Greetings, welcome to the Sachem Capital Corporation fourth quarter and full year 2022 earnings conference call. At this time, all participants are in a listen-only mode. A brief question- and- answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kevin Reed, ICR. Thank you, Kevin. You may begin. Good morning, everyone, and thank you for joining Sachem Capital Corporation's year-end 2022 conference call. On the call from Sachem Capital today is Chief Executive Officer John Villano, CPA, and Chief Financial Officer John Warch. This morning, the company announces operating results for the year ended December 31st, 2022, and its financial condition as of that date. The press release is posted on the company's website, www.sachemcapitalcorp.com. In addition, the company will file its year-end report on Form 10-K with the US Securities and Exchange Commission on March 31st, 2023, which can be accessed on the company's website as well as the SEC's website at www.sec.gov. If you have any questions after the call or would like any additional information about the company, please visit our website. We'd like to remind everyone that this conference call may contain forward-looking statements. All statements other than statements of historical facts contained in this conference call, 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 such terms and other words and terms of similar expressions are intended to identify forward-looking statements. These forward-looking statements are based largely on the company's current expectations and projections about future events and trends that it believes may affect its financial conditions, 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 company's Form 10-K filed with the US Securities and Exchange Commission on March 31st, 2023. Because of these risks, uncertainties and assumptions, the forward-looking events or circumstances discussed in this conference call may not occur, and actual results could differ material 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 the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, level of activity, performance or achievements. In addition, neither the company nor any 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 the 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. Thank you. Thanks to everyone for joining us today. I am very pleased to report Sachem had another year of record revenue of $52.3 million and net income attributable to common shareholders of $17.2 million or $0.46 per share. Our 2022 revenue was an increase of almost 72% from 2021. Our net income attributable to common shareholders increased over 50%. These results, achieved through disciplined underwriting in an increasingly difficult macroeconomic backdrop, illustrate the success and scalability of our business model. During 2022, we funded approximately $300.3 million of mortgage loans, including loan modifications and construction draws. While we are very proud of this level of activity, it is necessary to acknowledge the shifting trends throughout the year. As inflation increased, the Federal Reserve commenced a series of rate hikes, resulting in a sharp rise in interest rates throughout the year. Equity markets felt the pain of higher interest rates as sources of liquidity became cautious and credit spreads widened, turning previously profitable investments into losses. Amid this environment, we remained prudent and disciplined, and our investment in new loans slowed. Further, uncertainty continued with the broadening banking turmoil and potential fallout. Fortunately, we have no exposure to troubled banks at this point. That said, we are cognizant and keeping a keen eye on the implications the volatility may have on property appraisals, our cost of capital, and normal loan payoff activity. Let me now turn to what I believe are the key strengths that position us to perform well in the current environment and emerge stronger than ever. First, we have a diversified mortgage portfolio across commercial, multifamily and larger single-family fix and flip real estate projects. Our loan portfolio is spread across 16 states, and we continue to grow in the dynamic Southeast. In addition, in October, we acquired the business assets of Urbane New Haven, a move that was both strategic and highly synergistic. Having Urbane in-house provides us with very strong construction finance expertise. Which enables Sachem to take on larger and more profitable construction loans with better quality sponsors while vertically integrating our platform to be in a better position to address any loan issues that may arise. In addition, Urbane provides us a differentiated and consistent income stream as well as downside protection should a construction loan run into difficulty. Second, our portfolio is short-term in duration. As of December 31st, 2022, approximately 17.6% of the loans in our portfolio had a term of one year or less, allowing us to reprice our capital relatively quickly, better protecting margins in a rising rate environment. Third, we have a deep experienced and cycle-tested team having underwritten more than $939 million in loans through many different investment environments. With the ongoing economic uncertainty, local banks and other competitors are fearful to extend credit and have tightened lending and credit standards, turning away good borrowers and sponsors, or even withdrawing completely from the market. We believe we are well-positioned to potentially gain market share in this environment with our prudent lending tactics, capital strength, and flexibility. Fourth, we have a strong balance sheet with $565.7 million in assets, including $23.7 million of cash and cash equivalents, offset with $326.9 million in total debt outstanding. Earlier this month, we further augmented our capital structure as we entered into a $45 million revolving line of credit with Needham Bank, a new relationship bank, which further validates our portfolio strength and opportunistic growth strategy. This new line of credit enhances our financial flexibility and liquidity and gives us the capacity to further scale our business and execute on our growth strategy where appropriate. I would now like to turn over the call to John to touch on some key financial highlights. I'll talk more about our performance and strategy going forward. Thank you, John. Beginning with total revenue for the year ended December 31st, 2022, we generated approximately $52.3 million, up almost 72% compared to approximately $30.4 million for the year ended December 31st, 2021. The increase was due to an increase in our lending operations and overall portfolio growth, as well as higher interest income, net origination fees, and interest on investment securities year-over-year. Total operating costs and expenses for the year ended December 31st, 2022, were approximately $31.4 million, up over 83% compared to approximately $17.1 million for the year ended 2021. The increase was driven by higher interest rates and amortization of deferred financing costs, compensation fees, taxes, and G&A. Net income attributable to common shareholders for the year ended December 31st, 2022 was approximately $17.2 million, up approximately 50% compared to approximately $11.5 million for the 2021 period. Earnings per share for 2022 was $0.46 per share, up 4.5% compared to $0.44 per share for 2021. With regard to our portfolio as of December 31st, 2022, we had 444 loans with a total principal balance of $460.6 million with an average interest rate of 10.7%, including amortized fees. We had 40 loans with principal balance of approximately $8.8 million in default or foreclosure. In the case of each of these loans, we believe the value of the collateral exceeds the total amount due. As we have discussed in the past, a troubled or distressed loan rarely loses 100% of its value. Usually over the term of the loan, when interest income, origination, and other fees are considered, the overall transaction is profitable. Real estate owned was, what, $5.2 million compared to $6.6 million at year-end 2021. As of December 31st, 2022, real estate owned included $800,000 of real estate held for rental and $4.4 million of real estate held for sale. This favorable reduction is partly attributable to new asset liquidation initiatives that will further support a continued reduction in REO and real estate carrying costs. Turning to our balance sheet as of December 31, 2022, total assets were $565.7 million, up $147.7 million from year-end of the prior year. Total loan balance at year-end 2022 was $460.6 million. We had total cash and cash equivalents of $23.7 million. We had total debt of approximately $326.9 million as of that date. Additionally, as John mentioned, earlier this year, we augmented our liquidity with a new $45 million revolving line of credit with Needham Bank. This line of credit carries an interest rate of prime minus a quarter or 4.5%, whichever is higher, and matures in 2026. We were very pleased to work with Needham Bank to expand our capital sources and available liquidity. Given that this is the last day of the quarter, while we do not provide guidance, and as John alluded to in his remarks, we did want to share that we remained prudent and disciplined in regards to originations in the first quarter given the uncertainty in the macroeconomic environment. As others have shared, our originations will be lower than the prior year. We also continue to invest in the business operations infrastructure to position us for further future growth. With that, I'll turn the call back to John. Thanks, John. Our operational performance in 2022 is testament to our conservative and calculated approach given these volatile times, coupled with the sustainability of our business model built for the long term. Our company was formed in 2010 during a period of extreme financial dislocation. Since then, we have always kept our eyes on the horizon. Since our inception, we have walked before running and always kept our shareholders' invested dollars well protected. Moving forward, we will continue to monitor the ever-changing macroeconomic backdrop, looking for opportunities to invest capital and grow our platform. Further, our loan pipeline is robust, and there continues to be significant market opportunities for a well-capitalized hard money lender to originate attractively priced loans to small and mid-scale real estate developers with good collateral and a strong operating history. We are well capitalized with a solid balance sheet and will carefully underwrite opportunities that meet our stringent underwriting standards and that add to our portfolio diversification and strength. To conclude, we have an experienced management running a company born out of the great financial crisis, a solid and well-diversified portfolio, a strong balance sheet with excellent liquidity and a proven business model to navigate all economic cycles and drive profitability. We intend to stay disciplined while maintaining a conservative yet prudent approach as we continue to deploy capital accretively. We believe we are well positioned to grow cash flow, dividends, and shareholder value over the long term. With that, we will open the call for questions. Operator. Thank you. We will now be conducting a question- and- answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Thank you. Our first question is from Matthew Erdner with JonesTrading. Please proceed with your question. Hey, guys. Thanks for taking the question. I'm on for Jason Stewart this morning. When writing these fix and flip projects, what is the duration on these loans, and does that vary from house to house? Also, what kind of spread are you guys seeing now compared to either year-end or the end of 3Q, given the year, the move in tenure? The first part of your question, a majority of our loans are underwritten with a one-year term. As part of our construction finance business, sometimes it's in the best interest of the borrower for us to write an 18-month period, as opposed to 12%, and that's usually at the recommendation of our Urbane counterparts. Secondly, with respect to spread, in the past, we have had some price competition from our competitors. All of that has now gone away. We do have the freedom to price and price aggressively. Right now, today, what used to be middle of the road, a 12% and 2- point loan offer is now 13% and perhaps 2 or 3. In addition, if it's a construction finance situation, we have another 2 percentage points for the Urbane services added. Our cost of capital is just under 9%. Our spread is still pretty good. You know, overall, yes, we've moved with the rising rates. We have not moved as far as the rates have gone. Even though, you know, we're raising prices, there has been no slowdown in demand for quality projects on our end. Gotcha. That's good to know. What is the, I guess, what are you guys requiring people to put down on these loans that are either, 12% with the 2 points on top or 13% and whatever? Following up on that, on the for sale assets, what is the assumption that you guys kinda have going into a loan versus where you guys are able to exit or rent it out at? Thanks. Okay. The first part, we are still working with a max 70% LTV. We are looking to do better if we can. In the past, we, our borrowers did not put up those amounts in cash. You know, sometimes we took additional collateral. Now we are focusing more on cash down payments. We're really looking for the borrower or sponsor to have significant skin in the game, cash money in the game. That's a little bit of a change that we've implemented over a year ago. The second part of the question, Let me think of the best way to answer this. I'm lost here, John. How do you wanna —what was the second part of your deal there, your question? On the assumption on the exit of the loans that you guys are originating, how have the assets that you've held for sale or for rent varied, compared to where you guys underwrote to on the exit? Okay. We have done very well on troubled loan disposition, whether it be foreclosure or just a default and REO situation. Our underwriting has been strong. You'll see, in our K, the impairments are relatively low. They're based portfolio-wide. If you look in our P&L, the loss from the sale of real estate owned is nominal dollars. Our underwriting is strong. It's been tight. You know, I'll be right to the point here. Sometimes we let a property go at a break even just to get our capital back. There are times where we can hold out for more money, maybe redevelop the property a little bit. That's not our game. We want our capital back, and we want to put it to work again. Just to add to that, I'll apologize for my voice. I've kind of lost it. We work hard on the way in to make sure we have enough collateral, and we constantly look at the values if we have to take property back. We also, during our annual audit, you know, prove that the values we're carrying are holding and that we don't have to take any more write-downs. You see over time, we haven't really taken anything significantly. I think we do a really good job with underwriting and making sure that if we have to take it back, and that's not the initial intent, that we're very well covered, protecting our investment. Awesome. Thank you, guys. That's helpful. Thank you. Our next question is from Gaurav Mehta with EF Hutton. Please proceed with your question. Thank you. Good morning. I was hoping if you could provide some more color on your loan pipeline, how much is the dollar volume and what is it comprised of? Our pipeline is staggering. you know, it's probably at least $100 million. While most of these deals will not be funded by us, at least in this environment, it gives us the ability to cherry-pick what we think are the best deals in the best locations. right now, we are seeing loans from all over the country. there is a lot of fear in the lending business. People are pulling back. Borrowers with commitments are being hung out to dry by their bankers or other lenders, and those deals are coming here. Our pipeline is unbelievably strong, even at higher pricing points, and we are cherry-picking what we feel are the best of the bunch. Okay. In the press release, you also talked about your focus on enhancing your underwriting standards and limiting the terms on the new loans. Can you provide some more color on that? Like, you know, what's the expected new term on the loan, and what kind of enhancements you guys are doing? From a few years back, our underwriting standards are at the moment are truly institutional quality. I'll put up our underwriting process against anyone, and this is a big change from where this company has started and where it's come from. Part of it is in direct relation to what the market has been doing. As the market was scaling higher over the past couple of years, we increased our diligence. Now that we feel that the market may have peaked, we are further increasing our diligence, looking for sources of cash in deals, pulling some professionals into the construction finance components, doing significant more in the form of background and credit. We're basically beefing up our back office, knowing that we could be heading into a troubled environment. We also know that our borrowers and developers can also be running into trouble, and we need to see that before they tell us. Okay. Lastly, on the loans in foreclosure, just to clarify, did you say 8.8% of the loans are in foreclosure or active management? That is correct. Part of that is an initiative on our end to clean some of the smaller loans from our portfolio. If you remember in the past, we were a truly small balance commercial lender. We had loans as small as $50,000 or $100,000. We are not cutting those borrowers any slack at the moment. We're trying to enhance and upgrade our minimums with respect to the loans that we do. Again, you know, these are—y ou know, the Street doesn't like to see this, but I've got to be perfectly honest, and I say this every quarter. Sachem makes a whole lot of money in a default process. You know, we're not proud that they happen, but we are well protected in the form of our loan documentation. We're well protected in our collateral. In the end, there are significant pricing advantages and profit advantages for us as a company. Just to add, while they've done small loans going back in the past, I think the average loan in the last 12-15 months is roughly about $1.1 million. We have significantly upped our game, knowing that, to do a $100,000 loan and a $5 million loan, it takes about the same time. We're being more efficient and really going for the loans that make the most sense for the company. Okay. Thank you. That's all I had. Thank you. Thank you. Our next question is from Christopher Nolan with Ladenburg Thalmann. Please proceed with your question. Hey, guys. Am I correct that there was? Good morning, Chris. Am I correct that there was no common dividend declared for the first quarter of 2023? Chris, we're scheduled to do it early next week. Okay. But that will count for second quarter, correct? No, it's really a first quarter payout. Yeah. Okay. I mean, you seem to have a lot of crosscurrents going on in terms of strong pricing, strong demand, but also, you know, asset quality seems to be deteriorating. Where is the thoughts in terms of taking balance sheet leverage? Company-wide, we're really constrained by the asset coverage ratio on our unsecured notes, which it keeps us from getting out over our skis. It's one and a half times coverage. We're well within our limits. You know, we try not to, you know, go to bed at night and worry about portfolio performance because we have a very strong balance sheet. You know, compared to our peers, our leverage is relatively low. Okay. Then, I guess in a general, I mean, a lot of stuff is going on in the regulatory front, and it looks like you guys are sort of benefiting from it. Has there been any sort of change in the regulatory scrutiny of the company following all the stuff that's gone on with the banks last month? No, absolutely not. You know, we have no—n o one's poking around here. There are no hints of any trouble on the commercial side. You know, we feel like we're in a pretty good place and, you know, with the banks becoming very fearful, you know, companies like us are a last resort for a lot of sponsors and developers. There's really nowhere else for them to go. So we're actually very comfortable. We don't see any storm clouds on the horizon with respect to our business in this environment. You know, the last time that we had a situation like this back in 2010, hard money lenders were the only players in the industry, and that's how projects were completed. You know, banks kind of ran from the carnage. You know, banks took the TARP money and the hard money guys didn't. We're kind of comfortable here, and this is actually a pretty good environment for us to really maybe increase our stride with respect to distressed properties and other deals that may have been closed down by the bankers. Okay. Thank you, John. Thank you. Our next question is from Tyler Batory with Oppenheimer. Please proceed with your question. Hey, good morning. Thanks for taking my question. Just to follow up on some of the commentary thus far. Just, you know, can you talk a little bit more directly about the competitive environment, specifically your peers? You know, you kind of alluded to this, but, you know, it sounds like maybe there's some opportunities where some other folks, you know, perhaps did get over their skis. You know, is that something that you're seeing out there? I mean, is that an opportunity for you to take even more market share as well? Yes. You know, the first thing that comes to my mind, and I'm sure yours, is the financial situation that occurred with Broadmark. That was a situation where Broadmark was born from a SPAC. They had $1 billion in cash, and they lent it like drunken sailors. That's not our game. We don't play that. We've always walked before we ran, sometimes being a little too conservative at times. While we desire to be a larger company, it's been slow and steady here since our inception. We are always looking for accretive investment capital because there are significant opportunities. You know, our Urbane acquisition is part of the plan to take advantage of those opportunities that we think are coming and coming fast. Okay. Okay, great. That's helpful. In terms of the cost structure, I mean, you kinda mentioned, I think investing in the business. I mean, where are you in terms of, you know, headcount right now? I mean, would you anticipate that, you know, moving higher next year? I mean, might it move lower given the environment? Part of our initiative here is to move to larger loan sizes with better sponsors. What that does is it kinda caps our headcount. A lot of these smaller borrowers take a lot of our time, a lot of our legal effort, a lot of our treasury people. We wanna start getting away from those. At the moment we're looking to find a place to put them. Our move is to larger deals which will keep track of headcount, keep it in line. To be very specific, I think we're in pretty good shape here with comp. As you may be aware, we have moved to our new office facility. We've outgrown our last building and, you know, now with all of us here basically under one roof, we're efficient. We have a great working space, and we do have room for growth here. At the moment, you know, I think we have enough people to get us at least through the first half of the year without bringing on more bodies. Just to add, I think we'll strategically add as appropriate during the year. We're not gonna do it well in advance and get ahead of our skis, as we said. You know, we'll be conscious of, hey, you know, volume's up or whatever, and add in the right place. I don't think you'll see, you know, a lot of adds, but it'll be adds that make sense with what's going on. Okay. Just the last question, you know, really more general in terms of the dividend. I mean, I know it's something a lot of investors are focused on, you know, in terms of the, this whole return. Just how are you thinking about, you know, the level of dividend payout right now? Just any broad commentary you can make, in terms of kinda how comfortable you are, with where the dividend is. Again, I don't wanna project the future 'cause we don't know. As I sit here today, I'm pretty confident on our ability to continue to pay dividends. You know, last year we tried to move our dividend up. You know, we moved it from 12 to 14, back to 13. We're trying to find a stable ground. You may see it move $0.01 back and forth, but it's really just us, you know, the ebb and flow of our business. You know, our goal here is to always increase the dividend, and reward our shareholders. You can't. You never know how the quarter will end until it ends. We're trying to be a little conservative. We don't wanna jack the dividend and then pull it back. To that end, if you saw in our press release, you know, our non-GAAP earnings were $0.53. That's a pretty good number. You know, to spend a minute and explain the difference between our $0.46 and $0.53 per share, we had safe money parked in treasuries and long-term securities. The interest rates, you know, took the bat to our portfolio. Overall, our company performed outrageously well. We would have been at $0.53 if we didn't play safe with our, you know, our long-term portfolio. Makes sense. Okay. Very, very good detail. Thank you. Thank you. Our next question is from Chris Muller with JMP Securities. Please proceed with your question. Hey, guys. Thanks for taking the question. Congrats on a nice finish to a challenging year. I wanted to follow up on John's comments on the banks. I guess starting on the financing side, how have conversations been going with your existing relationships? Nice to see the Needham facility added. Are there any talks about pulling back financing at all, or maybe increasing credit lines as a supplement to direct lending coming from the banks? Thanks. you know, right now I think we're pretty good. We have a $45 million line. It's expandable to $75 million. John, I'm not sure how much we've taken off of it, but I don't think a whole lot. We haven't taken much at all. It's out there, very expandable, and Needham has basically committed that, you know, they will do most of the $75 by themselves. We don't have to go out and find other sources. You know, we do have that availability to us, and we all know other banks that over time, you know, we may bring on board as the situation warrants and/or permits. We felt Needham and us had some great synergies, and that's, you know, a good starting point for the next facility. Needham, you know, the first thing that would come to mind is, "Hey, you know what? We could put $45 million on the street tomorrow." That's not the play. That's not what we're thinking. This is play it safe. This is protection. This is let's wait and see what the world does over the next couple of months. We're looking at Needham, you know, one, as a really great lending partner with us, but also as a safety net should things get off the rails. Got it. That's helpful. Then on the demand side, as the banks do pull back, and competition kinda decreases a little bit, do you expect this $100 million pipeline to kinda be the new norm, or is that things being pulled forward a little bit? The, we've had a large pipeline for the past year and a half, and, you know, as I sit here, you know, I talk about walking before running. It would be nice to have a huge chunk of money to go to work. We just, you know. Our company is not too big and yet not too small. We're kinda stuck in the middle, and that's kind of a good thing because we get investment capital in moderate-sized chunks, and it keeps us playing, you know, close to the vest. I would love to be able to handle $100 million a quarter and not worry about our next dollar. You know, for right now, we're cherry-picking the best. I think that will continue to grow, and, you know, we'll see where it goes. For right now, everybody in the country seems to be calling us. Yeah, just to add to John's, if we found the creative capital that we could use, we would certainly do, you know, more deals. While we've had discussions and, you know, been offered some capital, if it doesn't work, it doesn't work. I totally agree with John on Needham. While it's there, we're not gonna ramp it up just because it's there. We're gonna really watch how everything's going and really be good stewards of our shareholders', investment and the company. Sometimes slow and steady is better than, "Hey, look, there's an opportunity, jump in," because you don't know what's going on on the other side. I think we're positioned right with, you know, some cushions and some capital that we can continue to grow the business, and if the right deal comes up or the right capital gets offered to us, we're all ears. Okay. Well, it's a good position to be in, especially in this environment. Thanks for taking the questions. You're welcome. Thank you. There are no further questions at this time. I'd like to hand the floor back over to John Villano for any closing comments. Thank you all for joining our call today. We look forward to updating you again next quarter. Thank you again. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.