Sachem Capital Corp. (NYSE MKT:SACH) Q1 2020 Earnings Conference Call - Final Transcript

May 12, 2020 • 08:00 am ET


Sachem Capital Corp. (NYSE MKT:SACH) Q1 2020 Earnings Conference Call - Final Transcript


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David Waldman

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 conference call. You should evaluate all forward-looking statements made by the company in the context of these risks and uncertainties.

With that, I'll now turn the call over to John Villano. Please go ahead, John.

John L. Villano

Thank you, David and thanks to everyone for joining us today. I am pleased to report that Sachem Capital achieved another solid quarter of performance. We started the year off strong, deploying capital and increasing our mortgage loan portfolio. We began 2020 with approximately $35 million of liquid assets, and we used about $15 million of that war test to fund new mortgages in the first two months alone. During this period, we began to establish lending relationships to further build our portfolio. Then about seven to eight weeks into the quarter, the world and our operating environment turned upside down. In early March, we took immediate action in response to the uncertainty created by COVID-19 and its impact on our business. In a defensive posture and for the balance of the quarter, Sachem only funded loans with approved commitments. Effective April 1, 2020, we implemented new underwriting -- guidelines to reduce our lending risk. First, by limiting new loan activity to the amount of income and cash received from loan payoffs, second, by reducing the LTV on new loans to 50%, down from 70%.

Third, loans greater than $1 million now require a Board review and finally, requiring an interest reserve on large loans. These guidelines will remain in effect until the economic outlook improves and -- credit markets loosen up. Sadly, our current view of the world and loan risk has not changed. Unfortunately, even with the federal government's stimulus programs, credit markets are still tight, bankruptcy filings are increasing and consumer finances are in disarray. And despite the fact that low interest rates -- seem to be providing a floor under real estate values, we continue to monitor the quality of our collateral very carefully. In effect, -- due to significant market uncertainty and limited access to reasonably priced capital, we put our growth strategy on hold and focused instead on preservation of capital and maintenance of our existing portfolio. This has had and will continue to have an adverse impact on our performance through the second quarter, unless there are unforeseen positive developments on the economic or public health front over the next seven weeks.

However, long term, we believe our plan is absolutely the right decision for Sachem, and our actions have certainly helped to mitigate the effects of the pandemic on our business. Although our lending is curtailed and our outlook is extremely cautious. We are, in fact, preparing for clearer skies. Credit market liquidity, real estate values and the strength of the borrower will dictate when the all-clear sign is posted. Some of the indicators we will be looking