Greetings. Welcome to the Sachem Capital Corp second quarter 2023 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 0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kevin Reed, Investor Relations. Thank you, sir. You may begin. Good morning, everyone, thank you for joining Sachem Capital Corp's second quarter 2023 conference call. On the call from Sachem Capital today is Chief Executive Officer and Interim Chief Financial Officer, John Villano, CPA, as well as Vice President of Finance and Operations, Nick Marcello. Yesterday, the company announced its operating results for the quarter ended June 30, 2023, 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 filed its quarter-end Form 10-Q with the U.S. Securities and Exchange Commission and 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. 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, we 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? Thank you, Kevin, and thanks to everyone for joining us today. Sachem produced another solid quarter of revenue and earnings growth while continuing to invest in our business. We accomplished this in a difficult operating environment marked by ongoing Federal Reserve rate hikes, banking sector pressures, and lingering inflation. Importantly, Sachem has remained disciplined in our approach, our second quarter results were quite strong. We achieved record revenue growth of more than 31% to $16.5 million compared to the same quarter of 2022, net income attributable to common shareholders of $4.8 million, or $0.11 per share. These results highlight the deliberate and prudent approach we apply to our underwriting, which, coupled with the resiliency of our loan portfolio, has allowed our performance to remain steady amid these ever-evolving economic conditions. As recent headlines confirm, new loan originations in the commercial and residential real estate sector have slowed dramatically in the wake of a rapid rise in interest rates over the past 18 months. As larger banks pull back, we view this as an opportunity to grow market share and continue to expand the Sachem platform. As we discussed last quarter, while these factors provide opportunity, we will not veer from our proven and disciplined approach to our sourcing and underwriting of loan opportunities. Given our ongoing cautionary outlook, our originations remain conservative and below recent historical levels. In the second quarter, we funded approximately $55.6 million of mortgage loans, including loan modifications and construction draws. While our originations have leveled off similar to the rest of the industry, we are seeing a strong pipeline of new requests for modifications and construction loans. As, as noted over the past several quarters, it has been our practice to lend to borrowers with strong credit profiles and a proven track record of performance, so we can be opportunistic and put capital to work when ideal situations arise. Our proactive approach during financial market dislocations will create opportunities to grow our already robust pipeline of potential funding opportunities. Due to our disciplined stance, we have maintained strong liquidity and are positioned to selectively capitalize on situations where banks and other smaller, less capitalized competitors are unwilling or unable to perform. Our focus remains primarily on residential and multifamily loans, where housing prices and demand have remained relatively stable. I would like to remind everyone of our strategic strengths that position us well in the current environment. First, Sachem Capital was born out of the great financial crisis and has a deep, experienced and battle-tested management team. We have underwritten over $1 billion of loans through many different lending cycles, and we'll use that experience as a guide to navigate our path forward. Second, we have a diversified mortgage portfolio across multifamily, single-family, fix and flip loans, and commercial real estate projects. Our loan portfolio is spread across 15 states, and as we have stated in the past, it is our intent to grow responsibly in the Southeast. Our loans are generally short-term in nature. As of quarter end, approximately 88.3% of the loans in our portfolio had a term of one year or less allowing us to reprice capital quick, quickly to better protect our margins. Importantly, we have a strong balance sheet with $624 million in assets, including $52.3 million in cash, cash equivalents, and investment securities, offset with $382.7 million in total debt outstanding. In addition, we have available liquidity of approximately $37.9 million in our credit facilities. This liquidity and availability provide us the financial capacity to capture market share in an opportunistic and selective manner. Let me touch on a few key financial metrics beyond the strong revenue growth that I mentioned earlier. Total operating costs and expenses for the quarter were approximately $10.8 million, compared to approximately $7.3 million for the second quarter of 2022. The change was due to higher interest and amortization of deferred financing costs, G&A, and compensation fees and taxes. Interest and amortization of deferred financing costs increased from approximately $5.2 million in the second quarter of 2022 to approximately $7.1 million this quarter, a change of approximately $1.9 million or 37%. Net income attributable to common shareholders for the quarter was approximately $4.8 million, compared to approximately $4.3 million for the second quarter of 2022. Earnings per share for the second quarter of 2023 were $0.11 versus $0.12 in the second quarter of 2022. With regard to our portfolio, as of June 30, 2023, we had 360 loans with a total principal balance of $506.7 million, with a weighted average interest rate of 12.17% weighted average interest rate, not inclusive of fees earned. We had loans with a principal balance of approximately $96.4 million in non-accrual status. There are 51 loans in pending foreclosure by the company, representing approximately $47.2 million of unpaid principal. During the quarter, the company modified or extended a total of 62 loans. These modifications resulted in gross fee income of approximately $2 million, supplementing our reduced origination fee income. 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, and usually over the term of the loan, when interest income, origination, and other fees are considered, the overall transaction is profitable. Importantly, we have the expertise to work through these issues, given our successful track record through prior cycles. For the six months ended June 30, 2023, the company impaired or wrote down approximately $413,000 of loans and had a gain on the sales of real estate owned of $126,000. In addition, we recorded a provision for future credit losses in accordance with CECL guidelines of $196,000. Turning to our balance sheet, as of June 30, 2023, real estate owned was approximately $5 million, compared to $5.2 million at year-end 2022. Specifically, real estate owned included approximately $818,000 held for rental and approximately $4.2 million held for sale. With regard to our dividend, we paid a $0.13 per share dividend paid on August 11, 2023, to shareholders of record as of August 7, 2023. This compares to second quarter net income of $0.11 per share. The difference was primarily related to our timing of certain revenues and originations. As a REIT, we are required to pay out 90% of taxable income per year to our shareholders, and in this environment, the board will continue to evaluate the distribution policy on a regular basis, balancing our performance with the importance of maintaining financial flexibility. In closing, we will maintain our disciplined and cautionary approach to managing the business and will continue to invest in Sachem for the future. We foresee the possibility of large cash balances and limited lending operations, potentially providing a near-term drag on earnings. While we do not provide forward-looking financial guidance, we believe maintaining our cautious stance is the best strategy to create long-term sustained value for shareholders as the economic environment evolves. Our management team has invested through many different economic cycles with a clear eye on asset protection and shareholder value. With experience gained through each cycle, we have built a resilient, well-diversified portfolio and a fortified balance sheet to navigate the current volatility and set us up to drive long-term value for our shareholders. With that, we will open the call for questions. Operator? At this time, we will 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 that your line is in the question queue. You may press Star two if you would like to remove your question from the queue. We ask that you limit your questions to one and a follow-up so that others may have an opportunity to ask questions. 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. Our first question is from Tyler Thayer with Oppenheimer & Co. Please proceed with your question. Hey, good morning. Thank you. So first question for me is just interested what you're seeing, you know, loan pipeline, what that looks like today compared with a few quarters ago, you know, where you're seeing the most opportunities. It sounds like you're still keeping your, your cautious stance. Should, should we expect origination activity to remain pretty consistent, with where you were in the first half of the year for the rest of this year? Good morning, Tyler. You know, first, our, our pipeline is still very, very robust. You know, its creation and sustainability is really based on banks and our competitors' inability or fear to fund our types of business purpose loans. We expect our pipeline to remain unbelievably large, really through the end of this year. With that, we are unbelievably selective in picking what we think are the best opportunities of the bunch. These loans in our pipeline are from all over the country. You know, as we've discussed in the past, we are doing our very best to stay on the Eastern Seaboard. We're still very strong in New England and Southeast part of the US. Opportunities exist for us everywhere. You know, the bank's failure to respond to borrowers' needs have turned over a lot of their better-paying customers to us, and we try to take advantage of them in terms of providing the services that they so desperately need to either start or finish projects. Hopefully, in the long run, we acquire a customer, but for right now, there is a steady stream of good quality borrowers and great projects. With respect to origination volume, as we talked in our release here, we have seen a reduction in funding. You know, it's kind of by design. You know, we have limited amounts of liquidity, as does everyone in our space. While we have sufficient working capital, we are doing our very best not to spend every penny. We're playing cautious. I'd like to just drop a couple numbers in here that I think you may find useful. For the first six months of this year, 2023, we funded $114.5 million in loans, and we received $66 million in payoffs. If we were to compare that to the year-ago period. To the year-ago period, where we funded $192 million of loans with $61 million of payoffs. It'll give you the feel of how we're condensing our workload, that we're picking better and better deals and doing our very best to conserve our capital until liquidity improves in our industry. Okay. Very helpful commentary there. My, my follow-up question, just, in, in terms of loans and foreclosure, loan modifications, you know, potential distress out there, just talk about kind of what you, what you're seeing with those two items. I mean, is that something that, you know, maybe trends lower the next couple of quarters, given you're being a little bit more selective in terms of the capital that you're deploying? That, that's a good question and, and of course, a very important topic. We have a bunch of foreclosures, and we have a bunch of modifications and extensions, as I discussed on our call. These numbers will start to wind down. These are loans that were originated during a very robust real estate cycle. There was a time where we were doing, given a given quarter, 125 loans. Those loans are looking for a home, which is our biggest problem. You know, the term of our loan runs its course. We have a choice. I, I can either foreclose, send a demand letter and foreclose, or we can extend and modify. Our team is really good at figuring out, you know, is our borrower doing what they should, what they agreed to do? Have they maintained the property? Is the construction on process? If, in fact, the borrower has done as agreed, we can extend and modify his loan for another year. We are seeing an awful lot of this, and it's really a result of, our people not having a place to go, you know, where they have completed projects and no bank financing to assist them, really, with lower payments and, and long-term, long-term debt capital. To be very specific, we see this, I don't want to say coming to an end. That would not be fair. We do see the amount of modifications and extensions slowing down tremendously towards the end of the year. Remember, our loans are one year. We were very busy last September and December, and we started to slow down in March. we have, we have another few months of this. I just want to give you. I just want to reiterate what was said in the call, that we modified 62 loans this quarter, the modifications resulted in a gross $2 million of additional fee income to Sachem. this income is really supporting our lower level of originations. you know. That's all for me. I'm sorry. Okay, thank you. Sorry. Go, go ahead. I didn't mean to... Okay. All right. Thank you, John. Appreciate it. Okay, Tyler. Thank you. Our next question comes from Christopher Nolan with Ladenburg Thalmann. Please proceed with your question. John, what sort of leverage level are you targeting? Given the inverted yield curve, do you see any sort of refinance opportunities at a lower rate, potentially? Let's talk about leverage. You know, overall, our leverage level, really not able to increase our leverage dramatically at this point, and there's really two reasons for that. One is, you know, finding affordable debt capital is very difficult, and finding it in an amount that would be beneficial to us. Second is the covenants on our short-term notes. We are limited to a one and a half times asset coverage ratio, which, you know, it's a good thing and a bad thing. It allows us to walk at a good pace. It doesn't allow us to sprint and get ahead of ourselves. You know, we did increase a little bit of debt in the quarter. We are always looking to raise equity. In fact, we have utilized our ATM during the first six months on a very sparing level, raising about $10 million during the first six months. We continue to balance debt and equity, and it's all about having a real fortress of a balance sheet. With respect to yields, you know, first and foremost, we don't have any pricing pressure at the moment. We still have a great spread on our loan products compared to our weighted cost of capital. We have the ability to put a lot of money to work with really great spreads still. Not as good as they were two years ago, but still very, very good. While we would hope, you know, the rise in interest rates would kind of slow down here, I think if it goes too far, I mean, we could have a crack. As of right now, margins are good. We're always looking for affordable debt capital. I feel like we're a few months away from finding that. Okay. Thank you. Our next question comes from Matthew Erdner with Jones Trading. Please proceed with your question. Hey, good morning. Thanks for taking the question. You mentioned that you're seeing good spreads still. What are those spreads looking like? Can you also describe what a typical modification looks like for you guys? You mentioned a year extension. Are you requiring more equity capital to be put in? Just what are the requirements there? Thanks. In terms of loan spreads, you know, our cost of capital is between 8.5% and 9%. We are currently, company-wide, lending at a minimum of 13.2%, pushing higher, mostly 13.3%. The three is the origination. Our margins are very good. These are one-year loans. We were 12.2% when rates were much lower. We're borrowing at 6% with our unsecured notes. Our margins have been compressed, but it has not been devastating. Okay? Now, our, our, our typical modification. There's two kinds. You know, around here, it's, you know, does the mod need new capital from us, or is it just a time mod? Meaning, project's done, project's cash flowing, and our borrower needs another year or six months to find suitable refinancing or sale. The easy ones are the time mods. You know, we have a completed project. It's a timing issue. I talked about the banks and our competitors' failure to lend. You know, their fear is causing us a little bit of a heartache, and a heartache, you know, for our borrowers as well, who have to incur additional costs. Our heartache is that I have to explain this stuff every quarter. The other mods, where, where a project may have run over budget due to material, labor, whatever, you know, lack of labor. Those require a little more effort on our part, and our team will go in and, and, and really underwrite the loan again. You know, not as full, but mostly, mostly complete. In that regard, we determine if it's, the loan is a keeper, meaning our borrower has done as agreed within his loan docs, or is our borrower so far off track, we need to put an end to it. If, if the deal requires more capital and we see light at the end of the tunnel, we, we will provide capital, complete the project, maybe provide some liquidity to the borrower so he can, so he can get three or four months down the road to complete a sale. All right? Those, those are the differences. Like I said, we, we cleaned up 62 of those during the quarter. I expect there to be another 62. Last quarter, we earned $2 million in gross fees. Yeah, that, that's helpful. As a follow-up, of the ones that you're not able to clean up and you take on as real estate owned, what is the timeline there of how long it's going to be on the balance sheet? What have you guys been seeing in terms of sales, and how quickly you can get out of these properties? Unfortunately, in New England, the foreclosure process is absolutely horrendous. Most of our foreclosures are resolved before we have to take back a property, okay? It's unbelievably hard to believe, but, you know, as you can see, our, our REO balance from quarter to quarter is relatively stable. It's, you know, it's $5.2 million a year ago, it's $5 million now. I don't want to say that I'm happy having $5 million of REO, it, it's just the ebb and flow of, of the product. Trying to add more color there. They, they resolve themselves, basically, Matt, and, mostly if, if it comes back to us, we have a stable of almost 500 developers that we, we circulate the product, the, the REO to. We have, we have built-in buyers. You know, as you can see in our historic filings, most of our impairments are relatively small when you consider the amount of loans in our portfolio. These problems kind of resolve themselves. Not to say that I'm not going to get a punch in the nose somewhere along the way here, historically, our loss provisions have been relatively low. I'll, I'll even say unbelievably low compared to our peers. We expect that to continue. All I can really say, these things kind of work themselves out. If our underwriters do what they're supposed to do, it's more a disclosure item than a, than a fire sale. Yeah, that's helpful information. Thank you. Okay. Our next question comes from Chris Muller with JMP Securities. Please proceed with your question. Hey, John. Thanks for taking the question. To your comment on the pullback from the banks, does this represent a short-term opportunity while they're out of the market? Or do you think you guys can win some longer-term business here? You know, don't... The banks always guess wrong, right? They're pulling back. This is an opportunity for us to, maybe garner some of their better borrowers, some of their better projects, clearly be able to price aggressively. You know, I think the banks here will come around at some point. You know, they did this during COVID, and, you know, we were just a couple months in, into COVID, and, and we saw that, you know, there was an opportunity for us to build our business, and we did. It worked. This is looking and feeling the same way. You know, what I'm seeing here, Chris, is that the banks are afraid. They're afraid of interest rates. We have a very interesting situation with respect to the rise in interest rates and the failure of real estate prices to fall. That just leads, leads me down a path of, hey, there is real value. The value is created, in my opinion, with new construction. New construction and new building codes, labor, materials, these things are so expensive that it's raising value across the board for all real estate, maybe except for office. The idea here is that older properties in need of repair are being bid up because the cost to build new is so expensive. I think the banks are missing the boat on that. Again, it's my opinion. We'll see what the market shows me, you know, a couple of months from now. you know, we, we, we like to zig when they zag a little bit. Yeah, that's helpful. Then, the other follow-up I have. I see some sub-subsequent ATM issuance in the Form 10-Q. Is that just to support the increased pipeline? It's... Well, yes. Yes, yes, it is. It's part of the balancing between debt and equity. We do that dance all the time. We, we don't want to put pressure on our covenants. We want to have capital, free capital, should we need it or we see an opportunity. When, you know, we have certain periods during the quarter where we can access the ATM, you know, it's non-blackout. If we feel that there's a market for us to raise some capital, we will, we will go and do that. Now, let me be very clear, I'm not happy raising capital at $3.75, all right? I just want that to ring loud and clear. sometimes we have to, and it, and it's not because things are at, on a fire sale, it's because we're doing that very delicate balance, the dance between debt and equity. Got it. Appreciate your comments. Okay. There are no further questions at this time. I would now like to turn the floor back over to John Villano for closing comments. You know, thank you for the questions. Thank you all for joining us today. I look forward to updating you next quarter. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.