Manhattan Bridge Capital, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023; financial statements are unaudited. Manhattan Bridge originates and manages short-term, first-mortgage loans to real estate investors, primarily in the New York metropolitan area and Florida.
Financial performance
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $2.434 million | $2.107 million | $7.231 million | $6.339 million |
| Operating income | $1.442 million | $1.232 million | $4.099 million | $4.005 million |
| Net income | $1.446 million | $1.237 million | $4.128 million | $4.018 million |
| Diluted EPS | $0.13 | $0.11 | $0.36 | $0.35 |
- Q3 revenue increased 15.5% and net income rose 16.9% year over year. For the nine-month period, revenue grew 14.1%, while net income increased 2.7%.
- Loan interest income rose to $1.992 million in Q3 and $5.889 million year to date, primarily reflecting higher rates charged to borrowers. Origination fees were $441,000 in Q3 and $1.342 million year to date.
- Interest and deferred financing costs increased 23.5% in Q3 to $614,000 and 54.0% year to date to $1.856 million, largely due to higher borrowing costs. Nine-month general and administrative expenses rose 13.2% to $1.274 million, partly due to a special officer bonus related to the credit-line extension and higher marketing, insurance, travel and meal costs.
- Approximate operating/net margins were 59%/59% in Q3 2023 versus 58%/59% in Q3 2022; for the first nine months, 57%/57% versus 63%/63%. These calculations use reported revenue and income figures.
Financial position, cash flow and capital
- At September 30, loans receivable were $70.781 million, down from $74.483 million at year-end 2022; total assets were $72.615 million and stockholders’ equity was $42.944 million.
- Cash was $133,000. The company reported $29,607 of net cash increase over the first nine months. Operating cash flow was $4.137 million; investing activities provided $3.697 million as loan collections exceeded new loan funding; financing activities used $7.805 million, including $3.561 million of net credit-line repayments and $4.019 million of dividends paid.
- Line-of-credit borrowings were $21.433 million against a $32.5 million facility maturing February 28, 2026. The rate was approximately 8.9% at quarter-end and floats. The company reported compliance with all facility covenants. The facility is subject to collateral, financial and operating restrictions, including dividend and share-repurchase limits.
- MBC Funding II had $6 million principal amount of 6% senior secured notes, due April 22, 2026. Their indenture requires mortgage loans and cash to equal at least 120% of outstanding note principal.
- Equity holders received $4.019 million in dividends during the first nine months; a further $1.289 million dividend, or $0.1125 per share, was paid October 16, 2023. The company repurchased 37,860 shares for approximately $186,000 through September 30 under a program authorizing up to 100,000 shares.
Portfolio, changes and notable items
- All $70.781 million of loans were classified as performing at September 30; the filing reported no loan impairments or impairment provisions. No borrower represented more than 10% of outstanding loans.
- The portfolio comprised $60.397 million of residential developer loans, $8.915 million of commercial developer loans and $1.469 million of mixed-use developer loans. The company had $9.664 million of construction-loan commitments available for draw when conditions are met.
- During the first nine months, the company issued $40.811 million of loans and collected $44.513 million, versus $49.242 million issued and $42.255 million collected in the prior-year period.
- One loan was sold at face value of $485,000 in February; CEO Assaf Ran participated in the purchase for $152,000. A foreclosure lawsuit filed in June concerned a delayed payoff following a title-related data breach. The payoff was received October 18; the company is pursuing additional interest, costs and legal fees. After quarter-end, $2.560 million of loans were paid off, including $2.150 million originally due in or before 2022.
Outlook, risks and controls
- Management expects cash, operating cash flows and the credit facility to be sufficient for operations over the next 12 months, while stating working-capital needs are expected to increase as it pursues growth. No specific earnings or revenue guidance was provided.
- Management cites demand for relatively small real-estate loans and intends to continue selective origination while protecting capital. Key risks include reliance on available funding and the CEO, competition, interest-rate changes, collateral valuation and borrower credit risk, borrower concentration, lender-liability claims, and the possibility of future non-collectible loans or foreclosures.
- The company is a REIT and generally must distribute at least 90% of REIT taxable income to maintain that tax status. Management stated disclosure controls were effective at September 30 and reported no material quarterly change in internal control over financial reporting.
Investor verification priorities
- Review the floating-rate credit-line cost, available borrowing capacity, collateral requirements and covenant headroom, especially as loan commitments and growth needs affect liquidity.
- Track loan extensions, borrower repayment performance and collateral values; confirm resolution and recovery of additional amounts related to the October payoff.
- Assess whether higher loan yields can continue to offset rising funding costs and operating expenses, and whether dividend levels remain supported by cash generation and REIT distribution requirements.
- Verify the status of the $9.664 million construction commitments and post-quarter $2.560 million loan payoffs, and monitor concentration and aging of loans originally due in prior years.