,225
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES		(40,734	)		44,496

NET DECREASE IN CASH AND CASH EQUIVALENTS		(2,021	)		(8,584	)

CASH AND CASH EQUIVALENTS – BEGINNING OF PERIOD		12,598			23,713

CASH AND CASH EQUIVALENTS – END OF PERIOD	$	10,577		$	15,129

Exhibit 99.2

Sachem Capital Corp. NYSEAM:SACH

FQ2 2024 Earnings Call Transcripts

Wednesday, August 14, 2024 12:00 PM GMT

S&P Global Market Intelligence Estimates

	-FQ2 2024-			-FQ3 2024-	-FY 2024-	-FY 2025-
	CONSENSUS	ACTUAL	SURPRISE	CONSENSUS	CONSENSUS	CONSENSUS
EPS (GAAP)	0.12	(0.09)	NM	0.09	0.46	0.34
Revenue (mm)	15.48	15.15	(2.13 %)	15.26	63.31	64.73

Currency: USD

Consensus as of Jul-22-2024 9:10 PM GMT

			- EPS (GAAP) -
	CONSENSUS	ACTUAL		SURPRISE
FQ3 2023	0.12	0.12		0.00 %
FQ4 2023	0.12	(0.05)		NM
FQ1 2024	0.11	0.08		(27.27 %)
FQ2 2024	0.12	(0.09)		NM

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Contents

Table of Contents
Call Participants	........................................................................................................................................................	3
Presentation	........................................................................................................................................................	4
Question and Answer	........................................................................................................................................................	7

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SACHEM CAPITAL CORP. FQ2 2024 EARNINGS CALL | AUG 14, 2024

Call Participants

EXECUTIVES

John L. Villano
Chairman, CEO & President

Nicholas M. Marcello
Interim CFO and VP of Finance & Operations

ANALYSTS

Christopher  Muller
JMP Securities LLC, Research Division

Christopher Whitbread Patrick Nolan
Ladenburg Thalmann & Co. Inc., Research Division

Gaurav  Mehta
Alliance Global Partners, Research Division

Matthew  Erdner
JonesTrading Institutional Services, LLC, Research Division

Tyler Anton Batory
Oppenheimer & Co. Inc., Research Division

ATTENDEES

Stephen C. Swett
ICR, LLC

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SACHEM CAPITAL CORP. FQ2 2024 EARNINGS CALL | AUG 14, 2024

Presentation

Operator

Greetings, and welcome to the Sachem Capital Corp. Second Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Stephen Swett, Investor Relations. Thank you, sir. You may begin.

Stephen C. Swett
ICR, LLC

Good morning, everyone, and thank you for joining Sachem Capital Corp.'s Second Quarter 2024 Earnings Conference Call. On the call from Sachem Capital today is Chief Executive Officer, John Villano, CPA; and Chief Financial Officer, Nick Marcello.

This morning, the company announced its operating results for the quarter ended June 30, 2024, and its financial condition as of that date. The press release is posted on the company's website, www.sachemcapitalcorp.com.

As a reminder, remarks made on today's conference call may include forward-looking statements. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those discussed today. We do not undertake any obligation to update our forward-looking statements in light of new information or future events. For a more detailed discussion of the factors that may affect the company's results, please refer to our earnings release for this quarter and to our most recent SEC filings.

During this call, the company will be discussing certain non-GAAP financial measures. More information about these non-GAAP financial measures and reconciliations to the most directly comparable GAAP financial measures are contained in our SEC filings.

With that, I'll now turn the call over to John.

John L. Villano
Chairman, CEO & President

Thank you, and thanks to everyone for joining us today. During the second quarter of 2024, we maintained our prudent approach towards balance sheet management and our lending activities. With the market anticipating a potential rate cut from the Fed in the latter half of the year and optimistic prospects for a soft landing, it appears that we could be trending back in the right direction. That said, we will continue our disciplined approach until markets have stabilized, capital availability has improved and opportunities for accretive investment are available.

This quarter, we generated approximately $15.1 million in revenue. As mentioned last quarter, origination fees make up a significant portion of our revenue. And until we feel more comfortable in the capital environment, we are prepared to postpone earnings growth in the near term to protect our capital, which includes avoiding borrowing at rates that could be potentially dilutive for Sachem. We believe remaining patient better positions us for long-term earnings growth. As we have said before, we are willing to work with our borrowers to modify or extend loans, provided they meet our stringent reunderwriting process and possess the necessary capital reserves.

During the quarter, we produced revenue of $2.1 million in fee income from loans, a notable change from the comparable period in 2023 from reduced origination volume. The first half of 2024, we added only $1.6 million in REO, reflecting our ability to efficiently manage nonperforming loans.

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SACHEM CAPITAL CORP. FQ2 2024 EARNINGS CALL | AUG 14, 2024

Our hands-on approach, coupled with firsthand knowledge of our borrower, can usually move a loan from nonperforming to performing. Additionally, we generated a net gain of approximately $264,000 from REO sales during this period, demonstrating that foreclosing on a property does not always result in loss. Our seasoned asset management team continues to take an asset-by-asset approach, meticulously reviewing and inspecting all loans in our portfolio on a regular basis.

Similar to many companies in our sector and more broadly across the financial services industry, we added an additional CECL provision for credit losses related to loans of approximately $8.5 million. While this is a noncash item, it further underlines the impact to real estate valuations and liquidity uncertainty that persists within the market, particularly with commercial real estate assets. As we look forward, I am confident that our cycle-tested experience provides us with the tools needed to navigate this environment effectively.

Nick Marcello, recently appointed as Chief Financial Officer, brings impressive financial acumen that has and will continue to greatly aid in this process. With that, I would like to hand the call over to Nick to discuss our second quarter financials. Nick?

Nicholas M. Marcello
Interim CFO and VP of Finance & Operations

Thank you, John. For the second quarter 2024, Sachem recorded revenue of $15.1 million compared to $16.3 million in the same quarter of the prior year. As John previously mentioned, we are still experiencing the impact of reduced loan originations, and until we are able to source accretive capital, the company believes it is prudent to hold cash on hand as loans continue to pay off. Opportunities within our sector remain, but our diligent approach and steadfast commitment to managing liquidity continues to guide our strategy.

Total operating costs and expenses for the second quarter of 2024 were approximately $18.5 million compared to approximately $10.3 million in the prior year quarter. For the second quarter of 2024, we had additional provisions for credit losses of $8.5 million to account for the ongoing challenges in the commercial real estate market.

As noted on our last earnings call, we anticipated an increase in provisions due to the prevailing uncertainty in the macroeconomic environment. This puts our current allowance for credit losses for mortgages receivable at $14.4 million or approximately 3% of unpaid principal balance. Most of these reserves are held against commercial real estate assets, as our residential mortgage portfolio continues to hold its value on a relative basis.

The increase in CECL provisions was partially offset by interest and amortization of deferred financing costs of approximately $7 million, costs related to compensation and employee benefits of approximately $1.4 million and G&A of approximately $1.3 million, which all exhibited decreases compared to the prior year quarter, a testament to the company's ability to control costs, as originations have been challenged.

As a result, net loss attributable to common shareholders for the second quarter of 2024 was approximately $4.1 million compared to net income attributable to common shareholders of approximately $4.8 million in the comparing prior year period or a $0.09 loss and $0.11 gain per diluted share, respectively.

As discussed in prior quarters, our Board regularly evaluates our dividend distribution policy on an ongoing basis, balancing our operational performance, federal tax requirements and the importance of maintaining long-term financial flexibility. On July 19, the Board declared a quarterly dividend of $0.08 per share for shareholders of record as of July 29, 2024.

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SACHEM CAPITAL CORP. FQ2 2024 EARNINGS CALL | AUG 14, 2024

Turning to portfolio activities. Like past quarters, our loan originations were down, but the demand for capital within the industry remains strong. With banks staying on the sidelines and financing challenges persisting, we believe our pipeline will continue to be robust even as we remain very selective given the current capital markets environment. Our core focus remains on single-family and multifamily residential assets in growing markets, where the metrics remain favorable.

For the quarter, we had net fundings of approximately $41.7 million from mortgage loans, including loan modifications and construction draws that were offset by approximately $32.3 million of principal paydowns. During the second quarter, the company modified or extended a total of 26 loans. These modifications resulted in gross fee income of approximately $1 million.

As of June 30, our portfolio comprised 262 loans, with total unpaid principal balance of approximately $500.1 million and a weighted average interest rate of 12.8%, excluding fees. Our loan portfolio is geographically diverse, covering 16 states, with a focus on growth markets in the Southeast, balance with more stable markets in the Northeast. Additionally, only 12.3% of our investments are in office properties.

At quarter end, we had loans with a principal balance of approximately $106.9 million in nonaccrual status, which includes 50 loans and foreclosure by the company, representing approximately $73.1 million of outstanding principal balance, including the accrued but unpaid interest and borrower charges. Real estate owned was $3.9 million as of June 30, 2024, including $800,000 held for rental and $3.1 million held for sale.

Let's now discuss our balance sheet and financial position, where maintaining strong liquidity remains a primary focus for the company. As of June 30, 2024, we had total assets of $586.3 million, including $10.6 million of cash, cash equivalents and $1.8 million in investment securities, offset by $343.8 million of total debt outstanding.

Additionally, at quarter end, we had available liquidity of $10 million on our Needham credit facility. We will continue to utilize drawdowns from our existing credit facilities, current cash on hand and principal repayments from our mortgage loans to manage upcoming debt maturities, notably the $34.5 million principal amount of unsecured, unsubordinated notes due on December 30, 2024.

I will now turn the call back to John for closing remarks.

John L. Villano
Chairman, CEO & President

Thanks, Nick. Since our inception as a public company in 2017, we have built a reliable and robust lending platform, paid an excellent stream of dividends and most importantly, increased book value during some volatile market periods. At quarter end, book value stood at approximately $3.76 per share. We have also returned to shareholders approximately $2.25 per share in dividends since our first quarter as a public company.

In closing, we will continue to uphold our prudent approach of managing liquidity and being highly selective in underwriting until markets improve. Our diversified portfolio and strong financial foundation support our confidence in the future as we work to get back to growing our business in 2025. I would like to express my gratitude to the entire Sachem team for their ongoing hard work, dedication and undeniable contributions to our performance.
We will now open the call for questions.

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SACHEM CAPITAL CORP. FQ2 2024 EARNINGS CALL | AUG 14, 2024

Question and Answer

Operator

[Operator Instructions] Our first question comes from Gaurav Mehta with Alliance Global Partners.

Gaurav Mehta
Alliance Global Partners, Research Division

I wanted to ask you, I wanted to follow up on the balance sheet, the $34.5 million loan that's due in December. I wanted to get some more color on your plans on refinancing that loan, and how much capacity do you have currently on the balance sheet to address that loan maturity?

John L. Villano
Chairman, CEO & President

That's a great question, Gaurav. So if you look at our June 30 balance sheet, we did have $10.5 million in cash. Currently, we have almost $30 million of cash on hand, not including liquidity from our credit facilities or repurchase agreements to handle the December maturity. So we're in really good shape.

Gaurav Mehta
Alliance Global Partners, Research Division

So $30 million cash on hand after 2Q?

John L. Villano
Chairman, CEO & President

That's correct.

Gaurav Mehta
Alliance Global Partners, Research Division

Okay. As a follow-up, I was wondering if you could provide some more color on where the interest rates are, if you were to issue new debt?

John L. Villano
Chairman, CEO & President

Can you repeat that again? I didn't catch it. I'm sorry.

Gaurav Mehta
Alliance Global Partners, Research Division

Just as a follow-up, I wanted to get some more color on where the rates are for your company in case you need to issue new debt.

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SACHEM CAPITAL CORP. FQ2 2024 EARNINGS CALL | AUG 14, 2024

John L. Villano
Chairman, CEO & President

Okay. So as I'm sure you're well aware, Sachem, we closed down an offering about 1.5 months ago, where we were trying to do an institutional note offering. The rates on the debt were just not accretive to our business model. And as such, we've kind of backed away from raising, we call it, inefficient debt.

It's best for us to perhaps shrink our balance sheet and wait for better opportunities in the debt markets when a deal doesn't fit the box, right? It's expensive in terms of rate. It has other provisions in terms of no call, meaning you can't pay it off early, if rates should improve. Those kind of things are detrimental to our business, and eventually they do come and hurt our shareholders.

So those are the things that we're trying to stay away from, and it'd be easier for us to manage our book as we have it. [ Marshall Cash ], continue to lend money, of course, but not to take a reach and certainly not to try to grow in this market where interest rates are still quite aggressive.

Gaurav Mehta
Alliance Global Partners, Research Division

Okay. And then lastly on the credit loss reserves that you had in the quarter, can you provide some color on those credit loss reserves?

John L. Villano
Chairman, CEO & President

What I'll do is I'll ask Nick Marcello to contribute to this. He's more in tune with the accounting treatment and the actual occurrence of the provisions. Go ahead, Nick.

Nicholas M. Marcello
Interim CFO and VP of Finance & Operations

Yes. Gaurav, so yes. So the company increased its reserve. I think we kind of saw this across the sector. We took the position that market conditions haven't improved all that much. We had -- and the company considers loans, nonaccrual loans on an asset-by-asset approach. The rest of the performing bucket has sort of a historical provision applied to it based on losses that we've incurred since inception.

So what you're really seeing in that $8.5 million is about $5 million to $5.5 million or so of direct reserve balance against individual loans that are nonperforming. The additional $3 million roughly was applied across the general reserve bucket, both of which were just as a result of, again, asset valuation declines for the underlying collateral for loans that are nonperforming, as well as just the company taking the approach that market conditions are still fairly punitive for our borrowers, as they really don't have an opportunity right now in a lot of cases to refinance as was probably in their business plan initially.

Just as banks haven't been able to offer takeout financing, our guys can only sort of withstand our 12% for so long. And as a result, you're kind of seeing an uptick in our -- how we're looking about our CECL reserve.

Operator

Our next question comes from Tyler Batory with Oppenheimer.

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SACHEM CAPITAL CORP. FQ2 2024 EARNINGS CALL | AUG 14, 2024

Tyler Anton Batory
Oppenheimer & Co. Inc., Research Division

Congratulations to Nick on the new responsibilities here.

First question, just to follow up on one of the prior comments. John, I think you said $30 million of cash that you have right now? Is that just that increase from the $10 million you had at the end of the quarter, that extra $20 million, I'm assuming there's just some extra principal repayments that have come through, correct?

John L. Villano
Chairman, CEO & President

That is correct. And let me be perfectly clear, Tyler. And I think you're coming here. [ Marshalling cash ], right, being somewhat defensive, it does have the effect of hurting bottom line performance.

So yes, you're absolutely right. We do have approximately $30 million in cash. Currently, we're deciding whether we should pay the December notes off early to save the interest rate on those or not. So that's a Board decision that's coming down the pike.

Tyler Anton Batory
Oppenheimer & Co. Inc., Research Division

Okay. And then some of the numbers you provided, I think you said the $106 million in nonaccrual, $73 million in change in foreclosure, I think a little bit of a tick up versus the prior quarter. So just talk a little bit more about what's going on there, and if there's potential that those numbers could go even higher the next couple of quarters? Or maybe you think you're in a good spot kind of given what you have right now?

John L. Villano
Chairman, CEO & President

Yes. So first of all, I'd love to say I'm in a good spot, but clarity, right, is a big issue right now. We are still not believers that 0.5 point interest cut, when it comes and if it comes, is going to solve the problems in the industry.

We're still fighting through some COVID excesses, not only material and labor costs, but rapidly increasing prices and now decreasing prices that kind of throw business plans out of whack. We have an election coming, right? And certainly not wanting to get political, but there's uncertainty, there's wars out there.

We're taking this month by month. And kind of in tune with where Gaurav was going with his questions, a lot of our competition, say, or fellow mortgage REITs, they have the ability to lever through a period of defaults. We don't. We can't. We're not going to chase ridiculous money. So we can't earn through these things. We feel that that's -- you're just really walking yourself off the plank, and we don't want to do that.

So we like to think that 2025 is a better time for us to get back on the growth wagon. We're playing defense. Hey, just yesterday, we received $2.25 million on a loan, an industrial property that didn't pay in 9 months, full pay. Those things happen. So the portfolio is still moving. And as you noted, we did raise $20 million in the last 1.5 months. So we're quite happy with how the portfolio is turning.

But we're still at risk with respect to appraisals and borrowers that, as Nick mentioned, they're just jammed up. There's nowhere for them to go. And the real issue that we run into is once the distress vibe gets out there, getting 100% is very difficult. So we're running into a little bit of that, where a borrower in distress can say, "Hey, you know, what if I give you 85%? What if I give you 90%?" So we're fighting some of those off at the same time. It's just going to take a little time for us to get clarity moving forward.

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SACHEM CAPITAL CORP. FQ2 2024 EARNINGS CALL | AUG 14, 2024

Tyler Anton Batory
Oppenheimer & Co. Inc., Research Division

Okay. Okay. Great. Appreciate that.

And then last question for me. There's a lot of people reach out, ask about the dividend, the dividend policy, how to think about the dividend going forward, given kind of where we are in the industry. So if you could address that for shareholders, please, that would be helpful.

John L. Villano
Chairman, CEO & President

Well, we've kind of worked our dividend down here a bit. When we don't have liquidity to grow our book, there's no way for us to maintain our, let's call it, a $0.12 dividend. The yield on our common was much greater.

What we've done here is we're actually paying out GAAP earnings instead of tax earnings, like we used to. So we're just trying to scale it down a little bit. We're conserving cash. Again, we have a couple more quarters of this. We hope to be back on the strong dividend train in the near future. But once again, we still feel that cash and liquidity is king. So I mean I think we're going to have a reduced dividend here for the next quarter or 2.

Nicholas M. Marcello
Interim CFO and VP of Finance & Operations

Yes. Just add to that. We're paying taxable non-GAAP right now. So taxable is more, you could think about like net distributable earnings as some of our peers kind of disclosed. And you think about that and CECL reserves don't reduce taxable income. So those sort of -- if you look at those as an add back, you get closer to that $0.08 number that we distributed for the quarter.

Operator

Our next question comes from Chris Muller with Citizens JMP.

Christopher Muller
JMP Securities LLC, Research Division

Congrats, Nick, on the new role.

So I guess, I wanted to touch on the specific reserves of $5.5 million that you guys talked about. I guess, given the short-term nature of your loans, what changed so quickly with the assets from the last quarter? And did they not qualify for modifications there? Is that what kind of drove the reserve, the specific reserves?

John L. Villano
Chairman, CEO & President

When we go through our modification, it's basically a re-underwrite of the loan. What we're finding is our borrower is not in the same kind of shape going forward. We may also find that a property, for example, didn't lease up, things like that.

So we're not being more aggressive with respect to the write-down, we're trying to be realistic with respect to where the portfolio sits, and it's a bunch of different occurrences. Just trying to get a feel for what net realizable value may be.

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SACHEM CAPITAL CORP. FQ2 2024 EARNINGS CALL | AUG 14, 2024

Christopher Muller
JMP Securities LLC, Research Division

Got it. And then I guess on the other side of the coin with REO, we really haven't seen a big jump in that REO bucket. Should we expect to see that increase over the next couple of quarters as you work through some of these loans? Or do you think you'll be more successful on the modification side and things won't have to go REO?

John L. Villano
Chairman, CEO & President

Chris, there's a very interesting phenomena in our business. Once we get a property back for good or bad, we're able to move it, okay? Our biggest issue is getting control of the properties.

The best thing in the world now is an attorney fighting a foreclosure. They make tons of money, the stall processes, in our opinion, quite frivolous, and it keeps us from really moving forward with respect to a sale or a renovation to complete the property.

So the issue is these things are hung up in the foreclosure process. In most cases, when we get the property back, it is sold within a few weeks after getting it. So the REO doesn't stick around for long, and we're quite happy about that. It is a testament to the underwriting. It's just getting them back into our hands where we can do some good with the property.

Operator

Our next question comes from Christopher Nolan with Ladenburg Thalmann.

Christopher Whitbread Patrick Nolan
Ladenburg Thalmann & Co. Inc., Research Division

Nick, congratulations on the step.

John, the allowance for reserves, is that a function of lower cash flows on the property or lower LTVs or a combination?

John L. Villano
Chairman, CEO & President

It's a mixed bag, Chris. In some cases, it's an LTV. We have talked publicly about appraisal risk. We do -- we have and we continue to run into that. It could also be cash flows.

We have run into situations where one of our properties is fully rented with magnificent rents, I mean, premium rents, and bank refi doesn't trust the rent roll, meaning they're too perfect. So they discount the rents and the offer to refi out is less. So we're running into properties that are performing perfectly. And now all of a sudden, the rents are too perfect, and they don't expect them to continue.

So we're running to a mixed bag of developer issues, developer capital, banks willingness to get into a loan or into a project. And then also, we have a distressed loan that sells on the street and all of a sudden, it affects your property in the next appraisal. So it's kind of a mixed bag for us. We try to handle each one a little differently. But again, we have a little more time to deal with this.

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SACHEM CAPITAL CORP. FQ2 2024 EARNINGS CALL | AUG 14, 2024

Christopher Whitbread Patrick Nolan
Ladenburg Thalmann & Co. Inc., Research Division

Okay. So assuming that it is -- a good chunk of it is LTV related, a rate cut may be giving you a little relief on the CECL provisioning. Is that a reasonable read into that?

John L. Villano
Chairman, CEO & President

I would say yes. I don't think one rate cut will solve not only our issues, but our industry issues. I think once the real estate buyer, the investor sees a steady policy coming from the Federal Reserve, it would be a great time for them to come in and not only by distress, but also to start doing their own projects and refilling our pipeline with deals.

One cut is just, let's wet our whistle and hope for the best. But if we start putting 2 or 3 of these together, I think we do have a change to get things fixed.

Christopher Whitbread Patrick Nolan
Ladenburg Thalmann & Co. Inc., Research Division

Final question is on capital structure. Following the withdrawal of the notes offering, it sounds like you guys are really starting to think about how to approach your capital structure a little bit different. And I'm sort of getting the sense that you're now considering a more deleveraged balance sheet going forward. And if that's the case, should we also expect improved pricing, because it sounds like you got more deal flow than you know what to do with. And so why not raise prices as well?

John L. Villano
Chairman, CEO & President

We do have significant deal flow. And the world is looking for money to do our types of deals. Lowering our leverage is, in our opinion, exactly the right thing to do now. I certainly can't go pay out our December notes, which I think are maybe [ 7 and 8 ] or something like that and replace it with [ 10, 11 ] or even something uglier. None of our shareholders would appreciate that move.

So we're not looking to sink the ship just to grow the book of business. We think by playing a little defense, with respect to growth, is going to position us to be really strong when the lights get turned back on.

We still have our pricing. We still can price. I mean we're still [ 12 and 2 ]. We have our construction service fee. It's just we're not doing many deals, so our origination fee income is down severely.

Operator

Our next question comes from Matthew Erdner with Jones Trading.

Matthew Erdner
JonesTrading Institutional Services, LLC, Research Division

I just want to repeat this back, make sure I got the right numbers, first off. Net fundings of $41.7 million and then offset by $32.3 million in paydowns. So I'm getting about net portfolio growth of like $9.4 million?

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SACHEM CAPITAL CORP. FQ2 2024 EARNINGS CALL | AUG 14, 2024

John L. Villano
Chairman, CEO & President

It's about right.

Nicholas M. Marcello
Interim CFO and VP of Finance & Operations

That's correct. Yes.

Matthew Erdner
JonesTrading Institutional Services, LLC, Research Division

Okay. And then what is your expectation for payoffs for the remainder of the year? Should we expect it to continue kind of at that $30 million pace?

John L. Villano
Chairman, CEO & President

We used to be able to project payoffs a lot better 2 years ago. Payoffs are still quite robust. There's a whole ton of good loans on the books that are getting refinanced and things like that. We still expect to raise some cash going into the end of the year, which -- it's hard to say, Matt.

I would probably -- if I had to work a projection, I would probably look maybe a $20 million portfolio growth, fundings over repayments, something like that. We're not jumping out of our shoes doing deals where we used to do $100 million a quarter. So it's going to be probably around $20 million net growth would be my best guess.

Matthew Erdner
JonesTrading Institutional Services, LLC, Research Division

Got you. And then as you guys continue to defend the balance sheet and kind of have the defensive posture, how do you weigh lending out new money versus keeping it on hand and just keeping that cash on the balance sheet to kind of take care of the current capital structure?

John L. Villano
Chairman, CEO & President

There's a tug of war in the office here. The best investment we can make is to buy our shares right here, quite honestly. We are a lender. We don't want to waste cash buying shares at the moment.

So I think, look, cash is king at the moment. There may be some stock buying some shares a little bit here and there depending on where price goes, and you may see what happens right after this call. So we have cash available to do those things. We have cash available to lend. And quite honestly, I'm able to sleep easy at night, knowing that -- very much like a COVID scenario, when COVID hit, we had cash. And it's a great thing.

So we don't want to out earn -- try to outearn our problems because we just don't know where the end is. So we have cash to do things. We're going to be prudent with our cash, and we just ask you guys to give us a couple of quarters to see where this ends. So I think we'll have some clarity probably after the elections and what's going on in the Middle East, but things should start to clear up.

Matthew Erdner
JonesTrading Institutional Services, LLC, Research Division

Right. Right. That's helpful. And then turning to the credit facility, I think you mentioned you had $10 million left there. Have you guys had any discussions about possibly increasing the size? And what's the demand on the bank side for something like a new credit facility or a repurchase agreement to kind of throw the [ ones ] on to?

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SACHEM CAPITAL CORP. FQ2 2024 EARNINGS CALL | AUG 14, 2024

John L. Villano
Chairman, CEO & President

We have a great relationship with Needham Bank. We have discussed an upsize. Most likely if they don't see us using the line sitting with a ton of cash, it's probably not a thing that they want to do. But again, they've been a great partner for us. I think they do want to give us more capital to grow our business. They, too, appreciate the play safe posture that we're taking.

Hey, look, we're always looking for accretive cash. And hopefully, it comes from Needham. We do have a Churchill facility with a lot of room. And right now, there's no real push for additional liquidity unless it comes at a great price.

Operator

We have reached the end of our question-and-answer session. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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SACHEM CAPITAL CORP. FQ2 2024 EARNINGS CALL | AUG 14, 2024

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Cover	Aug. 14, 2024
Document Information [Line Items]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Aug. 14, 2024
Entity File Number	001-37997
Entity Registrant Name	SACHEM CAPITAL CORP.
Entity Central Index Key	0001682220
Entity Tax Identification Number	81-3467779
Entity Incorporation, State or Country Code	NY
Entity Address, Address Line One	568 East Main Street
Entity Address, City or Town	Branford
Entity Address, State or Province	CT
Entity Address, Postal Zip Code	06405
City Area Code	203
Local Phone Number	433-4736
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Entity Emerging Growth Company	false
Common Stock [Member]
Document Information [Line Items]
Title of 12(b) Security	Common Shares, par value $.001 per share
Trading Symbol	SACH
Security Exchange Name	NYSEAMER
6.875% Notes Due 2024 [Member]
Document Information [Line Items]
Title of 12(b) Security	6.875% Notes due 2024
Trading Symbol	SACC
Security Exchange Name	NYSEAMER
7.75% notes due 2025 [Member]
Document Information [Line Items]
Title of 12(b) Security	7.75% notes due 2025
Trading Symbol	SCCC
Security Exchange Name	NYSEAMER
6.00% notes due 2026 [Member]
Document Information [Line Items]
Title of 12(b) Security	6.00% notes due 2026
Trading Symbol	SCCD
Security Exchange Name	NYSEAMER
6.00% notes due 2027 [Member]
Document Information [Line Items]
Title of 12(b) Security	6.00% notes due 2027
Trading Symbol	SCCE
Security Exchange Name	NYSEAMER
7.125% notes due 2027 [Member]
Document Information [Line Items]
Title of 12(b) Security	7.125% notes due 2027
Trading Symbol	SCCF
Security Exchange Name	NYSEAMER
8.00% notes due 2027 [Member]
Document Information [Line Items]
Title of 12(b) Security	8.00% notes due 2027
Trading Symbol	SCCG
Security Exchange Name	NYSEAMER
Series A Preferred Stock [Member]
Document Information [Line Items]
Title of 12(b) Security	7.75% Series A Cumulative Redeemable Preferred Stock, Liquidation Preference $25.00 per share
Trading Symbol	SACHPRA
Security Exchange Name	NYSEAMER